Tyson and I got married in April of 2017.
I graduated from college that next semester in late July.
I began my first big-kid job at the start of September. I called it a "stepping stone" job as it wasn't my dream job, but I was very intrigued by the entrepreneurial culture of the company and was excited to be a part of launching their first formal marketing department. It wasn't the best pay, but it was decent for Idaho, and for a recent grad - I couldn't complain! Tyson was due to graduate in April 2020 so we knew we would be in Rexburg another 2 and a half years. Spoil Alert:
Excited about adulthood and my recent wife-hood, I began to dream of our lives together; children, a dog (just kidding I'm allergic, ha!), and a home with a white picket fence! Children were a little too soon, and pets were a no-go, but a house... We could buy a home... Right? Realizing that could be our next step together, I quickly became fixated on the idea of buying our own home and it was a game for me to save-save-save! Unfortunately, this is when my Zillow addiction began... I've had a serious problem ever since.
3 months after starting my job (and saving any surplus $$), an opportunity opened up at work. I felt strongly to my core that this was the next move in my career. I took a vulnerable plunge of faith to offer my interest in the role. It took a few months of ironing out kinks and paving the way, but it was solidified that I got the promotion and coinciding raise. By this point, we had about 4k (going on 5k) in savings with a 4k tax return on its way. With these savings, an increased income, and our magnetic attraction to buying a home, this question hung over our heads like a cloud:
Do we continue renting and saving for a home, or do we take this small amount of cash and buy a home now?
This question is one I have discussed with MANY friends in similar phases in life! This is the BIGGEST question for anyone with real estate investing on their minds! Let me walk you through the pros, cons, numbers, the feelings that led us to buy sooner rather than later, and how we feel about our decision retrospectively.
If we continued to rent for 2 more years...
Let's talk about the pros and cons of renting. Pros: You can usually save more, you have less space to furnish, and rent (in our case) is usually a little cheaper than a mortgage. Cons: paying rent is a complete sunken cost. For us, our rent was $620/mo for the first few months of our marriage, then $725 at our second apartment and was due to go up to about $850 soon. Not too shabby right? Well, considering we wanted to start a family sometime after our first year of marriage and would need a larger apartment (usually runs about $1,400/mo), it's fair to say we would have paid an average of $1,050/mo on rent.
If we had continued to rented from the time we got married till we moved to AZ, we probably could have saved about $30,000 for a down payment on our first home. But, we also would have spent $40,000 in rent that we'd NEVER see again - that's a hard number to swallow!
Now, calculating how much money we could have saved in that time period took a lot of number crunching and realistic guestimating based on our habits and predictable behaviors. There's a lot of unknown factors. Like, for example, that 4k we had in savings was in savings for a reason! Before homeownership became attractive, we wanted to go on a big trip to Ireland before we started our family! Buuuuut we used that money to buy a house instead! If we had continued to rent, we most definitely would have pursued that big trip. If we would have continued to rent, we would also be tempted with a larger surplus of money - who's to say we wouldn't have cheated more often on nice dinners, trips, clothes, etc. Lots of factors to consider and assumptions to make, but every way I crunched the numbers it came back to roughly 30k of savings.
If we bought and owned a home for 2 years...
After lots of calculations and long conversations with each other and with our parents, we figured we'd walk away from the sale of a home with 30k (give or take) to put down on our next home. We were pretty confident in our ballpark guestimate which is one main factor that lead us to buy! And lucky for us, our ballpark was pretty dang close to what actually happened! For the sake of accuracy in this comparison, here are the hard numbers slightly rounded for simplicity sake... We got our 5k downpayment back as well the 5.5k we had paid off on the home over the 2 years. Our house had gone up in value and we had done some smart renovations that account for the other 30k we profited. Pros of investing vs. saving! In total...
After 2 years of owning our home, we walked away with $40,100 for a downpayment towards our next home. But, we also paid 17.5k in interest and 2.5k in mortgage insurance that we will NEVER see again - that's also a hard number to swallow!
One thing to note, that 2.5k for mortgage insurance could have been avoided, and here's how! When you don't put a significant amount of money down on a home the bank sees you as a higher risk customer so they charge you an extra interest on your loan - this is called mortgage insurance. One way to avoid this extra sunken cost is by putting a minimum of 20% down on a home. We did not have 20% of the value of our home in cash, so we knowingly took on an additional $112/mo in mortgage insurance. Cons of buying sooner rather than later.
Let's compare the 2 options:
Renting: + 30k in savings - 40k lost to rent = -10k Buying: + 40k in the sale of the home - 20k in interest/mortgages insurance = +20k
The obvious decision seems to buy right?! The numbers speak for themselves. However, I must give a disclaimer! You have to keep in mind all the EXTRAS that come with buying a home that is NOT accounted for in these hard numbers as it's near impossible to calculate. 2 factors to consider:
1) If this wasn't already clear, please know that you will be paying MUCH more in bills when you buy a home; water, trash, gas, electric, internet, home security, possible HOA - and it all adds up! While in our home, bills averaged $750/mo whereas while renting our bills (gas/electric) was between $60-$100/mo. Do your research and make sure you can afford all of it with comfort (a mortgage broker will help you with this).
2) When you own a home, you will also need to be financially prepared to spend more money on home maintenance and account for your growth. You will need to buy a lawnmower, keep up with your landscaping, and if you're in Idaho you'll be shoveling snow and salting for 6 months out of the year. You'll hire an electrician, plumber, handyman for necessary home maintenance, and buying tools for the fixes you decide to DIY. Assuming your home is bigger than your apartment, expect to go through more cleaning supplies! You'll need to buy a washer and dryer and replace appliances when they go out. And don't get me started on furnishing your home... It felt like we were bursting at the seams in our 2 bedroom apartment, but when we moved into our first home I swear it looked like we had Polly Pocket furniture sprinkled throughout the home! It was SO empty and the few things we did have looked so small in the bigger space! It took me the full 2 years to furnish the entire space to my liking - it's expensive and takes a while to find exactly what you're looking for.
After all was said and done, we spent THOUSANDS of dollars on these extra costs of being a homeowner. So, even though there's an obvious positive financial difference of buying over renting after you take all these things into consideration it could almost be an even split between the two!
What's the tiebreaker?
1st - The biggest factor was that we just WANTED to buy a house! We felt drawn to homeownership as if our lives depended on it! It was exciting and felt like we could adult a little more! Tyson and I thrive on pushing ourselves to be as self-reliant as we can in each phase of our lives. But I must say, I can only attribute the root cause of our urgency to buy a home was inevitably a loving hand from above directing us on the right path. There was something special and unique about our first time home buying experience; it had a familiar divine feel to it.
2nd - The financial benefit seemed to validate our swelling desire to buy a home. Simple as that, it seemed like the smart thing to do.
How do we feel about our decision retrospective?
The question may still linger, if we could go back in time would we have continued to rent and save instead of buying sooner rather than later? Tyson and I are unanimous in our answer: No - never in a million years.
Rewind to April 2018 to our first night in our new home. We sat on the floor of our empty master bedroom celebrating with Domino's pizza for dinner. We were almost speechless. We were in awe. We felt SO overwhelmed! Could we really do this? Tears flowed from my eyes when we realized our intense, uncomfortable feelings came from sheer humility. We felt so incredibly little yet so empowered at the same time. We had no idea how we just landed this magnificent piece of work! Over our 2 years in the home, we came to realize it was far from perfect, but at that moment on the floor in our echoey bedroom, it was perfection.
All of the extra costs of being a homeowner were compensated by some of the greatest joys we've experienced. That Mid Century Modest home was OURS. We earned it, we worked for it, we put our blood, sweat, and tears into it. We CREATED OUR HOME. It was empowering and we were proud of what we created. It was our first investment and we treated it as such. Though it was the right financial decision for us, that was just the icing on the cake. The cake for us was the friends we made, the neighbors that became our family, and the stressful, annoying, and strenuous challenges that pushed us to become more self-reliant - it was all worth it! Every. Single. Moment.
Rewind to May 2020 when we were finishing up some last projects before putting our house up for sale. Tyson expressed to me that he felt as if we were writing a "Thank You" letter to our home with every little touch-up and beautification project we did. Thank you, Mid Century Modest, for keeping us warm and safe, thank you for challenging us and teaching us, thank you for the curveballs and life lessons, thank you for being patient as we learned how to manage and improve you. Thank you for those cozy Saturday mornings in the natural light of your large, inspiring windows. Thank you for welcoming our first child and letting us paint you pink just for her - she loved it. Thank you for being a refuge for our friends, family, and most of all us. You will forever be cherished as our beloved first home. We love you.
Sincerely,
P.S. Here’s a collage with some of our favorite memories In our first home! Enjoy!