Tuesday, August 16, 2011

What to do with the house?

This is part of a series responding to Christine at Almost Fearless' series 30 Ways in 30 Days to Redesign Your Life and Travel the World. 

Day 8

I guess I kind of touched on this in my last post, but this part of the series was about how to sell your house in a downturn.

The original post was written in 2009. I bought my condo in 2008, and the only thing the housing market has done since then is drop like a rock. While the idea of offloading my condo and never having to deal with it again is appealing, if I sold my condo right now I would end up taking out a loan for the difference between the mortgage and the selling price. There are two other units in my condo complex for sale, and their asking prices are far lower than my mortgage.

So that means I am going to have to become a landlord.

I kind of already am, as I rent out the two spare room in my condo to students. I have learned from experience that there is a big difference between graduate students and undergraduate seniors. I have also learned that I am definitely going to be hiring a property management company and requiring co-signers when appropriate.

One thing Christine mentions in the homework section is this:
3. If you need to reach out for financial help, do it now.

I have considered refinancing in order to make it more likely that renting out the condo will pay for all of the associated expenses of keeping it. Since I have not had the mortgage for a long time, interest rates are low, and my income has increased since I took out the loan, it seems like a good idea.

But I still hesitate. If I had enough cash to pay down a point I would do it in a heartbeat, but I won't have that for a few months, and even if I did there's the question of whether I should be putting that amount towards going to Japan or not. PMI insurance rates doubled about a year ago - I may not see any real savings without paying down a point.

I'm going to have to do some research on refinancing before I put the house up for rent. I should probably start seriously looking at it in mid-2012, after I have enough saved to seriously consider paying down points or not.

Wednesday, August 3, 2011

Budgeting for Living in Abroad - When you still have a mortgage.

This is part of a series responding to Christine at Almost Fearless' series 30 Ways in 30 Days to Redesign Your Life and Travel the World. 

This part of the series didn't work as well for me as other parts did. I am planning on staying put in one country for a year or two, instead of country hopping for however long I can afford it. The article was definitely aimed more for a country hopper or RTW trip. It's good information if that's what you're planning on doing. (One day this will be me!)

But that's not the plan for my initial trip. I've decided, for a list of reasons I have talked about before, that even though it's the most expensive trip, I want to return to Japan first.

And that is expensive.

And I haven't made it any easier on myself.

I won't sell my horse. Even horse people might think it's dumb, but I would rather board him at a facility I trust rather than to let him go to an owner who may sell him off to who knows where. You hear horror stories of people's horses going to slaughter, even when they have a buyback agreement. I'm basically going to give him to someone I trust, with a big fat savings account available for his expenses. I plan on having 16k in a savings account for Avalon when I go. Not easy.

Additionally, all that money to move to a new apartment in Japan is going to have to come from somewhere. I want to have an account with 8k in it for move in costs. Hopefully I won't spend all of that finding and furnishing an apartment, and what is left over will be designated for rent.

Then there's the mortgage. I would LOVE to sell, even if I just break even. But some other people in my complex are trying to sell, and it looks like I am at least 30k underwater. At least when buying I made the good decision of insisting it be within walking distance to campus. Which means I will be able to rent it out for enough to pay the mortgage and insurance, and pay a property manager. It's possible I won't make enough from renting to pay the entire property tax bill, but property taxes in South Carolina are very low. I will have to make some repairs before I leave (mostly painting) and I want a few month's worth of the mortgage in a dedicated account, just to be safe. I would like 8k total in that account, but I could probably get away with 6k.

My boyfriend will be working while we are in Japan. Getting a job teaching English is actually pretty easy to get, and they pay around $2900 US dollars a month for those jobs, entry level. It doesn't go as far in Japan because of housing costs, but I'm familiar enough with the rental market that I can find us something far below the average $1100 a month most gaijin pay. If you don't speak Japanese, this is very hard to do. I hope to pay around $700 a month in rent in Japan, and from looking at rental agency websites, this shouldn't be impossible. We should be able to live off of his income easily.

Which means that I need to have $32,000 saved up before we go. We can probably make do with a little less, but I'm using that as a goal amount.

It's actually not impossible. See in the past three months I have been paying off as much consumer debt as I can. In 3 months I have paid of $3000 in credit card bills and personal loans. Once I have paid off all of my debt (late this month I should be done!) then I plan to roll all of the money I used to be using for debt into savings.

Even if I have unexpected expenses (car trouble, dental costs) I should be able to save that amount up in 3 years.