If you’ve been reading my blog for a while, you know I pooh poohed Real Property in 2016. It was right after my lawyer days and I still thought in legal terms (e.g. Real Property as opposed to real estate.) I find that amusing.
For my lifestyle, it made sense to rent.
Why it made sense for me to rent instead of buy:
- I moved around a lot and didn’t know where I’d end up.
- I know nothing about maintaining a house and would likely have to call professional help every time the garbage disposal stopped working. That sounds expensive.
- I’d still have to pay “rent” in the form of mortgage/taxes/HOA etc.
- It’s expensive to buy real property.
- It’s complicated to buy and sell real property.
- It’s complicated and expensive to finance real property.
- You’re tying up a significant percentage of your net worth and not making any money off it through dividends in the interim.
Blah blah blah.
I’ve lived in Denver for four years now, and I’m pretty sure it’s end game for me, so I don’t think the first reason holds true anymore.
And life has become more expensive. Besides inflation, rent has increased significantly, so I’ve been rethinking my policy on home ownership recently.
In May 2018, I moved into a large, vintage apartment complex in the Capitol Hill neighborhood of Denver, subleasing and purchasing furniture from the previous tenant. While the entry hallway of the building left something to be desired, the apartment itself was beautiful. Sunny, large, one bedroom, corner unit, with a big walk-in closet, and a washer/dryer in the building all in a central location with free street parking. All for $1,071.00 per month. This included all utilities except electricity.
It increased to $1,101.00 a year later. And $1,151 a year after that. All reasonable increases, in my head.
Gentrification !
And then a new management company bought the building in May 2021. A new Whole Foods had just opened up next door and gentrification was afoot. The new management company spruced up the place with renovations and new carpeting and new paint and new windows and new washing machines and new landscaping. The list goes on and on. They really made the building look snazzy.
But when it came time to renew, unfortunately for me, the new management company had a much nicer building in a much nicer neighborhood than when I first moved in and they requested $1,450 per month for the snazziness. I looked around for comparables in the neighborhood and all of a sudden, $1,450 seemed reasonable for a one-bedroom. $1,150 was a steal, apparently.
I could still afford the $300 increase, but, damn, that sucks.
I’ve paid my landlord roughly $44,500 in the four years I’ve lived in Denver. If I had bought a place instead, I would have bought into a booming housing market and paid into an investment.
Right?
I don’t know. I still don’t think I would have changed my trajectory. In the end, I paid $44,500 for certainty and flexibility and a happy place to lay my head. I didn’t know that I would like Denver so much. And I didn’t know that the housing market would continue to be on fire. And I don’t know that buying a house *wouldn’t* have cost me enormous sums of money to upkeep. I needed that money to grow in the market and not buy me a house.
That being said, I do think my previous position is a little naïve. I don’t think I gave enough weight to the emotional aspect of owning your own home.
Life changes
In the end, I decided not to renew the lease and moved in with my boyfriend of one year. I pay him $500/month and convinced him to invest that in VTSAX. He owns the property we live in.
Which leads me to my questions!
Currently, my boyfriend and I create a spreadsheet every month. We split everything down the middle.
How do you split expenses with your significant other? Do you have any book recommendations on that topic? I’m assuming that finances change throughout the relationship. I think the important thing is that it’s a regular topic of conversation, but I’d like to read more about it if you have any suggestions.
Your boyfriend of one year! News indeed! He has kind eyes! Very happy for you and him. So good to have a new post. Who cares about the housing market, love is all you need 😃
There is a Womens FIRE group on FB and that question is frequently asked. There are countless opinions and suggestions. It seems to become very complicated if you are trying to do things do things evenly when there is an income discrepancy. If you are happy with the way things are maybe just leave things alone.
Sounds like an interesting group.
What an awesome first comment. 😀
Congrats on your new life ThriftyGal, I wish you & your boyfriend both much happiness!! Re real estate, I think it’s a personal decision that has much to do with one’s life goals. I used to own my condo and personally do not think I’ll ever own again unless 1) it’s a house not a condo, 2) I’m living with, or know someone who can fix it up reliably, and 3) it’s in an area where real estate really does appreciate. But I fully appreciate I have different goals than many people. I want to travel, I’m about to fire and single and can geoarbitrage rent costs easily, and I’m not at ALL handy. You’re in a different life stage and I’m pretty sure that if I was in your shoes, I’d reach the same conclusion. As to how to split finances with a SO, you don’t say whether your boyfriend is fire’d too. If he is, I think you should split couple living expenses the same as your respective wealth ratios. I.e. if your networth is, say, $1M and his is $2M, and your living expenses as a couple are $60K/year, you should pay $20K and he should pay $40K. Everything else that’s not a “couple” expense is on your own dime. But if he’s still working, I think whatever you both think is fair is fine. Anyway, my 2 cents. Congrats on all your news!! Very happy for you 🙂
Boyfriend owns property and rents it out. He does fix things as they break, but he works anywhere from zero to thirty hours a week. It varies.
I like the philosophy as long as we both think it’s fair. 🙂
Whats the opposite of gentrification? I bought a place in 2010 for $200k, but now it’s worth around $120k. Wish I had rented. Real estate is just super regional as to how it performs and unless you know (you cant actually) that youll stay somewhere for at least 10 years then renting isnt a bad choice.
Slumification
Thanks for the flip side of that equation! I’m sorry that happened to you. 🙁
Unrelated, but do you have a Roth conversion strategy?
I don’t have a roth conversion strategy. I made too much money when I was working to have a roth IRA. Is that what you’re referring to?
It’s converting your taxable Traditional IRA assets over to a non-taxable Roth IRA account. Given your early retirement and depending on your tax situation, you may be able to do this more thoughtfully and efficiently.
Ah, yes, I have heard of this. I need to spend more time finessing the tax code. A topic for a future post. Thanks!
I have lived with my boyfriend for the past 7years in a house we bought together. We split everything 50/50 for the house. We have a spreadsheet that tallies each bill we cover. I have the mortgage and property tax, he has utilities, internet, and a joint credit card for regular household things like groceries, trips etc. At the end of each month we reconcile and send an etransfer to whoever paid more that month. Very transparent and we never argue about money. We have our own accounts and investments. It helps we have the same frugal values and end goal of early retirement.
Thanks for your comment. It makes me nervous to think about buying a house with boyfriend unless we have a written legal agreement of some sort. Do you guys have that? It sounds like you’re pretty harmonious and might not need it. An abundance of caution on my part.
Only my name is on the title and mortgage for a variety of reasons, and we did intend to get a legal cohabitation agreement but it just never happened. life got in the way and we forgot. It is a risk and while it has worked out for us it could just as easily fallen apart in a very painful way. We have to renew the mortgage next year and I think at that point we will get things down in a formal agreement and him on the title. better late than never.
I didn’t realize you had to renew mortgages
Congrats on your new relationship status! I am “FI” and unemployed. Husband works and pays all regular bills. I contribute to all non regular bills (travel and other big items). No fixed rules whatever works for you is fine but I am biased towards contributing based on earnings. Real Estate ownership is purely emotional. It’s a nice to have. We rent at the moment but I really wish for our own place.
I’m starting to see that no fixed rule works. I like fixed rules, though, so it’s kind of bumming me out. 🙂
Real Estate or Stocks. I think it’s good to own both if you can. I just bought a little house in a university town that is a perfect rental. It’s a sturdy old house at the end of a dead end street with long term tenants. It’s a good balance with my stocks. The house will return 5% on my investment after property taxes and insurance. Granted who knows which way the value of the house will go but long term I believe it will go up. I love stocks but being diversified feels safer to me so if you can add a little real estate to your life it might be a good idea.
I think I have FOMO when it comes to investing. I’m only in VTSAX, but I do occasionally check out real estate and other investments out of curiosity.
Are you happy with 5% return? I guess right now with the market giving me -10% for the month, you’re probably pretty happy with 5%. Maybe safer.
When I bought my house 33 years ago, it was because I wanted roots. It wasn’t really an investment decision. I bought at the market peak, when interest rates were at 10.25% for a 30-yr mortgage, a small , post-war home with updated bath and kitchen. I was kinda sorta handy, and willing to use books (pre-YouTube) and This Old House to figure out the repair and upkeep and decor as a hobby. So what I’m saying is, it’s just a choice. Renting can be cheaper than buying, and investing in Stonks can bring greater returns,. Ultimately, it’s about where you want to live and how you spend your time. I love owning my old home and not being beholden to anyone ( after paying off the mortgage several years ago). Don’t live mowing the lawn anymore, so there’s that. As for sharing expenses, outside of the rent, I’ve always liked the proposition that each pays in proportion to their income. The rent is whatever you agree is fair. You’re a renter, and don’t benefit in upgrades when he sells.
Housing is very over-priced right now, so you may well get an opportunity to buy cheaper in a year. Also, congrats on the year-old relationship – you’ve been holding out on us.
I date a lot so I wanted to make sure it was real before I gushed to you all. 🙂
And I hope you’re right in your prediction that house prices will be cheaper in a year. Fingers crossed!
Appreciate your perspective. Thanks for sharing.
Let me add that I also purchased the larger home next to me about 5 years after I purchased my own. I then rented it to friends for a slightly below market rate, as they took good care of it. When they were able to purchase and renovate their own home (one street over), they moved out, and I let the house sit empty for a year before I sold it. The market promptly went up hugely over the next few years. (I live in NorCal). Then in plummeted with the Great Recession. Now it’s back up to likely 2.5 times what I had originally paid for it. No one knows anything, least of all me. I just caution buying your home as an investment, when it is more a place to live and a lifestyle choice. In addition, with the Trump tax law changes, the tax deduction is more limited. On the flip side, I hear the Millenials are all starting to buy homes, so who knows? See – no one knows anything.
That’s kind of my mantra. No one knows anything.
Here are a few book recommendations on cohabitating in general, with possible answers about splitting expenses. All three are available on Amazon.
“Shacking Up: The Smart Girl’s Guide to Living in Sin Without Getting Burned” by Stacy Whitman and Wynne Whitman
“Unmarried to Each Other: The Essential Guide to Living Together as an Unmarried Couple” by Solot and Miller
“Living Together: A Legal Guide for Unmarried Couples” by Warner and Ihara (NOLO book)
I am extremely biased to “Shacking Up” as I am a college classmate of Wynne Whitman, one of the two authors. While I have not read the book (not the target audience) I have heard from several college friends that did and they found it interesting, useful and entertaining. Wynne has her law degree and a masters in finance, so perhaps she would be relatable to you.
Regarding owning real estate, John Goodman’s character in “The Gambler” had words of wisdom: “You get up $2.5M every a**hole in the world knows what to do. You get a house with a 25-year roof….”
The first thing he mentions is buying a house. That’s your base, that’s your fortress of solitude.
JL Collins did his own take on the scene with “You put 80% in VTSAX… Don’t buy a f-ing house, who needs the headaches? Let the landlord worry about fixing the f-ing toilets.”
So there’s two different opinions on whether to rent or own. Here are the truths that I have found:
– There’s a lot of “friction” in real estate transactions. The agent’s fee, transfer taxes, moving, etc. If you aren’t going to live somewhere long-ish term, it’s a gamble as to whether it will make financial sense and the odds are stacked against you.
– A very smart older gentleman that I used to work with told our team: “If it’s cheaper to rent than own, then how do landlords (owners) make money?”
– The only way to get around paying to fix the toilet is to do it yourself. If you own your home and don’t want to do the repair you pay a plumber. If you rent you pay the landlord to either do it or hire a plumber, albeit indirectly through your rent.
Lastly, have you considered a lease or cohabitation agreement with your boyfriend?
-Bob
I was always of JL Collins’ mindset. I don’t want to worry about the toilet! Luckily, boyfriend is very handy and can fix/do just about anything.
I’m talking to a family lawyer about a cohabitation agreement, but we haven’t signed anything yet. It’s definitely a topic of discussion!
Back when my wife and I were together, but not married, we did this for splitting “shared” living costs:
Total Combined Salaries
Me 70%
Her 30%
I paid 70% of the shared costs, she paid 30%
That’s a suggestion I hear frequently when I ask people this question. I love hearing different people’s answers! It’s a little hard in my case since I don’t have a traditional “salary” and just take out what I need from my investments.
Congrats on the year-old relationship! That is more important than the real estate question – and you know it! I think it was kind of a nervous reveal hiding the news of the boyfriend after the real estate musings!
When you were single, the real estate question didn’t matter hugely as your singleton self was never going to be homeless either way. Now you’re in a different phase of life and have a head start as he owns a place already. God knows but school districts and more bedrooms may become a topic in the future which is to say again I wish you much Irish luck on the relationship front as it trumps the real estate question in potential joy in your life every single time.
Shane
Great to read! Only one important question, why is the worldmap upside down?
That’s my upside down map of the world! The world is a globe, so there’s really no “up”. It’s just a different, fun perspective. 🙂
Thanks, Shane! We’re already talking about building a house of our own on some property he owns. It’s exciting times!
I always look forward to reading your posts. You are one of my favorite blogs to read.
I retired a couple of years ago (at 45) and my partner is still working. We are renters in a high cost of living area and we split rent down the middle. I think it is great that you have your boyfriend investing aggressively.
Besides the $500 I’m giving him, he’s also putting an additional $1,000 a month in there. I’m very excited for him. Especially since VTSAX is on sale!!
With my now-ex, we started by splitting everything down the middle. Then we did a split of expenses based on income (I made more than him); then he had significant health problems and stopped working, with the understanding that I would pay all our basic expenses; then he made way more than expected with some of his investments and started contributing again. In short, we did everything over the years except him paying for everything. While there were many problems with that relationship, money wasn’t one of them: each of these iterations worked for where we were at that point. So, I guess, just communicate openly and figure out something that feels “right” to both of you? And congratulations!
Sorry that relationship didn’t work out for you. You seem okay about it.
I think you’re right in your assumption. As long as you regularly talk about it honestly, then you’re probably headed in the right direction.
When my wife and I started living together, she paid me rent, which was half of my mortgage payment. We were both heavily into keeping our finances separate AF while dating and during our early post-wedding years. We’ve always got together once a month to track our expenses, income, and investments such as described in Your Money or Your Life.
12 years later, our finances have slowly but deliberately drifted together like giant mating amoebas. Our incomes went from roughly equal to her earning less, to me FIREing, with kids thrown in just to mix up things more. Now we’re completely combined financially, except for separate budget categories for each of our discretionary spending.
So that’s what we did, and I’m sure it will continue to evolve. There’s probably as many right answers as there are wrong about how to handle finances in a relationship, which is really just a reflection of the relationship itself. As long as you have communication and honesty, I think you’re ok.
Also congrats on the relationship front. I’m also a fan of slipping in the big important stuff in an understated way, right at the end.
Thanks for the thoughtful comment. We’re still in the “separate af” category, but hoping to get to the giant mating amoebas category at some point. How was it FIREing when your wife was still working?
A book I just read called Smart Couples Finish Rich by David Bach suggested scheduling a money date with your significant other. Love it!
FIREing while my wife is still working has been ok, but we’re only a few months in so far. I wish we both had FIREed and then gone around the world doing cool stuff. We’ve got small kids, and though I know hardcore parents travel with young ones, that did not sound like fun to us.
My wife downshifted her career years ago to support me when my job was bananas. I hit my FI number, continued to work for a few years, then finally was totally done with that career. My wife actually likes her job, so when I bounced she took the opportunity to go all in with a more demanding project that she cares about because it’s making the world better. She seems to really like it, and I’m gaining a new appreciation for being the primary caregiver for our kids. Not going to say it’s all rainbows and unicorns, but it’s for sure better than what we were doing before I FIREd.
I love the money date thing. I’ve heard of couples scheduling such an event and having a special meal or treat to incentivize the date. My wife and I are big enough nerds that we can’t wait to go over the numbers and update our shared spreadsheet together. Like seriously, a week or so before the end of the month we get really excited and start counting down the days.
You guys sound very compatible. 🙂
My common law spouse and I share everything we earn. I earn 35% more than her. she works less but does a lot more of the chores .I think this is a good compromise.
I haven’t thought about the term common law spouse in a while.
Buying the house you live in is the single most effective wealth generation investment. The tax system is designed to encourage home ownership. Don’t buy more than you need. Pay it off quickly and build equity. People should seek to avoid long terms, variable rates and make big down payments if possible. Having more equity makes mobility easier. This is basic common sense and lenders that don’t keep your loan have no stake in your future. Develop a relationship with a local credit union and you will get help in being a community home owner.
Good advice
Congratulations!
Denver eh… I’m looking forward to figuring out my home base situation.
Re: expenses, I’ve actually thought about this a little…
Why wouldn’t you split expenses 50/50? Do you have a good answer for this?
Presumably, people make more money because they work harder, longer, or made/make more sacrifices for it. But even if they just got an inheritance, why would I be entitled to it?
You should be with someone because you like each other, not because you want them to subsidize your lifestyle.
Cut expenses to something both people feel comfortable paying half. Or if one person is paying more it should be seen as a gift each time, not taken for granted.
The only exception I can think of is if one of you makes sacrifices so that the other person can earn more, eg if one person is taking care of kids or moves for the other person’s promotion. Seems like the thing to do here is to agree on the value of the sacrifice before making it.
My 2c
I think one would split something not fifty-fifty and based on percentage of income because they like being in a partnership. But I hear ya. I’d have a hard time being with someone I had to support.
Appreciate your pennies. 🙂
It sounds like your mind is already made up that “partnership” means “paying equal percentage of income” instead of “contributing equally to expenses”. 🤷🏻♂️
But if that’s how you feel then maybe you can calculate your “income” as your market returns for the year. Good luck!
Congrats on the life update!
I own real estate but it’s a bit of a hassle sometimes. On the other hand, although the condo fees go up, the rent doesn’t, and I’m not subject to a landlord about that. There has been appreciation but it’s not actual money until I sell.
We used to have separate accounts for everything but we moved towards joint day-to-day accounts (the “giant mating amoeba” model) a few years ago sort of because of bank service fees. Investment accounts still separate and we try to contribute such that they contain roughly the same amount of money. Incomes very much unequal but that answer probably doesn’t generalize to you: I’m subsidizing her living expenses in NZ as she works towards getting us NZ permanent residence. It’s not Sydney, but we never did manage to make it to Australia. Something about a pandemic. Mostly it’s about communication!
Making it to New Zealand is just as good as making it to Australia! Congrats!
This is awesome! I always enjoy your updates, and I feel like I have some experience in the relationship + real estate arena. My ex and I bought together, and split expenses by taking over whole bills, because some of our bills ( a new heater and then PV panels) were coming directly out of his paycheck. That was awful and I don’t recommend it, there wasn’t enough communication about how much we were each spending and we both felt like we were paying more than our fair share I think. When we split up it got less than amicable over money, which was unfortunate.
I bought a small duplex on my own, and eventually had a new partner move in. He paid me rent, and then we bought something else together and have been taking a ‘yours, mine, ours’ approach. We’ve got a joint account for household expenses and a spreadsheet of what we’ve updated / upgraded so we can keep track. Paying day to day expenses out of the joint account keeps it transparent, and having the spreadsheet for big projects, like putting on a new roof, has been great.
Clearly I like real estate as a strategy / investment, I’m a homebody and I know it. I don’t consider myself particularly handy, but I have had great success looking everything up on youtube. there is a tutorial for everything on there!
My boyfriend does a lot of fixes using Youtube. But it always seems to be the physical strength that prevents me from doing stuff. And I had none of the tools. Thanks for sharing your story!