So, we've had an idea brewing. I'm open to thoughts and suggestions.
Here's the deal:
- DH is a student and has one more year until he's done school. I'm the current breadwinner and am pregnant so will be off on maternity leave all of next year (it will be a tight financial year given that we'll have to live on half of one salary).
- we own a home out-of-town which is being rented out and is totally self-sufficient (i.e. paying for itself)
- we're currently renting a 1BR apartment in the town where we both grew up, meaning parents are near by (i.e. down the street) and it's where I work (career, contract, stable).
- A house in the neighbourhood just came on the market for a very reasonable price (modest bungalow, finished basement, huge lot, within school boundaries for DS)
So, we'd be crazy to double our housing costs and give up our 1BR penny-pincher apartment for a substantially larger mortgage/tax/utilities payment going into an already tight financial year, BUT (here's the hook)...
- We have friends who are moving back to town with the intention of saving money and proposed renting a town house to share (my initial reaction was "umm.....no...."). But this house that just came on the market would be great for sharing- we'd take the upstairs bedrooms and living space, they'd have the basement, and we'd share the kitchen. This means we could be in a HOUSE for the same price we're paying for our current 1BR apt. (there's not been anything that's come up in the rental market that would equally suit our needs),
Pros: more space, large lot, nice neighbourhood (welll...same neighbourhood...), most decently priced house to come on the market in a loooong time, it's finished and wouldn't need any work, financially would work splendidly for the year so long as our friends comit to a full year then DH and I would be back to work with dual income, my parents are able to help us financially to an extent, but would be uncomfortable in doing so if we keep both houses
Cons: some risk given that we'd be dependent on our friends' contributions, not 100% positive that it's where we'll want to be in 5 years (though when we leave we keep coming back, and now we have DS's school and my work here), we already own a house so I'm not sure how numbers will work out (qualifying for two mortgages, will we need to sell one to get the other?), we don't have a significant amount of savings (for down-payment, major repairs, not to mention tuition and FFEF).
Laurie, wife to DH (Aug/04), mom toDS1 (Nov/05) and DS2 (June/12).
I wouldn't do it. Too easy for the other couple to back out for some reason: they get in a financial pickle, need to relocate due to a job, etc. The living arrangement wouldn't be comfortable with someone you didn't know, what with having to share a kitchen. Also, since you will be on a tight budget and therefore will probably be cooking quite a bit, sharing a kitchen between two families could be an absolute nightmare. If you were looking at a regular two family house with two separate living spaces one of which you would rent to the other family, it would be worth looking at because if they fell through you could always rent out the space to someone else. Or if you could afford the house outright but did this to save some money every month. But this situation doesn't seem stable enough. If they back out and you are left holding the bag, you are talking possible foreclosure. And I would recommend never counting on what might happen after your dp finishes school. Could take much longer to find work that you are anticipating, it might also require a relocation.
I'd only do it if you could manage without their rent money.
Regarding the house you own now, for new mortgage purposes, bank will want to see the lease and probably last year's income tax return. I believe they will give you about 75% (don't know actual amount) of the rent as income when calculating how much income you currently have.
Created an instant family (7/89 and 5/91) in 1997. Made a baby boy 12/05 adopted a baby girl 8/08. Ask me about tandem adoptive nursing. Now living as gluten, dairy, cane sugar, and tomato free vegetarians. Homeschooling and loving it.
Is there any way you could install a small kitchinette in the basement? This way you would have really separate quarters and it would be easier to rent out to others if your friends are bailing out.
We've had friends live with us for 5 or 6 months, and it was a disaster, starting from sharing the kitchen. We seemed to need to use the kitchen at the same time, and although we came up with a schedule, we couldn't keep it because we both had small babies and crap just happened so we ended up needing the kitchen at the same time sometimes. Combined with the lack of sleep and different personalities, and it just didn't work for us.
Not saying it can't work, especially if you have a really good plan going in, but IMHO, I would keep things as separate as possible.
The first year would be a pretty major risk, that's very true...and that's one of the big things holding me back. ...as well as the possibility of re-locating when DH is done (but this is a very central location, so commutes would be easy and I'll likely continue to bring in more income than DHeven after he's done school and I work here)...mind you with another babe on the way I know he'd like to see me work less if at all.
There could be a kitchenette put in downstairs, but it would also need a larger bathroom to create two truly separate living spaces (and if we're getting serious about altering the house and making two separate living spaces, we'd probably want some stellar insulation in the floor/basement ceiling). DH's parents also make comments about getting a house with a basement since they'll need it eventually (they have NOTHING saved with a substantial mortgage and are about 10 years from retirement if all goes well). I don't know how serious they are about this though or what their timeline would be like.
There's the feeling that now's not the time and another one will come vs. it's a great opportunity and the space has lots of potential in the long-run. ....I fluxuate between those two feelings hourly....I think we'll talk to the bank on Monday, but chances are numbers won't work anyhow, but if they do then we can continue to explore options.
Laurie, wife to DH (Aug/04), mom toDS1 (Nov/05) and DS2 (June/12).
It sounds too risky to me. What if you didn't have the rental income from your friends or the rental you own elsewhere? That's worse case but I'd still consider it. For me, with two big changes coming up I'd not want the additional stress of the risk of having two mortgages and two renters on a reduced income.
Why the rush? It's only 12 months, you could get a great house after you have that dual income. What if you have a very lean year, and your friends bail, and then instead of dual income you get someone laid off and someone not finding a great job right away? it can get pretty painful.
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