Monday, 13 April 2015

Is Family Worth $400,000?

I'm a huge fan of living within your means. We try to live on half of a single income. We're always looking for ways to make better use of our money. In the last six months, we sold a second car, I gave up my cell phone plan, and we cut our electricity bills in half.

On the other hand, we also decided to increase our entertainment budget for the year, so that we could participate in more events with friends and family.

Now, we're considering spending another $400,000 to be closer to the people we love. How does that happen?

We live in a suburb of the City of Ottawa. We have a modest sized two story house with a spacious enough private backyard. There's a park with lots of greenspace at the end of the street next to the public transit station that takes Simple Cheap Dad straight to work. A discount grocery store, schools and libraries are all within walking distance. It's a great place to raise a child.

Most importantly, it's cheap.

When we bought this house, we knew that it could meet our needs forever and we'd never need to move. No, it doesn't have an ensuite bath or a walk in closet. But, we don't need those things and I'd just see them as more to space to clean anyway.

But the thing about me is that I'm used to moving around. I've never actually lived anywhere for longer than four years. That's a feat considering I've lived in Ottawa for 20 years.

Some window shop at the mall. I window shop on real estate websites.

We've started to create a community around us here in the suburbs. But, it's an hour commute each way for Simple Cheap Dad. Visiting family is a half an hour drive each way.

We'd love to live back in town, but it's hard to justify the extra cost.

The Temptation

This week a house came up on the market a few doors down from the inlaws. They live in a nice walkable neighbourhood with a traditional mainstreet, parks, a farmer's market and lots of young families. The schools are excellent. It's a very expensive neighbourhood. Definitely above our means.

The house itself is an older two bedroom bungalow. It's dated and it's got knob and tube wiring throughout and who knows what other issues. The basement is unfinished. It's not open concept.

They're asking almost $400,000 more than what we paid for our house two years ago.

We've booked a viewing.

How Could We Afford That?

If we see it and we want it, we could make it affordable. But, it wouldn't be easy and it would be much riskier than living here in the suburbs in our cheap house.

The attic in the home has been converted into a rental unit. It needs some updating, but it could be turned into a nice income stream with a some elbow grease.

The basement is unfinished and it could legally be turned into a second rental unit with one big cheque to a contractor.

If we want to live on that block, sharing our home is the only way that we could make the numbers work.

Is It Worth Taking on Debt to Live in the City?

That's the $400,000 question.

I've got a pretty swanky spreadsheet calculating the effects on our budget, our mortgage qualification ratios, how much cash we'll need to keep a healthy buffer through the renovations, and how we'd get by if we had extended vacancies. We could make it work.

But, would it be worth the extra debt just to live closer to family, friends, and Simple Cheap Dad's work?

Would it be worth the work of getting our home ready for sale to downsize to a more expensive 2 bedroom apartment?

Would it be worth sharing our yard, our driveway, and our home with strangers?

Things might be clearer after we see the house. It could be a disaster and we won't have to think about it again. But, it could be awesome....


Having this home come up on the market has really pushed us to talk about the kind of life we want to live. We have built a wonderful life for our family now and we're happy in the suburbs.

But, by moving, Simple Cheap Dad would cut an hour off his commute each day (and it would be much more likely for that commute to be done on a bike). We would have unlimited access to a free babysitter. It would be easier to spend time with friends and family. Plus, we'd have a nice income stream to help out in retirement.

How much money and risk is that worth to us?

So many financial decisions don't come down to numbers. I can open a spreadsheet, get creative, and run scenarios until I find a way to make the numbers work. It's the next step, the emotional stuff, that is the deciding factor.

Yes, I love cutting costs. But, I'm not unwilling to consider spending money if it will truly improve our lives. That's one of the reasons why we live within our means: to have the flexibility to take a good opportunity when we see one.

What About You?

Suburbs or City?

Have you ever tried to value your lifestyle and relationships?

Any warnings about being a landlord?

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