Coffee heat rising

Roomie Heads West

So the Great Rent-a-Room Experiment ended this morning when Roomie stuffed the last of her gear into her car, waved good-bye, and set off for San Francisco, where DH and Son hope to see her before the end of Christmas Day.

I’ll kind of miss her, because it’s nice to have a live human being around, particularly one who happens to be considerate, tidy, a good conversationalist, and so overworked she’s out of the house most of the time. 😀

So as experiments go, it was pretty successful. As a matter of fact, it worked out so well I could imagine going into the short-term rental biz, as an off-and-on sort of thing. Don’t think I’d care to do Air BNB, because I wouldn’t want total strangers around here. But occasionally visiting musicians come to town, and every now and again you hear a request for people to put up foreign students for a semester.

It’s not something I’d want to do all the time. But I could imagine hosting an out-of-towner two or three times a year.

For my purposes, Roomie could not have come along at a better time. The whole adventure was pretty stressful for her, given the circumstances she was having to cope with. But for me…hot dang!

Right at the time she was moving in, the pool pump sprang a leak. That was $600. Then of course it’s freaking Christmastime. I found the coolest hand-made artisan thingie for my son. To swing that I had to mortgage both his first-born sons (if he ever has any). And while junketing with my dear friends, I not only dropped more money than Croesus would even have considered paying for a very fine lunch, I bought myself a ludicrously overpriced purse and wallet.

Those two will go back, as soon as the holiday is over. But meanwhile the six hundred buckolas and the lunch and the Christmas presents pretty much broke the bank.

So number one Big Advantage to hosting a house guest for a month or two: the company.

Number two Big Advantage: those few incidental dollars for the rent probably saved my tail this month.

Two things I’d do differently the next time:

1. Buy a twin bed for the spare room.

Roomie bought one of those blow-up mattresses, which she tossed on the (cold!!!!) tile floor to sleep on. She insisted it was plenty comfortable, but I’ll believe that when I see corgis fly. Obviously, if I’m to volunteer that room for guests, it needs to have a decent bed in it.

2. Charge something for the utilities.

My son, a veteran of the Roommate Wars, urged me to add more to what I charged to cover utilities, and he probably was right. We’ll find out soon, when the water and gas bills show up.

When you live alone, you get so sot in your ways that you forget other people don’t live the same way you do. For example, in the wintertime, I like the ambient temperature to be cool. Very cool. Some folks (such as, oh, say, the occasional Roomie) might call it FREAKING FREEZING. I sleep better when the central heating is off and the bed is warmed first by a heating pad and then by a couple of furry friends. When the heat is set to 70 (or even 68), I’m sweltering.

Weirdly enough, Roomie found the climate on the tile floor a little too bracing for her tastes. So she would trot into the hall and jack up the heat. Eventually I would wake up in a sweat, sneak out into the hall, and turn it back down.  At one point, outside temps dropped far enough below freezing to seize up the heat pump, which caused it to labor away for hours blasting us both with icy air before one of us woke up and shut the damn thing off.

We found the way around that problem when M’hijito showed up with a fancy space heater with a remote control and a swell thermostat. It really worked very well to keep that room comfortable — Roomie expressed her joy. Nevertheless, I expect the electric bill will be pretty startling.

And Roomie is one of those folks who likes to stand in the shower until the hot water runs out. You forget there are people who are not tightwads where water and power are concerned. I’m very cheap about both and, though I insist on drawing a bath (dislike showers, by and large), filling the tub does not run the water long enough to drain a 50-gallon water heater. And when the weather’s cold, I’m not in the habit of bathing every single day, something that’s not good for aged skin and not necessary if you don’t work yourself into a sweat every day. So the water and gas bills also are likely to be…interesting.

So I think if I were to do this on a short-term basis again, I’d add a set amount to cover utilities. If the person were going to be here more than six or eight weeks, then I’d probably ask them to cover half the utility bills.

And if I were seriously to do this as a semi-regular thing, I might move myself into the guest room. The master bedroom in this house is no larger than the secondary rooms, and its bathroom is tiny. Day-to-day, I use the hall bathroom, which has room to move around and also has the bathtub. The master bathroom is about the size of the closet…and this house was built before the day of TractMansions with closets the size of a baby’s nursery.

Also, the dog door is in the guest room. To keep Ruby out of Roomie’s things, we closed off the dog door and also kept her bedroom door closed. This was OK — luckily, neither dog left any deposits around the house. But it was a little bit of a nuisance. If I were sleeping in that room, there’d be no need to keep the pooches out of it. I’d have access to the “good” bathroom. And the alleged master bedroom, which resides in the back of the house, would be more private for a guest, too.

Now I must run to the second Christmas party of the day. And so…

Merry Christmas to One and All!

BelievableFakeChristmas-tree

 

 

Counterintuitive Advice: Borrow to the hilt

Yesterday I called my investment adviser to discuss the possibility of buying a smaller house in a nicer neighborhood. I was operating under the assumption that I would apply all the proceeds from my present paid-off home’s sale to the new house.

He, however, urged me to finance as much of the new purchase as possible—80 percent—and invest the remaining cash in the stock market. The 5 percent drawdown (projected “take” for retirement income) from the increased amount in savings would cover the cost of the mortgage and, when combined with Social Security, would give me enough to live on. And then some, in his opinion.

Leveraging debt, as we know, is something that goes against my bourgeois grain. However, since this is a very smart guy with an MBA, I reckoned I’d better listen up.

So today I ran a bunch of figures, in an attempt to see the practical outcome of borrowing against real estate instead of paying it off. The fly in the proverbial ointment is the $1,000/month payment I’m making toward the house my son and I are purchasing as an investment, which we would like to hold until after the housing market turns around. That could be anywhere from two to ten years.

I assumed my monthly costs of groceries, clothing, gasoline, and the like will not change significantly, since I do not eat out and don’t have to buy special clothing for the office. Gas probably will drop a little, but not much, since the Valley’s sprawl requires everyone to drive from pillar to post just to accomplish ordinary errands. Monthly routine nonnegotiable costs such as tax & insurance, utilities, and the like probably won’t change if I move to the cute little house in Willo, but will drop sharply if I move to Sun City.

So: would I be better off to mortgage my home and add the cash to savings? Here’s what my calculations show:

In the first scenario, my real estate agent gets the seller to come down off his price by $10,000 and I get my full asking price of $325,000, netting a grandiose $274,100 after the Renovation Loan and closing costs are paid.

That’s depressing. Even without the cost of the Investment House, I can’t afford to move to the cute little house in Willo. Moving on…let’s suppose the guy is right, that carrying a mortgage on my house would allow me to leverage debt in such a way that I would have more to live on in retirement. Maybe that strategy would make it possible for me to stay right where I’m living. Suppose I did that right away, while I have a job, since no lender is likely to fork over 240 grand to an old lady on Social Security.

Wow! I profit by a fantastic $1,076. What keeps me in the black is my salary. In theory the positive balance is a bit higher, because I get a small income tax advantage. That notwithstanding, this does not look like it’s worth the effort, or the psychological stress of diving into debt up to my eyeballs.

Once all I have to live on is Social Security plus retirement savings, this scenario puts me deep in the red. Clearly I can’t afford to stay in my house using this strategy after retirement.

So, what if I pay off the Renovation Loan, leaving my house free and clear, and try to stay here after I retire. Can I afford that?

What with the ever-increasing property taxes and skyrocketing utility bills, it doesn’t look good. The only way I can stay here is to sell the Investment House prematurely, taking a loss on that. This will cause my son also to take a financial hit, which I would prefer not to do.

Ohh-kayyyy…. This leaves moving to Sun City as the last option. Costs there are much lower, because taxes are controlled and home and car insurance is much lower. Videlicet:

This represents a significant savings on the cost of living in my present (much preferable) home. So, what happens if I finance a sorta comparable house, which out there will cost around $260,000?

Lovely. I’m still in the red. Either my son has to come up with an extra $542 a month, or we have to sell the Investment House. This is getting depressing: so far, no matter what I do, I can’t afford to retire. Period.

But I can afford to pay for a Sun City house in full. What happens then?

OK! I probably could survive if I move to Sun City, buy a place for much less than I get for my present home, and continue to live frugally. The amount of play in my present budget is $29 a month, and so in this scenario my lifestyle would not change much. Except, of course, I would be enjoying the silence of the mausoleum in a ghetto for old folks.

In any event, this comparison suggests that paying off your debt is better than leveraging debt, at least in terms of providing you with cash to cover your living costs. Math is not my strong point, and there very well may be something in the logic that I just don’t understand. But if these figures are right, paying off all debt—mortgage included—is the sanest way for a middle-class earner to go.