How (and How Not) to Buy a House

Little MM tests out the public park that will be our new back yard!

Little MM tests out the public park that will be our new back yard.

Well, it’s official: The Mustache Family is buying a new house.

We’re pretty excited, as this is a chance to put many of our favorite values into action. It is a significant downsizing, at 1000 square feet smaller than our current place. This brings the chance to live more efficiently, with less idle space. It’s a bit of a fixer-upper, meaning I get to crank out another thousand hours of good old-fashioned hard work. The size and condition mean that it is $160,000 less expensive than our current house, which will allow us to transfer more of our savings to productive investments (and pay lower property taxes) forever. And it is situated with ideal Southern exposure (free winter heat), backing onto a beautiful public park filled with wide open grass areas and shade trees. This setting will allow us to do less of our living and entertaining indoors, and more of it out in Nature where we belong.

There will plenty to talk about after we close on this house later this month, do some quick renovations, rent it out for one year, and then move over and sell the main house next summer. But this enticing story is just an example to introduce the real theme of today’s lesson, which is how to buy a house in general.

House buying has been on my mind for most of the past year. We’ve been shopping for our own downsizing residence, making several offers on other places around the neighborhood. Several friends have coaxed Mrs. Money Mustache into using her real estate agent powers to help them buy their own houses. The Longmont property market has heated up to a frothy boil, with the nicer houses selling on the first day after listing. And I’ve watched it all with some interest, noting both the successes and failures on the part of buyers and sellers.

How to Buy a House

You might think that buying a house is just something you do, rather than a skill that must be learned. But the truth is quite the opposite: for the typical nonmillionaire, a house is the biggest purchase ever made, and thus the opportunities for both grand mistakes and massive scores are plentiful.

Mindset: You can start things off by giving yourself a great gift that will make the rest of the process go much more smoothly: a calm and rational mind. Repeat after me: “I am not buying a flowery pillowcase of emotions or a future of warm memories. I am conducting a business transaction to purchase a piece of land and an assembled collection of construction materials.

Don’t worry, there will be plenty of time for the pillowcases and the memories after you buy the house, but don’t put the carriage in front of the horse. For now, you are a BusinessMan/BusinessWoman looking to conduct some business. The strength provided by this mindset is essential to get the results you want.

Location: Next you choose your location. You need to do this before you start looking at houses, because it is way more important than the details of the structure itself. Beginner buyers often say things like, “Oh, I’ll just live somewhere near the interstate, so that way it’s easy to get anywhere”. Instead, I suggest starting with the assumption that cars don’t exist, and designing a life around that assumption instead. You’ll still have your cars, of course. But your level of need for them, and thus the quantity of money and time you waste sitting on your ass in them, will be completely different.

With a bit of planning, it’s almost always possible to put work, grocery store, school, library, and anything else you need right within the area you live. By looking for public amenities, you can get many of the benefits of a country house right inside the city, as shown in the picture above. The more things you live near, the less you need to own yourself.

Rent vs. Buy: There are a few old bits of folk wisdom that need to be put out of their misery. “Real estate is always a good investment, because it never goes down.” “They aren’t makin’ more land, so buy it now.” “Renting is just throwing your money away. You should buy, because you’re building your equity.”

In expensive areas (homes start at over $300,000), the math often comes out in favor of renting. In cheaper areas, especially with the currently-low interest rates, buyers usually win. In between, there are some considerations that tilt the balance: people who prefer not to maintain their own house should be renters (because the contractors will eat you for lunch if you do things like calling a plumber to fix a broken toilet). People who love customizing things to their own liking might still prioritize owning. But in either case, there are costs: if mortgage interest plus property taxes and insurance alone add up to more than rent for an equivalent house, you are throwing more money away by buying than you are renting.

Fixer-Upper or Fancy Luxury: much like the rent-vs-buy decision, this question often depends on how expensive the target area is. In pricey hotspots, everything sells at a premium – a renovated 3-bedroom house might be worth $200,000 more than the same thing in dated condition.  Since it costs far less than 200 grand to renovate a house, you’re better off with the fixer-upper. But there are still many US towns where houses are selling at less than their construction cost*, even assuming a land value of zero. In this case, you might as well get all the quality you need while it’s on sale, since even DIY-renovation will cost more than purchasing an already-nice house.

Ignore the Fluff, and See Opportunity in the Bad: When touring houses with buyers, I’ll often hear things like, “Oh my god, I love this pantry!”, or “Daaayumn.. this place smells dingy.. let’s get out of here.”

Small details like a set of wooden shelves with gourmet spaghetti sauce on them, or an old carpet that has absorbed more than its share of bodily fluids tend to have a big impact on buying decisions, when really they should not. These represent things that can easily be changed, at a tiny fraction of the cost of the house itself. Would you make a car buying decision based on how full the gas tank or the wiper fluid reservoir is?

Pay More Attention to Big Details: For example, which part of the house faces the sun? My pet peeve is houses that have little windows peppered into their exterior with no regard for what sort of heat and light they will let in. If you live in an area where heating is a significant expense, you want a house oriented on the East-West axis with a large area with lots of windows facing the sun. If you are in a hot climate, you want something with large roof overhangs and some shade. How efficient is the furnace, air conditioning, insulation, and water heater? These things make a difference of thousands of dollars per year, which makes them more important than most other home features. And good solar exposure and window placement can make for a happier living environment in general.

An interesting question is whether size, or square footage, is really a big detail. According to traditional real estate agents, it is one of the biggest. Square footage, relative to other houses nearby, is the biggest factor that goes into setting a listing price and doing appraisals. But as a buyer, you can safely ignore it. More important is, “is there a large enough common room for my family and friends?”. This can happen in an 800 square foot house, or be oddly lacking in a 3500 square foot one. Our “new” smaller house, for example, will be almost as useful as our current place, because a big chunk of the missing space is stuff that isn’t really living space anyway (hallways, staircases, an overly-big master bedroom, etc.) The new house is all at ground level, which makes for an efficient layout.

Take your Time: For the past eight years, I’ve researched every listing and every eventual sale in my area, so I’ve soaked up the market on a fairly deep level. Within the span of any given year, I see houses sell at both ridiculously high, and ridiculously low prices, given their quality and size. The market is hot in summer, cool in winter. And there are frequent random events, like a bank dumping a foreclosure at $100,000 below market value or an estate sale with an out-of-town realtor setting the price way too low.

Given the large sums involved, it makes a lot of sense for a home buyer to plan to shop for six months or more, rather than rush to find a house during a brief window of a summer vacation or a weekend househunting tour. If you spend 50 hours researching houses, but save $50,000 on a purchase because of it, what is your hourly rate?**

Move Fast when the Time Comes: You found a great house, and you know it is underpriced. Do you go away for the weekend and think it over, then maybe try to set up a showing next week? No. You tour it within a few hours of its arrival on the market, and you make an offer before you eat dinner that night. Good deals go quickly, so if you want one yourself, you must be even faster. Earlier this year, we found one of these bargains and had our offer in within 8 hours of listing time. We lost it to another person who only took 6 hours.

And that’s it! Sure, there are plenty of meat-and-potatoes details missing, but you can get those from a real estate agent who is trained for your own city, state, and country. This guide just represents my idea of what seems to be missing in the process for most beginners.

House shopping is much like car shopping: as soon as you train yourself to look beneath the superficial veneer, you gain a huge advantage in the marketplace. So good luck.. and maybe I’ll see you at the party in the beautiful park that is my new back yard later this month!



* I find that building a house in the US costs between $100-$200 per square foot (in the average-cost Denver metro region), depending on quality level. So a 2000-square-foot house selling for $150,000 is an unsustainable bargain – the prices will have to rise on these someday assuming eventual demand, because nobody can make more at that price. Omaha and areas near Dallas seem to have these amazing sales, among other places.

**One shortcut to this is if you can find that rare ultra-sharp, patient, analytical real estate agent to provide the market intuition for you. But these are 1-in-100 in my experience, and unfortunately Mrs. MM is not looking for more business :-)

Another big shortcut is to  strive to avoid wasting time: your own, the seller’s, and your realtor’s. So you start by getting all your information online – reviewing all available pictures, scoping out the area with Google Maps and Street View, and doing a walk-by inspection of any potential house.. all before setting up a showing. Only if you can still imagine buying the house at this point, do you bother committing to a tour, an act which involves consuming about 8 hours of other people’s time, and should thus be taken seriously.



  • Squeakywheel September 4, 2013, 4:40 pm

    Congrats on the new house! I’ve been wondering if you would see the light and downsize. Smaller is better for sure!

    • Free Money Minute September 5, 2013, 7:11 am

      I agree. I would much rather have more land and less house, than more house and less land. Although I am okay with a decent lot and a modest home. Looking for the right opportunity.

      • Suzan September 5, 2013, 6:56 pm

        I am looking for more land with a small house and finding it very difficult

        • tallgirl1204 September 6, 2013, 3:50 pm

          My folks had a 1500 s.f. house on two acres. When we went to sell it, it was impossible to figure out how to price, because (1) we were two years into the downturn so everything was wonky and (2) there were NO comparables on the market– everything was either a modest house on a small lot or a HUGE (6000 foot plus) house on acreage.

          We priced it best we could, and had three offers the first week, one of which we accepted. Then the fun began as the bank insisted on an appraisal based on comps– which (did I mention?) didn’t exist. It took about eight months to close.

          The buyer told us what you just said– she had been watching the market for a couple of years for a smallish house on a piece of land. A hot commodity.

          • suzan September 6, 2013, 7:59 pm

            I would have bought it if it was in my area I am sure. Why cant builders understand that small is better?

            • winstongator September 11, 2013, 4:45 am

              Builders and developers want to maximize their profit, and the value of the land is a big chunk of that. Bigger homes on smaller lots increases developer profits (higher priced homes pulls the prices of lots upwards).

          • Marcia @Frugal Healthy Simple September 7, 2013, 12:05 pm

            Yep, it’s really hard to find. Of course, everything is expensive where I live. So bigger houses are on small lots, and smaller houses are on really small lots.

            • Squeakywheel September 10, 2013, 9:33 am

              Yes, our small house is on a very small lot. But the backyard (more like a patio) is very woodsy and private. And we are 1/2 block from a great park, which is where the kids spend their time. Lots of outdoor space avail, but we don’t have to pay for it! Sounds like the MMM family will have a similar setup. Sweet

              At least partly due to the paid-off small house, we are about to retire, just have to decide when to take the leap. Our friends are incredulous. Of course they all have big houses and mortgages. I remember before we bought when we showed the house to one friend, she said she could NEVER live in a small house like that! Wonder what she will think when we retire, if she will see the link between the two?

      • RetiredToWin Alex March 10, 2015, 12:05 pm

        “Enough land” is what we looked for as our #2 priority, right after Location as our #1 priority. (You got that right, MMM!) We were looking for our 4th house and we had learned a BIG lesson: It’s the PROPERTY that was really going to make the difference in how we would live and how satisfied we would be. (Just like one of MMM’s new house’s major pluses is the property’s abutment to a nice public park.)

        So, on our written list of “gotta haves” right at the top it read: minimum 2 acres and no close-in neighbors. That helped a lot to keep us focused on what was really important instead of going ga-ga at the finish on a countertop or the designer sink in the bathroom!

    • Debt Blag September 5, 2013, 11:24 am

      Yup! I can never complain about the small place I live. It’s the right size for the four of us, easy to clean, and inexpensive to heat and cool. Well done :)

  • Mark Ferguson September 4, 2013, 4:45 pm

    Really good article. You made a lot of great points and I have been a Realtor in Northern Colorado for over 10 years. I would say that square footage matters as far as resale value. If you have the biggest or smallest house in a neighborhood it can effect value greatly relative to the cost per square foot of homes that are closer to average size for a neighborhood.

    Getting an offer in quickly is one of the most important things one can do in this market. I get a lot of deals because I can submit an offer in less than two hours after a home is listed.

    I agree about your new construction point. Many people think we are in another housing bubble, but the last REO cycle completely stopped building. We had no building in seven years, but increased population. The REOs provided all the inventory for the buyers and now that REO has slowed down, there aren’t enough houses in the low end to meet demand. Builders can’t build for under 200k in most cases to meet that demand. Prices have to go up, unless the economy tanks.

    • Mike F September 5, 2013, 10:36 am

      I think household growth is more indicative of where the market is heading vs population growth(which by the way, is growing 0.7% but at a long term decreasing rate). There has been the secular trend of later marriage and later childbearing along with smaller family sizes that would point to fewer households created. This is in addition to the cyclical trend of very high unemployment among the 18-34 cohort which is exacerbating the decline in total households per capita.

      • Dee September 5, 2013, 5:24 pm

        But couldn’t this trend also indicate increasing number of households because of the rise of 1-person households? It isn’t unusual for single adults to own their own homes nowadays.

    • Debt Blag September 5, 2013, 11:26 am

      Well now this is a super-interesting point.

      Would a small house in a neighborhood of large houses have a higher value than a small house in a neighborhood of small houses?

      I would guess yes, but am curious now :)

  • Mrs. PoP September 4, 2013, 4:53 pm

    A few other things:
    (1) Avoid HOAs and condo associations if possible. You are tying your financial decisions to others which isn’t always prudent.
    (2) In some parts of the country, outdoor area, even if it’s enclosed, is only loosely tied to your property tax appraisal. Our interior is 1,100 sqft, but we have another 1,600 sqft in garage space (400) and enclosed patio (1,200) that we pay a minimal amount of property taxes on. We’re out there virtually all year round, so we have a house that for all intents and purposes is about twice the size of what it should be considering our tax bill.
    (3) Ugly is easy to fix. You’d be surprised how far paint, new fixtures, and good cleaning solvents go to making a place that’s 30 years old look up to date!

  • Mary Ellen September 4, 2013, 5:02 pm

    I am with you on the pet peeve about tiny randomly placed windows. I am a designer, and find this kind of thoughtless design painful. A new house was just completed on an infill lot a few blocks from my mine that doesn’t have ANY windows on the south side. They even built a top story deck up there with a roof and a totally unnecessary wall along the entire south side. In the dark Seattle winter natural light comes at a huge premium, and this is just wasteful. This brand new house sold in the high 600’s, but in a few years it won’t be so shiny and new, and I have to think that gross design flaws will cripple its value, like the shoddy infill houses of the ’80s.

    On the other hand, any number of 100 year old craftsmans in the neighborhood are still charming and gracious places to live with plenty of windows, large front porches, and half the square footage of the infill homes currently being built, and their values are consistently high as a result.

    • Debbie M September 5, 2013, 8:43 am

      My house also has no windows on the south side. But in my part of the country, that’s awesome. (Why yes, it is expected to get to 100 degrees again today.) And my south side is less than six feet from my neighbor’s north side, so they get to have windows and not worry about us looking in.

      Inside, we have a giant fabulous set of floor-to-ceiling bookcases along that wall, so it works for us.

      Also, we have ten windows in our 960-sqare-foot house; all but the bathroom and kitchen ones are floor-to-ceiling and four feet wide, so we get plenty of light. But it’s hard to place furniture if your windows are gargantuan like that! So it is possible to err in the other direction as well.

      • Gina September 9, 2013, 4:20 pm

        Debbie, we deliberately built our house with very few windows on the south side for the same reason – really hot summers! And it’s still the warmer part of the house, even with foamed walls/ceiling/floor. I only wish we had also put a deep porch along that side of the house as well! We have them on the other sides and they make a huge difference. We’ll be planting some shade trees soon.

    • PawPrint September 5, 2013, 9:06 am

      And what’s up with all the “boxes” they’re building? We moved to Seattle four months ago, and all we’re seeing are three-story condo boxes with flat roofs. I understand the need for dense housing in urban areas, but the condos look like boxes stacked on top of each other.

      • Mary Ellen September 5, 2013, 10:12 am

        I know exactly what you mean. We refer to them as ‘big grey boxes’. It is like they passed an ordinance that you must maximize your allowable building envelope, put the door on the second floor, and wrap it in grey hardy board. That is not going to look very appealing in 10 or 15 years, but builders are convinced that it is they way to maximize their profits right now. I would never look at buying one, but they seem to sell quickly, so maybe the builders are right.

  • Bob in Denver September 4, 2013, 5:04 pm

    Pay close attention the major mechanical components of the house. I am getting somewhat killed on my house because the foundation was made of swiss cheese (well, really a double row of bricks buried 18″ underground, but after 120 years, the effect is the same). I’m only saved from an equity perspective because of the rising Denver market after dumping a lot of money into the place.

    Older houses can have asbestos & lead paint which make everything more expensive when remodeling.

  • Christine September 4, 2013, 5:30 pm

    Congrats on the new house! Do we get to see pictures? I’m moving near a lake and closer to work. My current home will be rented out. However we are going bigger, not smaller.. But who knows? Maybe someday we will go smaller again!

    • Debt Blag September 5, 2013, 11:27 am

      Wow. Near a lake! And bigger! That sounds like it is going to be nice to look at indeed :)

  • Chris September 4, 2013, 6:12 pm

    Interesting to see the relative costs of houses. I live in Western NY where we have ridiculously low and stable house prices. My wife and I casually browsed listings for months when we saw our current house and figured it must have serious issues: 2700 sq. ft., passive solar heating and local municipal electric that’s about 1/3 the typical cost – for $165,000! We definitely have too much house for our family of three plus two cats and a dog, but we’re working on that ;)
    Nobody could look past the 40 year old decor and they all passed. We saw a great chance to get a great house cheap with a little elbow grease and hard work.

    • Lisa September 4, 2013, 6:57 pm

      Nice Work Chris!

  • Rory September 4, 2013, 6:57 pm

    Congrats on the new purchase. I’m glad to see you downsizing rather than moving up. Keep it mustachian.

    My wife and I tried recently to sell our home and move closer to our respective workplaces. When we went house-hunting we were paying attention to a lot of the things you mentioned in the post. However, we just never felt comfortable moving on an offer in 6 or 8 hours. Part of the reason is that we aren’t real estate professionals. Another part is that we often work long days and often can’t even view home in 8 hours.

    We ultimately made an offer to buy a home within biking distance of one of our jobs; it was contingent upon the sale of our home. But here we are 3 months later with only 2 showings on our current home. Last month someone else purchased the home we were considering.

    Any advice on whether or not to simply purchase before selling your existing home? I know we’d save money moving closer, but part of me thinks we may have dodged a bullet by making the contingent offer and being able to back out instead of a bath on the sale of our current home in the country.

    • dottie September 5, 2013, 8:02 am

      three months and two showings = house priced way too high

      • Melissa September 5, 2013, 5:41 pm

        In selling my old house, my grandparents’ homes, and my mother’s condo–we had showings nearly every weekend and 15-20 nice (carefully taken in good light) photos online with detailed house highlights. These were your run-of-the-mill homes, nothing special, and they sold fairly quickly. Mostly due to the photos, we felt. If you want to sell, you need to really go for it with descriptions, photos and be open to showing it often.

    • Patti September 7, 2013, 6:34 am

      Agree that the lack of showings means your price is too high. We listed our house August 2 and the phone began ringing less than an hour after the posting hit MLS. We had four offers within two days, all above asking.

      It all depends on your motivation. We knew going into the listing that we were NOT going to get the same price for our home that we might have received five years ago. Our realtor gave us a realistic range of prices based on comps and we decided to go with a middle of the range price. Our objective was to walk away from the deal with at least twice what we are paying for our retirement home in another state. That meant we could list at a competitive price and let the buyers bid each other up. It worked for us.

  • Mike September 4, 2013, 7:01 pm

    Good stuff! My wife and I bought our first house in June, 2012. Housing in the Boston Area is not cheap, so this certainly represented our largest financial transaction to date. We spent 12 months studying the local market and educating ourselves on the buying proces. Here are some of the things we found of value:

    1) If you are moving to a new neighborhood, do your due diligance. This means visiting that neighborhood multiple times to verify that it is a fit for you. Go out to dinner, talk to the locals at the grocery store or library. Take a walk through the neighborhood after dark. Check out spotcrime.com. For those like us that rather leave the car in the garage, try walkscore.com.

    2) Study sales transactions in your target market. If you have to ask your real estate agent what he/she thinks the house is worth, you haven’t studied enough. After you look at enough transactions, you’ll start to know a good value when you see it.

    3) Consider the operating and near term repair/replacement costs of major items once you’ve identified a target home. In Boston, everything is old, so when we found a home with updated electrical, new insulation, a new water heater, a newer roof and gas heat, it was a winner!

    4) Consider utilizing a buyer agent. Your state likely has an association of buyer agents and is a good resource to get started. Interview no fewer than three. Prepare your list of questions ahead of time, ask for referrals and call them.

    5) Consider buying in towns that offer a residential exemption on your real estate taxes. A residential exemption, as the name implies, simply means you live in the home full time rather than renting it. I’m not sure how prevelant this is across the US, but our discount saves us about $1,500 per year.

    6) If you are on the lower end of the income scale and a first time buyer, inquire with state and local agencies about their various financial assistance programs. Though we didn’t qualify, we learned that both the City of Boston and the State of Massachusetts will throw free money at you to get you into your first home.

    7) Spend a little extra on a good home inspector. Take the inspection seriously, as this is free education from an expert. We spent $600 for our inspection but shaved $5,000 off the purchase price based on what he found.

    8) If you still have your cable TV, there are a couple of channels that focus heavily on home buying, renovations, investment properties, home inspections, etc. It’s good stuff. Sorry Money!

    Keep up the great work MMM!

  • Stephen September 4, 2013, 7:39 pm

    Thanks for posting this! I had this on my list of things to write but you save me the trouble. Now I can just link to your article. I think to many economist (and engineers) think like this intuitively. However, understanding that is a rare breed, thanks for putting everything together into one place. I really like the part about the efficiently of the house when it comes to layout (and energy too). I find that square footage is often overrated and that our current 850 sf house is actually much more functionally efficient than many properties twice the size. And my favorite part is buying with the idea that public spaces can serve as a freely maintained playground that is often better than individual ownership. Ride a bike. Play in a park. Love it. Congrats on the house!

  • Maslow September 4, 2013, 7:42 pm

    Another great post! I totally agree that most people get “caught up” in a property way to quickly! They fall in love with a particular collection of construction materials situated on a particular piece of land that hours or days ago wasn’t even in their world of consciousness, and they’re toast…they get tunnel vision, don’t even consider alternatives, and end up paying the full asking price (even if it’s not a reasonable one).

    With my most recent house, I made a pact with my wife that we wouldn’t even crack a smile in the presence of the listing agent during the showing…!

    Looking forward to hearing more about the new house, MMM! Another example of Mustachian innovation…”rightsizing” by design.


  • Miss Growing Green September 4, 2013, 7:43 pm

    Excellent post! Downsizing from a larger hose will have so many benefits- less property taxes, less utilities (because of less space to maintain), less area to keep clean, fewer things to repair, lower property taxes, and a smaller carbon footprint. I am a huge proponent of the small house concept.

  • FI Pilgrim September 4, 2013, 8:25 pm

    That’s awesome, congrats on the find! I’m sure it helps to have a real estate agent for a wife, but I’ve found that just keeping my ear to the ground as far as what houses are selling for in nearby areas has provided the most valuable information. I often end up house shopping myself, and totally ignore the real estate agent’s recommendations.

  • PFgal September 4, 2013, 8:30 pm

    I’m a big fan of large windows, so I’m glad you mentioned that. Especially in our dark New England winters, I want to get all the light that I can!

    More than that, I appreciate your comments about renting vs. buying. Friends often talk about the “waste” of renting, but in the Boston area, renting is usually a better deal. When I try to show them the numbers, they just don’t want to see it. Why pay $350,000 plus taxes plus condo fees when I can just continue to rent? Besides, I’m not a DIYer when it comes to repairs, so I’m happy to let the super fix everything that breaks in my apartment (and in these 100+ year-old buildings, a lot breaks.) I think it’s better to know yourself and find what’s best for you, than blindly reach for the “American Dream” of home ownership.

    I hope you enjoy the new place!

    • Devorah September 25, 2013, 5:26 am

      The reason for buying is because some day you stop paying that principal. Condo/HOA fees and taxes you don’t though.

      • Tyler July 16, 2014, 9:50 pm

        If you take all of the money that you save by renting instead of buying and invest it, the returns will eventually pay your rent for you. Additionally, you’ll have a large chunk of capital that’s not tied up in an illiquid asset like a house.

        The math can work out in favor of buying *or* renting, depending on the area.

        • Devorah March 10, 2015, 6:13 pm

          I’ve never seen that happen where I live. Although I have unusual medical costs that cost more than my rent, so it muddles any theories of saving a difference. If I build, sustainably, I have the opportunity to save a third on the total price of the house. Soooo, there’s something, in theory.

  • GamingYourFinances September 4, 2013, 8:38 pm

    Congrats on the new house! When we bought our house we took over a year to decide (probably drove our real estate agent nuts!). One of the funniest incidents was during an open house when we overheard another couple say that they would never buy that particular house due to the “ugly color on the walls”….. Seriously!?! The color is how you decide?!?

  • insourcelife September 4, 2013, 9:13 pm

    Damn it MMM, you are making rationalizing staying in our big house that’s similar to your current one that much harder! Congrats!

  • EL September 4, 2013, 9:52 pm

    Frugality has no bounds, congrats on this new milestone. I noticed you are way ahead of the average person, because people tend to downsize when the kids move out of college, and yours has not even graduated middle school.

    • Mr. Money Mustache September 5, 2013, 9:15 am

      Thanks El.. some of this early downsizing was because of the family size adjustment: We originally bought this house with one 5-month-old in tow, while planning an eventual second child. Then we changed our mind and decided one child is plenty, and thus some of this extra space would never be used. Plus I started this blog, which has led to a lot more reading and thinking about minimalism and happy living in general. So my old Big-House mentality is fading away as I get older. Very convenient!

      • Insourcelife September 5, 2013, 10:00 am

        So does that mean that if you decided to have 2 kids you would stay in your current house? We plan on having 2 and I still think ours is too big at 3,100 sq. feet, even though I love the house. We don’t want to move though for many reasons so I was thinking about renting out our 3rd floor with it’s own bathroom on airbnb at some point, probably when the kids are older.

        • Laurie September 5, 2013, 12:12 pm

          I’ll throw in my two bits. We have three children in a home just under 1400 sq. ft. It has a very functional layout with no wasted space. It has 1 1/2 bath, which at times causes me to dream about not sharing a bathroom with the kids. However, whenever cleaning time comes around, I am reminded of how much I dislike cleaning bathrooms, and I feel grateful again! The other advantage we have noticed is that when we feel a need for more storage space, we realize that we have acquired too much junk. It is sometimes hard for me to remind myself why I don’t need more space in a world so focused on materialism. My personal “punch in the face” is remembering my time living in southern Chile. I met a lot of happy people living with hardly anything. Truly I live in luxury.

        • eldub September 5, 2013, 12:46 pm

          Hey, we’re raising 2.5 year old twins in 850 (beautiful) square feet. Now I know we won’t fit two teenagers into their one tiny bedroom one day, but I see it working probably for the next 8 years or so. Efficiency is key!

        • Lucas September 6, 2013, 9:05 am

          3 kids here in 1250 sqft (official) + 300 sqft furnished basement space. Totally doable, just have to make use of wasted veritcle space (installed storage in attic, bunk beds, better shelving in closets, etc. . .). I would like a better yard area but don’t think we will move or anything while I have my current job here.

        • CincyCat September 6, 2013, 10:54 am

          We have 2 kiddos in a 1940’s cape cod, and all four of us share 1.5 bathrooms. You just have to get creative with when baths/showers take place (hint – right after school, or before dinner, gets them just as “clean” as at bedtime…). Our house is more “spacious” than others on our street, with finished attic bedroom space, AND a finished basement, but it still feels like way too much space sometimes.

          That said, there is very little “wasted” space as far as the floor plan / layout is concerned. There is no long “hallway,” and closets are narrow, but tall, so they don’t eat up that much floor space.

          Most of the “extra” spaces (utility room, unfinished attic areas, garage) are just full of junk we hardly ever use. The stuff we actually use takes up very little space. (For example, our entire ensemble of holiday decorations fits into 2 plastic tubs & a tree box, and could easily fit in a closet.)

          Other families on our street have raised 5 – 7 kids in similar sized houses/layouts as ours. They had this crazy idea that kids of the same gender, or who are under the age of 5, can *gasp* SHARE a room! (Craziness, I know!)

          • MickeB December 20, 2013, 1:16 am

            I grew up in similar circumstances: 1150 sq ft with four kids (age 2-11) when my parents decided to extend the house with another maybe 500 sq ft – maybe needed, as there were two more kids to arrive :)
            And yep, of course we shared rooms. I never saw the problem with that!

        • Anne-Marie September 19, 2013, 9:53 pm

          We have 7 kids and our house is about 1700 sf. The key is how usable the space is, not just how much there is. At one point the five girls shared the 17×17 room intended as the master bedroom. Now that the three oldest are in college and soon to move out, we are looking to downsize.

        • GTArea May 20, 2014, 1:46 pm

          Another one plugging multiple kids in an average house. 3 bedroom 2 bathroom, not sure of square footage but it’s a side-split with a backyard that makes the house look small. We could nearly triple the house size if we got out of this urban area, but we’d have a much longer commute and I’d rather spend that time with my husband and kids than stuck in traffic or in a train. 10yo girl in one room. 8yo and 5 yo boys in bunk bed in the other room. The basement is a playroom right now but we can turn it into another bedroom if/when the boys don’t want to share the room. To date, it hasn’t occurred to them that they wouldn’t share a room. Really don’t need a big house for kids.

  • Jim Weston September 4, 2013, 10:35 pm

    Congrats on the new house MMM! Interesting that you are downsizing. I understand the logic, however you obviously can easily afford the bigger house easily enough. I definitely respect your courage to use less than you are able to!

    • Uncephalized September 6, 2013, 8:51 pm

      At the risk of speaking for someone I am not, I really doubt MMM sees this as a decision requiring courage or that he is taking some kind of major risk. :-)

      Good work, MMM! Keep living your principles.

  • Josh September 4, 2013, 11:01 pm

    Nice article! An article on financing a house could also be helpful for first-timers. I bought my first house about 7 months ago. Lenders may try to talk you into doing stupid things like paying PMI. I didn’t fall for it, but it may be good for people to be aware of this from the start. I almost had some trouble getting a good loan because some lenders require a minimum of 3 trade lines for a year each for a conventional loan. I didn’t know that while I was building my credit score, and was not told about it even though I asked way ahead of time. Luckily, I found a lender that did not have a minimum number of trade lines requirement. They may say they all have to meet the same requirements since the loans go through the feds, but that was not true in my case.

    • MN Mitch September 12, 2013, 9:42 am

      An article about financing for first-time buyers is a great idea Josh for MM! In our mid-20s my wife and I recently bought our first home and were overwhelmed. Our budget was $180k but bought at $215k which caused some anxiety and felt guilty (did put 20% down). However, our realtor/lender said no young couples underbought like we did (with $140k annual HH income – we were approved for a ridiculous higher amount) and we see that with many of our friends/coworkers in 20s buying at $300-$400k!!! Whatever happened to starter houses and working up?

      • CO Zebra December 23, 2013, 10:55 pm

        Where I live, $400k is a starter home. At least if you want to be anywhere near where your life is, as MMM wisely advises. Location, location, location.

  • Annamal September 4, 2013, 11:08 pm

    I have to admit to being a little jealous, New Zealand is currently going through a period of collective insanity regarding house prices.

    I suspect it will eventually tail off for a little while but it feels like a very bubble like market in the 3 main centres at the moment

    • Meghan September 6, 2013, 4:07 am

      Hey Annamal,

      I am in Auckland! Nice to see another Kiwi on here. I know what you mean about the insanity in Auckland at present. I work for one of the major banks. Changes are on the way. Interest rates are increasing and Low Equity Margins are doubling on high LVR properties.

      I’m watching what happens in the next couple of years. There are many people who have maxed themselves out and will struggle when they come off their currently very low interest rates.

      Hubby and I are intending to buy when property becomes unpopular again. We will do like MMM and rent out our new place until it is a good time to sell our current house and pay off the new property.

      • Annamal September 7, 2013, 2:01 pm

        Hi Meghan

        Go kiwis =)
        I’m Wellington based so the market is less frothy usually…except for right now when there are a lot of panicked people looking to get in before LVR limits.

        In theory I could buy now but I would be competing with people who seem to be really irrational (last time we went to an open home there were more than 100 people present).

        I have a nasty feeling that a lot of people are buying houses that could become un-insureable as well and that is a real concern with the recent spate of earthquakes.

        We’re renting at the moment but our savings are ever-increasing so we should be ready to act when the crazy stops.

        • Godder October 1, 2013, 1:04 am

          I’m in Chch, NZ – we bought for $300K 6 months ago with a deposit of $33K, but that seems to have worked out well given the current market and new lending restrictions! Prices closer to work are stupidly high, so that wasn’t an option, but maybe when things settle down (and we’ve paid more into the house)…

  • moneystepper.com September 4, 2013, 11:58 pm

    Congratulations on the new house and what a brilliantly thorough article.

    I think the point that hit me the hardest was the “mindset”. Too many people get emotionally over-involved in the transaction and it can end up costing them thousands of pounds/dollars/other!

    I also am really impressed with the decision to downsize. If you are not going to use the space, its just wasted cost to maintain.

  • Shandi76 September 5, 2013, 1:25 am

    Congratulations on your new house. Would love to see pictures. Did you manage to get your offer together so quickly because you are purchasing in cash?

    I’m probably going to be buying a new property (moving to a new city) in the next 12 – 18 months. I’d love to be a cash buyer but unfortunately the new city has much higher house prices than my old one and I am reluctant to sell shares to fund the purchase.

  • KruidigMeisje September 5, 2013, 1:59 am

    While not I would not choose based upon easily changed details as a mouldy carpet, I would very much MENTION it, while negiotiating over an offer (in NL we have a buyers market at the moment).
    In removing all these details in my SO’s house, we were able to sell at a decent price within a month – while the average sales time was going over the 12 month limit at that moment. I also used all the nagging details when I bought my own home. Probably my best hourly rate ever: a few (let’s say 3) hours of telefones and mails and getting 23,000 off the price. Even if I calcate all hours of the 4 days this took, I get to an hourly rate I never have been paid as salary.
    But then, I work along the same lines as MM (though I did have a time limit then). An engeneering mind can pay itself in unforeseen ways, it seems.

  • marcus September 5, 2013, 2:20 am

    Congrats on your new house MMM. Regarding the topic of rent vs. buy, what are your thoughts about places like bay area where homes start at 600+k?

  • charles September 5, 2013, 4:28 am

    Congratulations on the new house, you’re right on having a good analytical real estate agent. In the real estate industry I have found the bad ones outnumber the good ones 10 to 1. The worst are the ones who under price the house by a lot, get multiple offers and claim its thanks to their effort. They end up costing the seller thousands due to incorrect pricing, but take credit for selling in one day.

    • Mr. 1500 September 5, 2013, 7:37 am

      Yes, good agents are hard to find. My favorites (sarcasm alert) are the ones who brag about an elaborate marketing plan. Everyone in the industry knows that it’s really the MLS that sells a home, not the postcards you send to the neighbors announcing that your home is for sale.

      My favorite agents are ones that are highly educated and are now in real estate because they need something to do after leaving the corporate world.

  • ChicagoTransplant1976 September 5, 2013, 5:24 am

    Thank you for this great article.
    I just closed on my new home yesterday and based on your previous I think I applied your principles and advice correctly.

    However, any feedback or additional advice would be helpful.
    Here are the details:

    1 mile from work
    < 1/2 mile from schools, grocery, library, parks, public transportation

    Home type:
    2 flat/duplex

    Purchase Price:
    15 year fixed mortgage
    Interest rate: 4.125

    Expenses per month:
    Mortgage interest per month: $1900
    Principle payment per month: $2300
    Property taxes per month: $650
    Property Insurance per month: $120

    Rental Income per month (we live in one unit, rent out other)

    Total monthly expenses:
    $4970 expenses – $1800 income = $3170 but $2300 of that is toward principle so expenses are $870

    There is no HOA and we were able to get rid of one of our cars. I did not add maintenance (we do almost everything ourselves) or vacancy rates (current tenant has been here for 10 years).

    I know $635,000 is a lot but I only looked at homes with rental income and at an efficient location.

    Any comments from others would be helpful too.

    • Mr. Money Mustache September 5, 2013, 9:07 am

      Sounds like a pretty Badass move to me – Congratulations!

      • ChicagoTransplant1976 September 9, 2013, 6:51 pm

        Thanks MMM for the comment. I’m a huge fan and you are one of my top role models in life so having your approval means the world to me!

      • theFIREstarter September 10, 2013, 4:49 am

        Hey ChicagoTransplant, sounds like you are doing well there… your comment got me thinking about MMM’s advice:

        “If mortgage interest plus property taxes and insurance alone add up to more than rent for an equivalent house, you are throwing more money away by buying than you are renting.”

        It has taken me an embarassingly long time to fully appreciate this statement… I kept thinking that there is something missing out of the equation, i.e. paying back the principle.

        The key words I glossed over were obviously “mortgage INTEREST”.

        I am going to run the numbers on our humble flat near London later on to see how we are faring against renting, but my intuition tells me we will come out on top… although helped no end by the ridiculously low interest rates we are experiencing over here as well at the moment.

        Another lightbulb on moment inspired by the MMM blog!

        • ChicagoTransplant1976 September 10, 2013, 10:15 pm

          Hey Firestarter, I have read almost all of MMM’s articles and I try each day to reduce my consumption and to live an efficient life. Being a landlord is way easier the closer you live to the property and you can’t get any closer than living in the same building. Plus there are tax and mortgage benefits to living in the same building as your renters.

  • lurker September 5, 2013, 5:45 am

    Congrats! Even sounds like the new place has enough space for that Permaculture Food Forest I have been planning for you guys!!!! LOL

  • TallMike September 5, 2013, 6:46 am

    When my wife and I bought our house five years ago we enjoyed using walkscore.com’s website to scan for local services within walking distance. It was also fun to look up our parents’ homes and seeing their abysmally low walkscore ratings. One limitation (at the time, perhaps they’ve improved this) was the site makes assumptions about what qualifies as walkable with a fairly short leash; walkable means less than 0.5 miles away (0.8 km for the more enlightened metric readers…). In our family, walkable means something like less than one mile. So, a good tool that benefits from some personalized post-processing. I suspect any good Mustachian could make the mental adjustment.

    • PawPrint September 5, 2013, 6:55 pm

      When looking for a rental in Seattle, I looked at walk scores and could not figure out how they worked. What I was looking for in walkability was to be able to walk (1 mile or less) to the grocery store, the post office, the library, the bank, perhaps a coffee shop (it is Seattle, after all) and a bus stop. The places with the highest walk scores were close to restaurants and shopping, but not grocery stores, banks or post offices. Coffee shops abound here so that’s not really a problem. I looked at my old house in another state where the walk score was 50 and realized it was within 1/2 mile of a grocery store, less than that to the bank, and within a mile of a post office and library–acceptable distances to me. Luckily, I found a place in Seattle where I can walk a mile to QFC, two miles to Fred Meyer, a mile to the P.O. and there are three different library branches within a mile. The coffee shop is only three blocks away–I’ve been there once in four months.

  • Basenji September 5, 2013, 7:20 am

    Older homes are built better. Ours is an old workhorse from 1939, built of brick, and made to last.

    +1 on south-facing windows. We have a whole wall of southern facing windows in the front room. We close the drapes in summer on sunny days and keep them open in winter to maximize solar gain.

    Re the Ugly: The house we bought (and love) was on the market for more than a year (back in 2007-2008). I’m sure one reason it lingered was a truly horrible old bathroom (NOT charming 40s tile, but crap fixtures, shallow cheap tub, hand “marbled” paint, glued on wood wall decor–fugly but functional). I was THRILLED when I saw that nasty room because I knew it meant full gut job and future bathroom of my dreams. Ugly but with fairly up-to-date systems and general soundness of construction is the way to go.

    • Mr. Money Mustache September 5, 2013, 9:06 am


      Regarding old vs. new homes: I actually maintain the opposite opinion – fairly recent homes in the US are much better built than older ones, thanks to the adoption of ever-stricter versions of the international building code. This affects everything from structural strength and insulation to window sizing and electrical and plumbing. Anything from about 2000 onwards should be pretty rock-solid.

      Now that I’ve built a few places from scratch and renovated a bunch of other ones, I can see how sloppily made most older ones are – especially wood-framed ones. There is no structural strength whatsoever, and many of them lean an inch or more in one direction and have sloped floors due to pile-of-stones foundations.

      Even a cheap new house today will be well-built.. but it may have cheesy plastic-based finishes like carpet/vinyl/particleboard. You can tear these out and replace them with natural materials and have a structure that will last for 300+ years. Of course, you’d want to look for non-shitty architecture too if a house is going to stand so long.

      The exception would be the classic East-coast brick and stone houses with solid wood staircases and windows, etc. In that case, they really don’t make ‘em like they used to, unless you’re willing to pay about twice as much to build it due to the labor intensive nature of the older materials.

      • Justin G. September 5, 2013, 11:05 am

        Unfortunately, in my town all the new houses are at the edges of town, far from the library, YMCA, grocery stores, parks and other good stuff. All the listings proudly proclaim things like “only minutes from the interstate!”

        With that in mind, I will almost certainly be buying an older house.I know houses built in the 70s and 80s are especially poorly built, but the houses I’m looking at are mostly pre-WW2. I’m just trying to decide if it is worth paying significantly more for an older house which has recently been stripped to the bone and given new insulation, siding, roof and drywall (and unfortunately a crappy new kitchen) or dive in the deep end with a fixer-upper.

      • David W September 5, 2013, 11:42 am

        I’m with you on this as well, building codes along with modern materials have really improved the quality from a strength and durability perspective. On the flip side though, some older homes were built like tanks. My grandfather’s brother in law was a forester and had his house framed with solid oak, floors, paneling, and cabinetry were all solid cherry. The house has been relatively untouched for the last 60 years. Granted you have to pre-drill to hang anything on the walls…

      • Basenji September 5, 2013, 12:10 pm

        “The exception would be the classic East-coast brick and stone houses with solid wood staircases and windows, etc. ”

        Yes, that was what I was getting at using the example of my pre-WWII brick bunker, but I grok your point about new construction post-2000. Still, I think it is a valid consideration for people thinking about buying to consider how they react to all new materials versus those things that may come with older homes (and which might not be affordable if put in new): real oak floors, original solid doors and glass doorknobs, etc. Older homes often sit more proportionally with the lot size and have MUCH more attractive (IMHO) architecture.

        • Ishmael September 8, 2013, 5:08 am

          Stuff before WWII is generally much better built. There was a lot of collective skills and knowledge lost in the war, and it took a while for it to be regained.

      • rob September 6, 2013, 8:56 am

        That’s enlightening. I’m an east coast guy and to me, all the houses built between 1900 and 1930 “look” way more solid than the ones built later. The 1910s seemed to be an especially great decade. I have no experience with construction though, so have really no idea what to look for.

        I’ll just have to relinquish my prejudice that new is essentially inferior.

      • Pretired Nick September 6, 2013, 10:39 am

        Totally agree with this. The only thing I’d add is that I advice avoiding anything built in the 1970s and be wary of 1980s construction as well. I find something built in the 1950s is a way better investment than anything built in the 1970s, when construction and materials were at their cheapest.

  • Brian September 5, 2013, 7:23 am


    I have disagree with the point about not being able to construct a new home at less than $100/sqft. Here’s a link to just one example in Augusta, GA:

    There are plenty of others, but this is mainly in GA and TX, and other southern states where housing costs are ridiculously low. I live in the suburbs of MD, between Baltimore and DC. The home prices here are approaching 300% of the equivalent GA, or TX properties.

    The question from me is. How is it that they are able to build so cheaply there, whereas even a modular home in this region would cost much more.

    Also, do you have any opinion on modular homes? As a future investment endeavor, I am planning to have a modular duplex built.


    • Mark September 5, 2013, 10:01 am

      Lower new home costs in TX . . . one reason: no basements!

    • Terr September 5, 2013, 6:16 pm

      Re: Why are homes so cheap in TX? That’s easy: Texas is a land rich state. It is the largest state in the union. As populated as the major metro areas are, you can drive out of the cities, drive literally for hours and see empty plains, hill country, mountains, coastal plains, etc.

      The East Coast states are tiny. Therefore, land is at a premium.

      But then again, the cost of living and wages are lower in Texas. East Coast people earn far more money for the same job positions than Texans. I’m an East Coast transplant and part of why I won’t go home is due to the high cost of living, although I’d earn more money.

      • Brian September 5, 2013, 6:59 pm


        The comment I originally made was in reference to the new home construction price being significantly lower than $100/sqft assuming a $0 property value as stated in the article. This is irregardless of land availability. Augusta GA is another hugely cheap area near a large military installation, which means many jobs…

      • Kokuanani September 18, 2013, 1:58 am

        Um, Terr, check your map.

        Alaska is the largest state in the Union, much larger than Texas.

      • Dan C September 1, 2014, 3:25 pm

        Texas is land-rich but that’s not why housing prices are cheaper than on the east coast. The real reason is regulation.


        The vast plains, hill country, mountains, etc., are mostly irrelevant since you’re not going to commute from the middle of nowhere to one of the big cities.

        On the east coast, even New Jersey has a lot of undeveloped or lightly developed land. Plenty of room for new housing stock, but regulation makes it expensive to develop.

    • FrugalinGa September 5, 2013, 6:31 pm

      That’s a great question, Brian. I suspect at least a significant part of the difference is significantly lower land costs, and possibly a less rigorous, less cumbersome, quicker regulatory approval regime.

  • Mr. 1500 September 5, 2013, 7:33 am

    One thing I like to do is feel out the neighborhood. I try to talk to as many neighbors as possible. Ask lots of questions. If people like the area, they will gush about it.

    I also like to walk the neighborhood. Go 10x a day. Make sure there are no trains going by at midnight or a trashy neighbor drinking cheap beer blasting Nickleback at 2:00am.

    • Debbie M September 5, 2013, 8:38 am

      Also, the aromas. Is there a bread factory nearby? A paper factory?

      Note that people often get so used to things that they forget to mention them. Make sure to ask specifically about things that worry you as well as ask generally about everything so you can hear about things you never would have thought of.

      • Mrs. PoP September 5, 2013, 10:13 am

        And don’t forget to go in all kinds of weather! A couple streets over from us is a neighbor whose middle of the driveway is sunken, so floods every time it rains and can take hours to drain away. So to take her dog for a walk, she gets in the car with the dog, drives it 15 feet past the 6″ deep puddle, but still in the driveway, and reverses the process at the end of the dog’s walk. Considering we get afternoon and evening storms pretty much every day in the summer, this is her routine 3 months of the year. Even worse is the entire culdesac that floods several inches deep.

        • Mr. Money Mustache September 5, 2013, 11:55 am

          Oh, man.. using a car as a replacement for a few strategically placed concrete blocks. Car culture, how you need a punch in the face.

          • Gina September 9, 2013, 4:12 pm

            I guess she’d never heard of galoshes. We don’t have them, but we live in Texas where there isn’t much use for them.

            However…when we moved into our newly built house in the country last December, there was no driveway or walkway yet, so when it rained, we had Lake Johnson between us and the car. We put down boards and sheets of plywood left over from construction to use as walkways until early summer, when we hauled in crushed asphalt and laid sod ourselves. It wasn’t classy, but it kept our feet dry and mud-free, and used materials already on hand.

            Afternoon and evening storms everyday in the summer? I wish you could send some of that our way.

  • Danny September 5, 2013, 7:42 am

    This is good advice, but I’d question the “act immediately” part. It’s useful perhaps for seasoned house-buying experts who already have well developed intuition, but beginners making quick decisions might easily be swayed by factors that aren’t important–and then be stuck with whatever decision they make.

    I did a lot research on buying my first car, but when it came time to buy I made a quick decision based upon my intuition. I got a good deal financially speaking, but it turns out I’d rather have something different and perhaps a little less expensive. Too late now! Similarly, perhaps a first time buyer might find something they like, but fail to factor in how much it sucks to live next to a noisy interstate. They’d be stuck with their decision.

    I suppose “act fast” is good if you are seasoned and know what you’re doing. It could be a way for a beginner to make a big mistake, though.

  • Joe @ Retire By 40 September 5, 2013, 7:55 am

    Congratulation! Move fast when the time comes is huge. I let quite a few deals through my grasp because I’m a bit indecisive. We’d probably go for a fixer upper if we ever move again. It’s a great way to increase your net worth.

  • jestjack September 5, 2013, 7:56 am

    Congrats on your new purchase. I have been toying with this very idea but haven’t found anything that peaked my interest….yet. As I recall you don’t have a “real job” …if you could share how you handled the financing end that would be great. Maybe an equity loan used for a year and then when the current home sells pay the loan off? Just curious…like you I don’t have a “real job” and wouldn’t want to cash in other investments that would have tax consequences that would cause me pain. Look forward to your response and please share with us your progress….

  • Alfredo September 5, 2013, 8:01 am

    Maybe this link is more related to other MMM posts, but I really wanted MMM and all the community to see it, just in case all you guys hadn’t see it before, because it is so MMM… and I like Bill Watterson a lot…


    • Heath September 6, 2013, 12:39 pm

      Thank you for that extraordinary comic from Bill Watterson (Calvin and Hobbes creator). It was soooo perfect for this mustachian community! :-)

      EDIT: Looking at it again, it’s not actually drawn by Bill Watterson, but by the individual who does “Zen Pencils”. The quote is from Bill though :-) Still very excellent!

    • Shane February 18, 2015, 5:00 am

      Thanks Alfredo. This is perfect timing for me to see this as I will be talking to my wife tonight about a house she wants to buy. It looks nice but I’d prefer something that allows me to be financially independent now and spend lots of time playing with our son rather than constantly juggling with work and keeping an income stream coming in. I’d like to start riding the passive income stream but it means living humbly in a smaller older home. I’d be so fine with that if it means all costs are covered from past income and investments but it’s hard to get my wife to buy into my dream.

  • SavvyFinancialLatina September 5, 2013, 8:30 am

    Thanks for the article. We need to keep these factors in mind as we plan to buy a house by the end of the year.

  • Debbie M September 5, 2013, 8:35 am

    Things didn’t work exactly like that for me.

    Location: I specified that my employer be easily accessible. My employer is downtown where it is not cheap. Actually, I figured my agent would not be able to live up to her promise that buying could be cheaper than renting. But she did find something in a neighborhood I didn’t really know existed. If I had been more specific, this wouldn’t have happened.

    Rent vs. Buy: One thing you didn’t mention is that landlords can raise your rates so high that you want to move. So buying is good when you don’t want to move all the time. Also, landlords can take forever to fix things and when/if they do fix them, they are often cheap, crappy fixes. So if you want your place well maintained, it can be better to buy, even if you have to pay people to do the fixing.

    Fixer-upper or fancy luxury: My house was neither. It was dated (no dishwasher, no dryer hook-up, washer in the kitchen, laundry lines out back, one-car driveway, no garage) and ugly (orange counters, green bathroom, maroon living room floors, old blue carpet in the bedrooms (pink in the hall). But it was well-built, well-designed, worked fine, and didn’t need fixing up.

    Big things: don’t forget to check for disaster zones and crime rates. I was smart enough to make sure I wasn’t in a 100-year flood plain, but I only looked up my address: I didn’t look at a map. A map shows that my back fence is the boundary for one, and the apartment complex behind it is mostly paved over. If they are flooding, I’m pretty sure I will be flooding, too. It’s good that the flood insurance is cheap, but it would have been better to live a little further away! Do not reward builders who build on fault lines or other stupid places!!

    It’s also better to get good design. I already knew I didn’t want any bathrooms with two doors (though you can easily permanently block one) or any rooms you can only get to by going through another room and that I like having cover from rain at the entrances. As Stephen said, good design can help you live with less square footage. Some design flaws can be fixed fairly easily, but many cannot.

    And like Mrs. PoP and Micro said, check for HOAs and ordinances on issues you care about or might care about. Can you have laundry lines, chickens, solar panels, native plants that aren’t lawn, any paint color you want? Are you allowed to fix your car on your own driveway? Can you have a home business? Can you build a mother-in-law apartment over your garage? Are your neighbors allowed to fill their yards with junk cars, have parties all night, and let invasive plants grow waist high? Some laws are city-wide, but some aren’t.

    One more thing: Note that things can change. A lot! Even if that big park is zoned to be a park only, zoning can be changed–at least find out if anyone is already working to change that zoning. In my case, the closest highway entrances and exits were removed! A Montgomery Wards was torn down and turned into a Target. The airport was moved out of town and replaced by a foofy HOA-neighborhood. The pool was declared too broken to fix; we will go without a local pool for over a decade when all is said and done. The library was relocated. An okay grocery store was turned into a useless one and a horrible one was turned into a mediocre one, then a new good grocery store was built within walking distance. And I’ve only lived here 16 years. (Some of my neighbors have lived here over 50 years–back then this was a quiet suburb!) So beware of picking a location based on one or two things you are in love with.

    I agree wholeheartedly with ignoring the fluff (it’s amazing how dumb people can be).

    • Mrs. PoP September 5, 2013, 10:21 am

      Totally agree on disaster maps, but they’re a moving target. The area our duplex is in is about 5 miles from the coast, but was newly classified as 100 year flood plain in 2009. (This hit to the neighborhood was particularly hard when people already struggling with their mortgages were hit with new flood insurance requirements…)
      But if that weren’t enough, looks like our place in coastal S FL is due again sometime in 2017-2018 for a remapping. Seems as though the frequency of remapping is definitely increasing – here’s the schedule for when coastal counties can expect new FEMA map classifications.

      • Debbie M September 6, 2013, 7:47 am

        They’re moving targets for noncoastal areas, too. I live near a creek and I just got a postcard this week saying that changes will go into effect for insurance purposes in 2015. As things get built up, the floodplain gets bigger, but the city also sometimes does projects that reduces the flood zone, so the new map shows both additions and deductions. Still, all the zones are along creeks–it’s worth looking into. Also, last time this happened, we were told that if we already had flood insurance we would be grandfathered into our cheap rates after the official change.

      • devorahf December 24, 2013, 7:47 am

        If you’re worried about disasters, I’d stick with natural building. Cob, straw bale and the like don’t tend to fall with hurricanes or earthquakes. The challenge is building one near civilization.

  • Drew September 5, 2013, 8:49 am

    Good insight into buying a house. I bought my first property last year, and some of these things I did without knowing much about buying property. Some of them I have learned the hard way over the last year. I bought a REO, and had a huge amount of equity going into the purchase. But I also needed to put a lot of work into the house, and it still all hasn’t been done. I bought the place knowing that I would use it as an investment, either renting it out when I get stationed somewhere else, or selling it (hopefully for profit). The one thing I can’t stand are the HOA fees – $364 a month. It does pay for external maintenance (condo style townhome) lawncare, trash, and pool/clubhouse but I just cringe every month watching that money disappear. That will be on my list of things to look for at my next property

  • crazyworld September 5, 2013, 8:59 am

    All great points; but an important one, based on personal experience – do not buy a fixer upper if you are not very confident in your abilities. We moved into a smaller, historic house in a great school district. What i thought we were going to spend on remodeling vs what we are actually going to, is double. Maybe more. Ouch. We are doing some of the superficial stuff, but we don’t have the time or expertise for the large projects. Also, an old house is way more cold and drafty and therefore more expensive to heat and cool. So far, it has proved to be a money pit. A beautiful and charming money pit.

    • Mr. Money Mustache September 5, 2013, 9:12 am

      Good point – I generally find that REALLY old houses cost about the same amount to renovate as to build from scratch. On the other hand, houses with reuseable bones are quite easy and cheap as you are working more on finishes. But you should be willing to do some dirty work yourself, unless you have an amazing handyman friend who will work by the hour as much as you like.

  • mollyjade September 5, 2013, 9:22 am

    Texas houses are so cheap because they’re built by undocumented workers who are willing to work for less money. If you’re looking at new construction, it can be hard to find a house that isn’t gigantic here.

    • Terr September 6, 2013, 6:46 am

      People can build big homes when there’s a lot of land to “play” with. Undocumented workers have nothing to do with that!

  • Leslie September 5, 2013, 9:29 am

    I wish I had not been so frugal when purchasing my last house. Our 1,400 square foot house has doubled in value in 14 years. It was a fixer upper and we are still working on it but it is more than livable. I wish I had bought in Palo Alto instead of Sunnyvale. I am not good at predicting the future.

  • TSR Capital September 5, 2013, 9:30 am

    “With a bit of planning, it’s almost always possible to put work, grocery store, school, library, and anything else you need right within the area you live.”

    True that, MMM.

    I have a Giant grocery store across the street and a library down the block from my apartment. My workplace is 1 mile away. I’m working on a masters online at Bellevue University.

    There is a nice park right next to the grocer and a huge trail that circles the DC MSA right behind my apartment complex.

    I walk a lot and ride my bike occasionally. Sold my car years ago and haven’t missed it a bit.

  • Random September 5, 2013, 9:46 am

    Looks like a good move all the way around.

    One question, what are the tax implications of taking $160k of equity in a house and shifting it to your investment account (rather than into your house)?

    • Mr. Money Mustache September 5, 2013, 12:22 pm

      No tax implications, other than the fact that we will start having a much higher dividend income – yahoo!

  • Kerstin September 5, 2013, 9:53 am

    I bought a house 6yrs ago at the height of the market (in UK anyway) but luckily it held its value as it was in a good location though it was very small. We have a website here called Rightmove that is used by most estate agents to advertise their stock so I checked it on a daily basis for three years and eventually found a house that was being sold by the bank. It was 10 minutes walk from my house but a lot bigger with a lot more land and for the same price as my house was worth if i could sell it. So I put my house on the market with the same estate agents who were in charge of the bank owned property stating that I would only sell my house if i could get that house. Its amazing how much harder estate agents work for you when they realise they could have two sales on their hands! Within 7 weeks I had sold my house and purchased the new one with the only additional costs going to the estate agent and solicitor. Result!

  • Mr. Everyday Dollar September 5, 2013, 9:59 am

    Congrats on the new home MMM! You must feel good knowing that you’re going to be living in the average U.S. house size….of 1950! It has more than doubled from 983 sq ft since then, peaking at 2,521 square feet in 2007 and now standing at 2,392 square feet.

    When my grandparents were raising children, they wanted an average house, which to them meant a one-stall garage, a kitchen and dining room, a living room, one bathroom and 2-3 bedrooms. If they had more than 2 kids, which my grandparents did, then the kids shared bedrooms.

    Now, the average house has swelled to include media rooms, trampoline rooms, home offices, a separate bedroom for every kid, a separate bathroom for every bedroom, walk-in closets the size of bedrooms and three-car garages. And we sure have no problem filling those spaces with clutter!

  • Gates September 5, 2013, 10:01 am

    If you sell your house within a day of listing it, your estate agent has conned you. The fact multiple people are willing to pay a given price on the first day means your price is too low, you should solicit more offers or list it higher.

    Estate agents are typically paid commission, but they have nowhere near the stake in your house you do. If they can sell in half the time by convincing you to drop the price by 10%, they win.

    • Mr. Money Mustache September 5, 2013, 11:57 am

      Very true – I always find the US “listing price”/”offer” system to be a bit inefficient. There is nothing stopping us from selling the place at auction, as they do in Australia.

      • Rook September 6, 2013, 2:23 pm

        I’m in NZ and a lot of houses are sold at auction here as well. In Auckland, where the property market is really going nuts you almost see nothing apart from auctions. For awhile, you would see articles in the local papers stating how a house had gone for 30, 40% over it’s valuation etc.

        “Sold – for $1m over valuation”

    • PawPrint September 6, 2013, 3:19 pm

      I don’t agree with this. If you have a good house priced fairly using comparable homes, then why shouldn’t it sell in one day? Why would it be better to price it higher and wait weeks or months for an offer? My house recently sold in one day for over asking in cash (we had another offer $13K less than the cash offer). I did my due diligence and felt the house was priced fairly. The house next door has been on the market for five months because it’s priced too high for our neighborhood. I like my one-day sale much better.

  • nicoleandmaggie September 5, 2013, 10:08 am

    Good for you! A smaller space will have a better environmental footprint, and cost less too.

  • tomsang September 5, 2013, 10:13 am

    Great article! Another area that you touched on but people should really focus on before they buy a house relates to how long are you going to live in or keep this house. Transaction costs kill those that buy a house if it not retained for a number of years. I have heard many friends who were shocked when their house is underwater after transaction costs, yet they planned on selling it after only 2 years.

    Have a strategic plan covering decades if possible vs. months that covers what your plans are or likelihood of events that include your employment geographic security, family size, schools for kids that may or may not exist, elderly care, etc. and plan B if your plans don’t occur.

  • Brendan September 5, 2013, 10:27 am

    MMM how did you factor the cost and joy of building your own home into this purchase (having your skill set and desire for a low or zero energy home)? I have similar skills and desire for a high quality low energy home. If I don’t put a price for my time into the build, because it is a hobby, I think I can build a much higher quality (windows, door, HVAC) and better insulated home for the money verses fixing up an existing home even if it is somewhat undervalued in today’s market. I realize this is dependent on your local market.

    • Mr. Money Mustache September 5, 2013, 11:51 am

      That’s a pretty neat question. In my case, there are no vacant lots in the area I want to live, because it was built up over the last 130 years. There is always the option of finding a crappy house on a good lot and bulldozing it.. but in this case we found a place with a nice overall layout (solid brick construction too), that can easily be fixed up.

      Building from scratch in this case costs more because the excavation and foundation is very expensive, plus my city charges about $25k for a building permit for a new house. So the plan here is to do some fairly major stuff (all new plumbing and electrical, upgrade all windows and doors, new kitchen and 2 bathrooms, and even tear off the roof and build a new one one with a new slope and better insulation). But even so the cost should be reasonable because of doing the work myself, getting materials from Craigslist, hiring friends, etc.

      In the end it should be a nearly-zero-heat house because of its southern exposure and the climate here. Even now in the 2600SF house, the combined gas bill for heat and hot water averages to only $37/month (and $12 of that is the fixed account fee!). Electricity just depends on how much you use your A/C and clothes dryer (none in our case), so our consumption of that is only around $20/month regardless of house size.

  • Meg September 5, 2013, 10:40 am

    Great post! We’ve been thinking about downsizing as well. I’d love to see a post on when you should sell vs. keep a house (maybe you’ve already written one and I didn’t see it). Our house is worth 20k less than what we paid for it in 2008, but the mortgage payment is ridiculous ($2300/mo). Would be willing to sacrifice square footage to get rid of these golden handcuffs!

  • TLV September 5, 2013, 10:59 am

    If moving to a new area (say another state), would you recommend renting for a year or so in order to have time to study the market?

  • Debt Blag September 5, 2013, 11:23 am

    This is terrific news. Way to live your dream! And I like that your dream involves downsizing by choice — so much of a departure from what we see out there a lot these days.

  • Ree Klein September 5, 2013, 11:26 am

    Such great advice. When I bought my (now free and clear) home 20 years ago, I loved it for the open floor plan. While it is only 1,123 sq ft of living space, it’s completely useable and feels roomy.

    We added a covered patio cover with an outdoor fan, seating and good lighting so it feels like an outdoor living room. A cheap and enjoyable “room addition!”

    I’ve never felt like moving to get more space, but living in a small home does require some purging from time-to-time to keep from getting buried in stuff.

    That’s fine with me, too, because it also keeps spending under control: less furniture, fewer sheets/towels, less to clean, and so on.

    Congratulations on your new home…can’t wait to hear more!

  • WageSlave September 5, 2013, 11:42 am

    “Ignore the Fluff, and See Opportunity in the Bad… Daaayumn.. this place smells dingy.. let’s get out of here.”

    What if that smell is cigarette smoke? We toured a house that we would have loved, except that it smelled like it had been used as the barracks of the Phillip Morris Army for 100 years. It smelled like this *after* it had been remodeled (refinished floors, new paint, new carpeting, no furniture in the house). We noticed a doorbell fixture that had clearly not been part of the remodel, and it was coated with that lovely yellowish tar coating that only long-time passionate smokers can produce.

    My grandpa passed away several years ago. He was a smoker, but my grandma (still living) was not. After he died, they did everything to get rid of the smoke smell: new carpet, paint, furniture, window treatments, etc. My dad says that you can’t smell the smoke smell anymore… except when it rains or is really damp outside.

    That story scared me enough to pass on the house. (That was the main reason; the other was that half the basement was consumed by a four-foot tall slab of concrete [think a crypt or tomb] that no one could explain.)

    • Emmers September 5, 2013, 11:23 pm

      I don’t blame you for not buying the tobacco-smelling house; but the crypt sounds kind of amazing, in a terrifying sort of way.

    • Terr September 6, 2013, 7:01 am

      A flood damage/fire restoration company could have taken care of that. They specialize in removing smoke odors and it’s chemical residue after houses catch on fire.

  • sande September 5, 2013, 11:51 am

    love reading your blog and the smart comments from younger people who are making such good decisions about their life and finances.

    I am a 68 yr old woman, widowed extremely young with 3 children. I have a high school education and lived on social security while my boys were growing up. Later I went to work but with no degree never made a lot of money. I am still working and make $44,000 yearly but am now collecting my deceased husband’s social security. Lucky for me I live in the city I was born in and several months ago moved into a 28 apt bld that is for women only. You must be 60 yrs of age and a resident of this city to apply. It took almost 3 yrs to get an apartment of 3 rooms; living room, 15′ x 10′, bedroom 13′ x 10′ and kitchen, is about 9′ x 9′ total, and a lovely tiny bathroom. It is a little piece of heaven! My 87 yr old mother is only 1 mile from me, 15 steps from my door starts a river walk on the Charles river (I am outside of Boston) and 5 steps from that is a wharf where people fish and boat. This was built with money a generous lady left for other women of lesser means to live and the cost of my rent is $450.00 monthly. Yes, that is what I said, $450, and this includes all utilities but not cable. A sum of $15,000 was put up front which is nothing today. Rents in this area are huge. If you can find an apt. for $1,000 a month (with no utilities) you are doing well. My joy is boundless over finding this hidden gem at this time of my life.

    Others need to listen to Mr. MM and follow his example to live a simple life and the joys can be many.

  • matt September 5, 2013, 12:07 pm

    MMM: You forgot to put (high crime rate) after your “beautiful public park” text. Also, you forgot to tell people to shop around for a realtor. I purchased a home in March with a realtor credit of $2500 which was a significant savings.

    • Mr. Money Mustache September 5, 2013, 12:19 pm

      Shopping around for a realtor is a good idea. The higher the purchase price, and the lower-maintenance person you tend to be, the lower percentage commission a smart realtor would be willing to accept.

      As for crime rate: that might apply in some areas, but there is essentially no crime where I live. Locking up your house/car/bike seems like a quaint old concept to most residents of Old-town Longmont. If you check out the data in Freakonomics you might notice that crime has been dropping nationwide for quite a while.

      • Sandee September 5, 2013, 1:39 pm

        Regarding realtors, a buyer’s agent seems to have little incentive (above the possibility of the deal falling through) to help buyers zero in on a good offering price, or haggle down a seller from their asking price. Both of those nuanced efforts, which may yield a not-insignificant difference in the sale price of the house, chip away at their commission. Though I’ve only bought one house, I came away from the experience thinking I should have “lied” to our realtor regarding our price range – on the low side. Is this a common complaint on the buyers’ side, or did we just have an incredibly un-invested buyer’s agent?

        • Debbie M September 5, 2013, 10:04 pm

          My agent definitely only wanted to show me places at or above my upper limit. (To be fair, my upper limit was just over half the median price and I didn’t want a fixer-upper.)

          I resolved that next time I would give the price I actually was hoping for instead of my maximum and/or try negotiating an up-front fee of their normal percentage of the figure I give them plus an additional percentage of the money they save me. So, for example, I could say I want to spend less than 150K, and I would like to pay them 3% (if that’s the going rate) of 150K plus 1% of every dollar less than 150K that the house costs me, included repairs noted in the inspection. Do you think they would go for that?

          • Geek September 7, 2013, 6:55 pm

            Buyer’s agents don’t set the % that agents get though, do they? Usually the seller and the seller’s agent enter into an agreement for the 6%. I could be wrong :/

      • Mustache Real Estate November 15, 2013, 1:14 pm

        While shopping around for a realtor is a good idea, looking for houses without a realtor is an even better idea.

        MMM, I was disappointed to see you didn’t list the option of buying without a broker/agent as the most mustachian option of all!

        If someone is ready to take a power tool to the property she is about to buy, certainly she could pass on the hand holding and the offer from your typical agent to be driven around in their fancy pants Lexus looking at houses. I am sure Mrs. MMM provides great service to folks, but buying real estate via brokers is a dying, wasteful model.

        Saving up to 6% on a purchase in the six figures is quite a cost savings. I’ve known several folks who have negotiated with sellers and/or their agent to get a lower overall buying price in exchange for not using a middle man. One of the biggest misnomers in real estate is the myth that “the seller pays both agents’ commissions.” While this is technically true, it is certainly also driving up the overall cost of the house being purchased. I say be your own Mustachian real estate agent.

        • Mr. Money Mustache November 15, 2013, 3:49 pm

          You are correct, MRE! I have bought two houses that way too – shopping without a buyer agent. And now, of course, we are our OWN buyer agent, which is the same thing.

          The only catch: sometimes the seller’s agent will simply jack up their share instead of passing the savings on to their client. Also, there is some advantage to knowing the details of real estate law for your first deal – once you’ve been through it all once, it is more sensible to take on the role yourself.

          If you’re a do-it-yourself type who is able to do the research and make big deals while remaining calm, buying and selling with a discount (or no) broker can be a great idea. In my ideal world, all houses would just trade hands on Craigslist :-).

  • Rebecca September 5, 2013, 12:14 pm

    Congratulations! Do you care to share why you plan to rent it out for a year before moving in? Is it related to writing off the improvements?

    • Mr. Money Mustache September 5, 2013, 12:21 pm

      No.. it’s actually a tax disadvantage to rent it first. This is just to give us a chance to get some things fixed up, and get our current place ready to sell. And to make sure we’re not crazy for making such a big decision :-)

  • Alexandria September 5, 2013, 12:18 pm

    Great Post!!

    We’ve actually been extraordinarily lucky when buying homes. We had some of the same thought processes when we bought our first home, but not all of them (we were only 23!). But we had an A+ buying realtor that showed us some great tricks and things to think about. We actually bought a home very young because renting costs were absurd where we lived.

    Oh, and we have bought all our homes in December and sold them all in spring. OF course! The pattern I have noticed over and over on low selling prices is a really bad selling realtor. Generally not properly marketing the house. Somehow we always end up finding these little gold mines that everyone is overlooking. The first home we bought had actually sat on the market for 6 months in a market known for “six figure above asking price” bidding wars. IT was also remodeled to the hilt and move-in ready.

    One final tip: Never assume anything. We bought a small condo in our crazy high cost region and then ended up making a lateral financial move to a “dream home” in a less expensive city. We had perused some home models, and they were by a mile the best value. People always assume we are hoity toity because we bought a new house (& obviously bought such a fancy condo too). The truth is they are hoity toity because they paid HUGE premiums for “old neighborhood charm.” Both our condo and this home have been extremely practical purchases. We aren’t overly handy types, but both have been quite low maintenance. When we bought this home it was also an “Energy Star” home. I half listened to the sales people and didn’t think much about it. But, then we got our energy bills – holy cow!! People regularly ask if we pay $300/month for the gas/electric. I laughed one time when someone was going on about that – our gas bill was $10/month at that time. Our home is extremely energy efficient, so that will be a must for our next home. & it’s not solar/crazy expensive gimicky type stuff. For example, we have a tank hot water heater – it’s just crazy efficient and cheap to use. We have been in house for 12 years and still have most of the original light bulbs – the CFLs and LEDs aren’t as impressive. We live in California so solar might be great in the long run, but just not the most cost efficient at the moment. I am not even sure we’d save anything, our electric bills are so low. The house harnesses the sun in winter with window placement and other more cost effective energy savings (most of it over my head – but the roof and the insulation and so on).

  • Tad September 5, 2013, 12:36 pm

    Good post! One question for you: why are you planning to sell your current house, rather than rent it? You personally enjoy managing rental properties. You said that Longmont offers attractive rental returns, and neither stocks nor bonds are particularly cheap by historic standards. So, why not just enjoy the rental income and possible further appreciation?

  • Brandon September 5, 2013, 12:41 pm

    We are thinking of downsizing also, but are facing a “well” dilemma. Water is very expensive here (desert area in Nevada). If we move into the downtown area we’ll be very close to everything, but we will have expensive water bills. There are some houses (about 4-5 miles out of town) which have wells (nearly free water for life, just have to pay for the electricity for the well pump, and that can be taken care of with solar), but are not nearly as accessible to the library, thrift shops, etc. However 4-5 miles IS still bike-able, but less convenient. I ride almost everywhere, but the wife (with two small children) still takes the car a lot. I’m curious what MMM would think of this dilemma.

    • Gerard September 5, 2013, 3:57 pm

      Dunno what MMM thinks, but I think it’s a lot easier to radically downsize your water consumption than to convince a library to move closer.

    • Jeff September 12, 2013, 10:33 am

      I would say that the wife needs a family bike. Search “Emily Finch bike Portland” to see how a mother of six does it in the PNW. 4-5 miles is not an unreasonable distance to drive a car, if not done several times per day. The cheapest way to live that I have found is no vehicle in a place with awesome public transit (like Chicago). 200 steps from our front door there is a bus line which has a bus come by every 3 minutes during rush hour, and every 15 minutes even in the middle of the night. With a bicycle (which is faster than a bus), I can ride to the subway train station in about 8 minutes and then ride express subways to the center of Chicago in about 12 minutes. Once there, I can walk or ride a Divvy Bike anywhere I want to go. Winter in Chicago sucks, but summer in Tampa sucks, too. We have a 600 SF cute studio condo with a Murphy bed in the best neighborhood in Chicago. Out the front door is a 1000 acre park. And it costs $183.00 per month in HOA fees which includes cold and hot water, sewer, trash, basic cable, and heat. Taxes are $1200 per year. Insurance is $350 per year. Gas and electricity are about $50 per month. The total cost of ownership is less than $400 per month….utilities included. An unlimited bus and train card is under $100 per month. So, we can live there for less than $600 per month….but it gets better….we rent the condo to a college student for the academic year and spend summers there. By doing so, we avoid our home state of Florida in the summer rainy season (think terrarium) and the college-student lease pays more than the cost of the entire condo. We put the dividend into improvements on the property and show no income…and have a VERY NICE place to summer-over until the weather cools in the sunshine state.

  • Johnny Aloha September 5, 2013, 12:45 pm

    Hmmmm … maybe this is an opportunity for me to come help you renovate!!

    Congrats on the purchase!

    How are you paying for it – super cheap 30yr loan, cash, HELOC, other?

  • Mom @ Three is Plenty September 5, 2013, 12:56 pm

    I’ve always bought a house with good “bones”, but got bit by that on my last house – I just never got around to fixing things up – they worked, they functioned properly, but they looked butt ugly – then we tried to sell it… We were able to fix some things up after renters moved out, but not enough to get a price premium with other houses in the neighborhood which had upgraded to granite and stainless, etc. We have a lot of things we want to do to our current house too, but it’s not getting done because everything’s functional…

    • KruidigMeisje September 9, 2013, 1:53 am

      How much difference is this non-prettying-up making in the selling price, you think? (aka is it worth renovating before putting it on the market?)

  • chc4444 September 5, 2013, 1:02 pm

    I started looking at waterfront property in the Northwest in 1974. I probably looked at 100 places at that time and we ended up buying some waterfront property a year or so later. But I continued looking and we lived several other places. Then in 1986 I started a serious hunt for waterfront again. Lots of stuff happened but we found the perfect place where the owner hadn’t managed his money well and needed to sell. We were frugal so we had the money to buy. We have 1700 square feet with a southwestern exposure with large windows to let the sun in. This perfectly placed house sits on four acres of low bank salt waterfront and is all paid for. The trick was that I was always looking at real estate (sort of a hobby) so I knew prices and what pitfalls to be careful of with waterfront. When we found our house we asked the realtor to meet us there with all of the papers and we were able to make a cash offer immediately after seeing it. We had the confidence to move fast because I had essentially spent 12 years looking. Other then marrying the right person and my staying home to raise our kids, our house purchase has been the best decision we’ve ever made.

  • MonicaOnMoney September 5, 2013, 1:24 pm

    Awesome, congratulations on the new house! I’m happy for your and your family and it sounds like after 8 years of research, you found the RIGHT house for you. I think it’s smart to do research, wait it out and be financially ready to buy a house. I bought my on an impulse right after college and while I love the place, I spent WAY too much and am still paying WAY too much now. I wish I had waited so kudos to you. And thanks for the advice, next time I’m waiting until I’m debt free and can afford it outright. I also like your ideas of getting a fixer upper instead of a new fancy home right away. Excellent advice to those buying now! Keep up the awesome advice, my favorite is the $10 iPhone plans. Briliant.

  • Sarah September 5, 2013, 1:27 pm

    Very timely article as we are just starting to look for a house. The good news for us is that we are moving back to the small town we grew up in and we know exactly where everything is. We are definitely choosing a house that is walking distance to everything. The only one we have seen the inside of so far was built in 1910 but was in immaculate condition!! The only thing that stopped me from putting an offer in immediately was the fact that they closets were tiny and few. We have since been brainstorming about turning one of the four bedrooms into a closet/dressing room and now we very well may put in an offer. We are in no hurry and plan on offering at 20-50k less than asking price, just to see what happens. Asking price on the 1910 house? $165,000.

  • Sarah September 5, 2013, 1:28 pm

    OH and Question MMM!!! Are you keeping/renting out the current house? Or selling??

  • Lindsey September 5, 2013, 1:34 pm

    We recently purchased our second home and went through all this analysis. We really didn’t want suburbia, but home prices near my work were way too expensive. My husband job is 22 miles away from my job so we split the difference and moved to the middle, right off the interstate. The schools there are way better for our two young children. We rented out our old house (1,300 square feet.) Our new home is 2,200 square feet and will fit all of our needs for the next 15 years. Due to the ups and downs in the market, and the interest rates, we are only paying $120 per month more for our new home (including increased HOA) than our old home. This one is more energy efficient and utility costs are pretty similar. In the end, this fit us, but we can’t wait for the day when we can downsize again. I’m also working on getting a job closer to my home (in my home would be ideal.)

  • Sammie September 5, 2013, 2:39 pm

    In Texas property taxes + insurance will run you 3.2% on your house. $5k on that $150k house.

    That is one reason houses are cheaper in Texas.

  • WalletEngineers September 5, 2013, 3:26 pm

    Another great article from the MMM thanks for the info! My wife and I were thinking about buying a new home this past spring when our First Time Home Buyer Tax Credit restrictions fell off at our 3 year mark. With my commuting 1 hour each way to work everyday we felt it just made sense to move down closer to work but because we already own our Town Home we were planning on just going right ahead and buying our Single Family home we would live in for ever. Thankfully we came to out senses and will be staying in our 2 bedroom town home with our 500$/month mortgage and save boat loads of money we would have wasted if we took the plunge and purchased a single family home with our family just being the two of us.

    • Chad February 20, 2015, 2:05 pm

      Wallet Engineer (formerly #1, but above Wallet Engineer retired. He since bought a new house, put in some sweat equity, and rents out the one mentioned above. And they had a baby.) here.

      Ostensibly I bought a home because the Rent vs. Buy calculation come up with BUY. However, I also wanted the space to garden and customize as well as a place that feels solid, a long-term base of operations.

      Stop by for a drink. I’m a few blocks over. I’d love to make your acquaintance.


  • Brian Romanchuk September 5, 2013, 3:38 pm


    One question – do you know of a rule of thumb for the various costs associated with moving house, not counting the broker commission.

    I have only moved houses once, and it seems I was continuously opening my wallet for various “necessary” things over the first couple months. If someone tied up all their liquidity with the down payment, it seems they could have some problems (if they are non-Mustachian and spend most of their paycheque…).

  • deepseafalcon September 5, 2013, 4:10 pm

    Hi MMM
    I am following your blog for several months now, and am amazed over and again by the degree of alignment with your views. Usually not much to add or disagree, so this is my first response :)
    While I agree with all your statements and advise, I would want to add a few hints I found to be useful in my own real estate transactions (5 in past 10 years, 3 of them in the US):

    1. try to acquire basic knowledge of building structures and equipment, to be able to look in the right places to quickly spot possible problems. This avoids relying only on a paid-for inspector, after you have fallen in love with a place.
    (I have found that inspectors can be both sloppy, or overly conservative, in their advise)
    Or get a friend or family member to help you.

    2. Maintain a detailed list of all issues you find during a walk through, and make/get estimates what it costs to fix them. This will be very helpful to rationalize the buying decision (incremental expenses!), and in price negotiations.

    3. Know your market, and develop a healthy “gut feeling”:
    Invest a “brute-force effort” of at least 1-2 weeks to scan all transactions of the last 2-3 years in your target area. Online tools like Zillow are invaluable for this.
    Drive around neighborhoods in your target area. Look at as many houses as possible, at least from the outside. Make occasional appointments to see a house even if you are just mildly interested.
    Only then find “your” realtor (you will likely have met several in the process, and can select the one you trust most)

    4. Listen to your gut.
    Don’t consider a place where you or your spouse have an uneasy feeling. You will likely regret it later if problems arise, no matter how rational these regrets are. And there will be problems after you bought a house. Always!

    5. Buy below your means:
    Don’t buy a place that maxes out the financing your bank gives you. Rather leave yourself comfortable headroom for a sufficient down payment plus early out-of-pocket expenses after the closing (renovation, unforeseen repairs).

    6. If you don’t intend to retire in your home:
    Buy a type of home where there is continuous demand in the market, no matter how bad the economy is. This will ensure you can sell quickly and without a loss, if you ever have to. Especially important for those of us that are still in regular jobs.
    What I mean by this is a style, size and location that is preferred by “regular families buying their first or second home”. In the area of the US I am in, this would be a 4 bedroom, 2.5 bathroom Colonial.
    It should be in a neighborhood with good schools, and not in an obviously disadvantageous spot (e.g., behind a mall, on major roads, at a rail track etc)

    7. Avoid “unusual” or “too fancy” places, unless you are absolutely certain you never want to sell. This is really similar to advise no 6: don’t fall for a “architect’s house” or grandiose custom-build castle. It is a matter of taste, and what you (and the original owner) like may not be preferred by 90% of the population. So too unusual homes narrow down you potential buyer group significantly, especially if the economy is bad and people who don’t “have to” buy a house hold off.

    8. Look for “burned houses”, i.e., places that are fundamentally attractive but have been on the market for a long time due to obviously too high asking price. Then go in with aggressive offers (more on that below).
    Not sure this works in all markets and under all economic conditions, but it sure did for me.

    9. Look for attractive, yet (in your personal judgement) overpriced houses, and go in early with an aggressive offer.

    10. Last not least: Be aggressive with your offers, and don’t listen to your realtor that wants to tell you “not to offend the seller” and “not go in too low”.
    Instead, be diligent in your preparation to determine a reasonable market value, factor in any necessary repairs or improvements (see topic 2.), and offer exactly that (or a fraction less).
    No matter how much this might be below the asking price! Be patient and polite. If the opportunity arises calmly explain the seller’s side your position.

    Either of three things will happen:
    a) The seller turns you down and finds another buyer that didn’t do his homework. Bad for him, good for you.
    b) The seller surprises you by accepting your offer, or with a reasonably close counter.
    c) The seller comes back to you later, after he has learned that his asking price is really too high and your offer is still the only concrete opportunity he had.
    All three things have happened to me in the past, and have worked well for me. Surprisingly, every time the realtor tried to talk me out of this.

    Sorry for the longer than expected writeup, but I felt these topics might augment your excellent article….

    • P. September 6, 2013, 1:40 am

      Hey deepseafalcon, I really appreciate how you numbered things off and made it easier for readers like me that have not bought a home yet. Thank you for your contributions to mmm.

  • Lydia Pack September 5, 2013, 6:02 pm

    Awwwww, I’m gutted!!!!!!! I just finished reading the mmm blog from start to finish and now there are no more articles for me to read (boo hoo). Of course there will be the new ones as time goes by, but not quite the same as devouring mass amounts of awesome articles at a time!

    Thanks for the brilliant inspiring work mmm and looking forward to your book!

    • Gerard September 6, 2013, 4:42 pm

      Re-read! As they say about Bugs Bunny cartoons, you’ll be amazed how much you missed the first time around!

  • Melissa September 5, 2013, 6:36 pm

    Thanks for another great article MMM. I was eagerly checking nightly! I’m always amazed at the cookie-cutter homes in our area where it appears the builders pay absolutely no attention to the sun or the cold winds, placing the garage and no windows on the south side. Even building 2×4. When I built my new small house (in Iowa-a state which is more cool than warm) we paid attention to the south lighting as far as placement of the house on the lot, placing lots of windows on the south side. We tiled the floors for passive solar (and easy cleanups at parties!), put the garage on the NW side to block winter winds, used 2×6 construction for extra insulation, which was only $1,500 more than 2×4, put in a wall water heater and a corn stove for heating (by code we also had to install a furnace, which does run on days that go below zero. Our size corn stove cannot keep up on those days). I received several significant rebates for energy efficiency. My utility costs were lower than my 1100 sq ft 1979 built home. Our house is ~ 2200 sq ft including a finished basement. We have more than enough room with our open floor plan. We’re now adding solar due to some awesome rebates this year. How often do you put yourself on the line for hundreds of thousands of dollars? Like MMM notes, there are lots of considerations which are far more important than the color of the carpet.

  • Retired By 40! September 5, 2013, 6:42 pm

    Bingo! This was exactly my mindset when I bought my house 4 months ago, even though I am scared to say this, I think it worked out well! My house just appraised for 3x what I bought it for, and after factoring in renovation costs, (assuming a buyer could be found since the market where I live still is not great) I would more than double my money! Hopefully things continue along the same path, and I am praying that when we move in 5 years we are able to keep our heads and score another good deal on a house. Thanks for another great post!

    • MoneyAhoy September 12, 2013, 9:54 am

      Wow – that sounds like you really lucked out. Anything that worked especially well for you in finding the deal, or were you just in the right place at the right time?

    • Sully May 11, 2014, 9:42 am

      I want to use that appraiser the next time I apply for a mortgage.

  • FrugalinGa September 5, 2013, 6:49 pm

    Well done, MMM, on both the downsizing and the excellent post.
    It amazes me as well how many buyers cannot see past ugly paint or carpet or other easily fixable items and pass on otherwise good houses and excellent values, but it also amazes me how many sellers don’t make the effort or spend the relatively small amounts needed to declutter and really clean the house, pull up ratty carpet, ad some new paint, etc., money that would pay for itself several times over.


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