Mapgirl’s Fiscal Challenge

I just ran some numbers. If I sold my condo and cleared a bit of cash, say $15K, even with my salary, I’d hardly be able to upgrade to a full one-bedroom in a nicer part of town. I worked up some numbers with the Kiplinger’s Real Estate calculators. I used the one to find out how much can I borrow and one to find out how much can I spend on housing.

The reasonable figure I came up with was buy a place for $279k, and put 5% down. With taxes, PMI and home insurance, that’s about $2030 a month for the mortgage payment. Factor in monthly maintenance cost/HOA fee, utilities, I’d barely be able to cover the cost of a home like this.

The reason is that with a full complement of saving in my 401k plan (capped at a theoretical $16k for 2009), plus some money in the company ESPP, an HSA (capped at $2400), and a little for a Roth 401k, there would be very little left for a mortgage payment. I am not sure I’d want to pay more than 50% of my take home pay on a mortgage. That seems like excessive saving, doesn’t it? But when you’re in your 30’s and undersaved for retirement like I am, I think supercharging my saving is a good idea.

I just don’t understand the DC housing market. How can people live here, save and have kids all at the same time? Unless you really are a K Street lobbyist raking in the dough, it’s nigh impossible to live here and raise children all at the same time. (But is my dream of San Francisco any better? Hardly.)

My other strategy is to stay put and ride things out, even though there are things going afoot at my condo that displease me and could end up being worse if I wait. (Action is sometimes better than inaction.) I could easily see thing going to hell in a handbasket and getting a special one-time assessment of $2-4k next year for major property repairs.

I could rent my apartment out and find an alternative place to live, but the rent I could collect is less than what I’d have to pay so it’s a negative cash flow situation.

The last strategy is to sell and move to an apartment with a roommate. However, with the way my mortgages and HOA fee work out, I’d be hard pressed to find a great living situation for rent and utilities for less than what I pay now. And great would have to mean a not crappy neighborhood where I wouldn’t have to struggle to park my car. Now that’s a joke in busy Arlington.

One of my girlfriends lives in a one-bedroom with all utilities for $950/mo, but she has no elevator, a walk up 2 flights of stairs after a 20′ flight of stairs just to reach her building from the parking lot, a crowded parking lot and crappy neighbors. Should I go in the opposite direction, I’d be paying the same amount as my current housing cost for one-bedroom rent with utilities included, and extra for limited parking. But the building would have package service and a bigger laundry facility with nicer views. And likely the rent would actually be about $200 more than my current housing cost since it’s not rent controlled and could easily balloon after 12 months.

So really I should shut up and put up with the mess that is my condo, keep my head down, pay off the credit cards and keep my savings plan intact.

Every once in a while, it’s nice to get a cold hard reality check, run the numbers, and say to yourself, “Well this glass is certainly half-fulll, but really, at least it’s not half-full of poison.”

I know I have to get out. This place is going to the birds. I ran into a neighbor of mine and frankly, there is a situation afoot which I do not like. I don’t mind so much the foreclosures and the low price being set on one of the condos in the building. If that was the only problem, no big deal, I could renovate and rent out.

What really concerns me are some other structural issues with the building I live in, and some of the machinations of the HOA president. (Telling another condo owner to whom she should rent.) He doesn’t like me anyway, but he really has no right whatsoever to tell someone they shouldn’t rent to a responsible tenant just because the guy complains (legitimately) about what needs fixing. (And often does it himself, for free.)

I got the skinny from this neighbor of mine and it worries me quite a lot. I need to find a way to renovate and sell quickly. My kitchen and the entire apartment needs to be done over, but I will barely cover my costs in this falling market. If I wait longer though, I will get screwed with a potential one-time assessment cost.

I love the concept of my apartment, but right now, I’m not loving my building, nor the HOA, and haven’t been in the last 2.5 years I’ve been here. This is all very great news as I celebrate 4 years in the place. (As of last weekend. Yay for me!)

I’ve been looking at home listings and I still think I can get about $150K for my apartment, but I would have to really spruce up the place first. I’d have to put it on credit cards, move out and pay for a sublet/rent and carry the mortgage. That kind of scares me since I liquidated all my savings in the first place for the bathroom repair. (I should stop calling it a renovation, because it was well and truly damaged.)

UGH. I’m so obsessed at the moment with paying down my credit cards that I’m not sure if I should stop all the savings I’m doing or not. (This kind of expense goes way beyond belt tightening and into needing $15K ASAP.)

Remember, Cash is freedom. Don’t forget that.

I just paid out $3084.00 to the contractor for my apartment. It’s done. It looks great.

Total cost was $5684.00. Not bad for a DC area bathroom remodel. They’re between $7K-12K for a low-end estimate. But since my bathroom is exceptionally tiny to fit in my studio, I saved some money by ripping out a tile backsplash around the room (but also spending $300 extra to remove some extra concrete under the tile). Paint is a lot cheaper than tile, plus you don’t have to wait extra for the grout to cure.

My contractor left me extra bath and floor tiles, just in case they cracked. He’s going to send a granite care sheet for the countertop. (Basically no ammonia cleaner and wipe up all acidic liquids right away.)

I saved money by telling my contractor about a special deal at Home Depot for a towel bar, toilet paper roll holder and handtowel and generally keeping my eye out for the things that I liked in particular so he would have an inkling for what to pick up for me. We sent a lot of pictures back and forth via email. It really does help to have a cameraphone sometimes, though it’s the most loathsome of all cellphone features.

Half of the construction was paid for by my tax refund, stimulus package payment and the insurance payout. I took out $5000 BT on a credit card, but I was able to payback $2000 right away. It’s put a dent in my finances psychologically more than anything else. I have definitely depleted my emergency fund and added a little to my credit cards over the same period.

Was it worth it? Well, if I add up my construction cost to my remaining mortgage amount, I’m slightly over my original purchase price. If I look around my bathroom, touch my fixtures, and stare into the mirror with really good lighting, I am satisfied. Pleased. Happy.

While I won’t recover all the cost of the remodel, I think it was a good idea. There were small little patches all over the place. Just little stuff, but it added up in a way that didn’t look good. I figure I’m more likely to get a premium for the bathroom now if I sell it because it looks intact and unified.

The only downside is still the dust everywhere, but at least now I can rearrange my closet more efficiently. (A lot of studios in DC have a walk through closet with the bathroom on the other end. I hate the layout, but it’s what it is.)

Que sera sera. I’ll just have to live with it now! muhahaha!

After a deluge of rain this spring, my windows are still leaking. I tried to tell the HOA about this 2 years ago when we had a crappy representative from the property management firm. However, they’re only taking action on it now.

So now that I’m done the bathroom, I’m going to have to move out and redo the entire back wall. And if I do that, I’ll rip out the carpet and put in hardwood flooring. And when there’s money once more, I’ll have to redo the kitchen.

But since my HOA is somewhat incompetent, I will wait to do all of this until the window leakage problem is fixed. Since that’s probably not for a few months, I’ve got time to save.
Blah blah blah.

At least the flooring is something I can do myself on the weekend with a few friends.

You know, everyone tells you must add an extra 10% on top of your estimate on any construction project to get the final cost.

Of course, my bathroom remodel is going poorly and it’s sucking up my 10% overage.

There was some concrete under the tile in the bathroom that’s coming down. Unfortunately, to get an even surface on the wall, the concrete has to be removed. Don’t ask me why in the 1950’s they put up concrete halfway up the walls, but they did. All the extra labor hopefully will not be a huge amount more, but I have a feeling it will cost me another 20% on top of the estimate.

I wanted to have a special countertop cut for me so I can have a shelf over the toilet, just like I had in the original bathroom. However, it has a 10-day lead time for the order, which would mean I’d be out of my apartment for over almost 2 months. The contractor thinks he can get me a light grey granite countertop cut in the same shape out of scrap material from his usual granite supplier. It will only cost me $100 more but will take 3 days instead of 10. Is that worth it to me? You bet. It’s been over a month since I’ve slept at home and I’m cranky.

But things got a lot worse. The contractor had a drywall guy come in and they put in the ceiling piece early in the week. They came back the next day and the tub was full of water and the new piece was soaked. Apparently, there’s another leak coming from the unit above mine. ARGH.

I don’t know how all this is going to play out, but why do I feel like it’s going to cost me more money and time, no matter what happens?

Hate the data it contains.

As someone with a professed love for visual representations of data, I was looking at this post by real estate analyst Jonathan Miller at his real estate blog, The Matrix.

I didn’t have time to read his analysis, but scroll down and look at the maps of the US. Note the dates of the data (always important) and then look at what the maps show. I’m kind of amazed at what’s going on around the country. The data seems to have been gathered over the last 4 years, but the data display is interesting. It’s kind of frightening what’s expected of consumers trying to buy their own home in many metropolises. Did we have to piggyback our mortgages? In doing so, did we create a false demand pressure not truly representative of the price of the real estate? Of course we did, but the bubble markets in all the press have related correlated data to go with it in terms of foreclosure trends, etc. Just take a look!

There was an open house last weekend in my condominium building. I took the opportunity to stop by and peek inside. Turns out the realtor is a neighbor in the building. So we chatted for a while.

The unit available is a junior one-bedroom, but it’s a studio like mine. The bathroom isn’t very nice, but the kitchen was much nicer than mine. The cabinets went all the way to the ceiling, which mine don’t. It had a stainless steel backsplash and some other cool features, like newer applicances. But it was interesting since while they were newer, therefore nicer, they were just low-end stuff, just very functional.

It gave me some ideas about my apartment and what I might like to do next after the bathroom. The wish list is the back wall where I have water damage, put in a wall to make a junior one-bedroom, rip out the carpet and lay down some new flooring, re-do the kitchen.

Of course, if I keep it a rental, then all I have to do is fix the wall and update the current kitchen appliances. Looking at this unit available just re-confirmed my feelings on what needs to be done to sell the place vs. what I would like to have done.

Contemplating things further, I think I can finance a bathroom remodel. Especially since the estimate I received is under $6K. Add on 10% for overruns, as most places advise, and it’s still slightly under the $6K mark.

Resources available:
1. The insurance company will pay me for the repairs ~$950.
2. My tax refund is ~$1400.
3. My stimulus payment is $600.
4. Liquidating my savings accounts ~$1300.
5. Cash I can raise from my next two paychecks, $1200.
6. Balance transfer at 1% APR till January 2009, $5000.

So that’s $10,450 in resources, not bad. Of course, I have debts to pay. And to get my apartment ready as a rental, I need to do a few more things to the plaster and the kitchen. The plaster work is only about $1000-1200. However kitchens are expensive and that’s what gives me pause. I’m not sure I should go as far as fixing the kitchen up really nice. Should I stick to something cut rate? Should I only update the kitchen appliances? At the moment, I am leaning towards replacing only the dishwasher.

Right now, in the aftermath of tax season, I think the only way I can take on all this cost is to sink it into my apartment as investment or improvement costs on a rental unit. Make it all a Schedule C line item.

Renting out my condo at market value will end up having negative cash flow for me each month unless I find a really sick cheap room for rent, which is possible in my neighborhood. I looked at a sublet for $575 a month last week. I could net about $300 in my pocket from positive monthly cash flow and put it towards debt repayment. Then I’d also be able to reduce my tax liability from a Schedule C net loss. But all of this makes me exceedingly uncomfortable. I am just not confident I can make it work out in my favor though.

I would have the hassle of finding a stable roommate situation and signing a lease. I’d have to move all my stuff out of my house and find storage for it. Having moved 7 times in 2 years during a transient period of my life, and recently reliving those times while filling out a security clearance form, I really hate the situation I’m in.

Of course, I could stay in the place. But then I’d want to remodel the kitchen, tear out the carpet and really spruce up the place.

At least I’ve freed up some resources and have a plan now.

Since the ceiling needs repair, I figure I should do the entire bathroom. I thought maybe it would cost $5K, but after talking with a few people, I need to budget closer to $7K. I suppose this is a very salient lesson that everyone needs an emergency fund. Say 3-6 months of take home pay, which of course would cover the repairs. Unfortunately, my emergency fund has only about $1.5K in it.

In desperation for cash, I looked at all my options here. I have credit available on my HELOC and on my credit cards. I have a few CD’s expiring, which I was going to liquidate anyway to pay down debt. But since there is an emergency here and now, I’m going to use them to fund the repair.

With construction, you usually have to pay a deposit of some sort to get the work started. In my case, the earliest construction can start is in another week. The work will take approximately 10 days, taking me to early May.

In looking at my cash flow and available credit, I decided, rather sadly that I cannot attend my friend’s wedding in Boston this month. There’s just no way I can find a hotel room under $200 a night anywhere near the festivities or near the hotel where my best friend and her husband are staying. I’m looking at $1000 for just hotel and rental car alone at a time where I need the $1000 for something else.

I have balance transfer checks coming to my house all the time for a promotional rate less than 2% APR. Unfortunately, these BT’s have a fee. A friend asked me if that fee was capped out but reading the fine print, I couldn’t find any mention of a cap. I called the customer service line and asked about a cap. However the representative said he couldn’t change the BT fee. Instead he offered to change the rate from 1.9% to 1% APR after looking at my sterling payment record. It’s the best he could do, but I’ll take it.

Now the trick here is that I’m sitting on $5K borrowed for 1% APR. Do I pay off my 11.99% APR credit card balance of $4K only to ring them up further as the construction work progresses, or do I hold onto this wad of cash and wait to pay it out to the contractor? (It’s going into an account that doesn’t bear interest so there’s no arbitrage going on here and there isn’t enough time to move it around and take advantage of that sort of thing unless I’m paying off the credit card.)

The last $2K I need, I figure can come from liquidating all of my savings accounts and my next two paychecks. The problem now is that I’ve shot my 2008 debt reduction goals to pieces.

I’ve been sighing a lot this week. Life. It’s what happens to you. Dealing with it can suck, but I look forward to having a shiny new bathroom with better lighting in the shower and for the mirror when I put on make up.

Luckily for you, this week, several PF bloggers have Emergency Fund posts.
Five Cent Nickel: On building an emergency fund
Get Rich Slowly: Learning to love his emergency fund
Plonkee: On why they’re no fun

As of Monday, the leak in the wall was found and repaired. The plumbing company my HOA uses sent two different plumbers onsite to fix the drainage pipe from the kitchen of a unit two floors up and one unit over. Absolutely nothing was going down the drainpipe and all of it was going out the hole and down the walls for 4 floors. EEK.

What does this mean? This means my HOA’s insurance policy for the entire building can pony up the entire cost of the problem, or else split it with the unit directly above mine. And they can cover the moisture abatement problem that I can tell is an issue from the yucky smell in my apartment.

I have decided that someone is going to pay me the $1450 claim amount written up by my claims adjuster. Either way, the damage to my ceiling is the worst of any unit that I have heard so far.

All I am waiting for now is a full written estimate from the contractor I would like to use. I did ask the handyman belonging to the landlady upstairs who came in and also did a repair estimate. He gave me a ballpark $6-7K for the entire job and a repair cost close to that of my claims adjuster, but I got a shady feeling from him for two reasons. 1. He didn’t really want to commit himself to a paper estimate of any kind. BAD. 2. He was pretty reticent. I wasn’t sure if he was really listening to what I was saying about my desire to balance value with decor. This is my permanent home and I would like it to be nicer than your basic cut-rate rental unit. But maybe one day, I will rent it out.

I asked a friend of mine about a bathroom remodel he did and the cost. He gave me a figure in line with with the handyman’s verbal quote. Too bad it’s all more than I want to spend. But alas, I don’t get a choice here. It means that I need to adjust my budget and expectations.

SIGH. Where to find $6-7K?