I wrote about this Portland condo purchase a few times already. To make you just a bit more nauseated, I’m going to write a little more about this recent condo purchase.
The idea of making a purchase came to me when I started facing a hefty rent increase. I realize that Portland, just like any major growing city, could have absurd rent increases for decades to come.
Sudden Rent Hikes
I care less about the actual dollar amount of the rent. I care more about the unpredictability of the monthly liability. Rent can be $1k/month or $2k/month. As long as it’s fairly predictable, I can create a budget based on it. But if it were to jump from $1k to $1.5k/month, then I’m fucked.
I am trying as best as possible to have a defined baseline budget. By this, I mean I would like to control my minimum living expenses as much as possible. This is one way I’ll know I can break away from my j-o-b. I posted my average monthly income in this previous post.
Remember, this post is from 2015, when I was still in my wealth accumulation phase. Now, in 2022, long “retired”, at age 44, I don’t care too much about hitting a particular budget number.
The Predictability of a Mortgage
A mortgage is a predictable expense that remains the same month after month for the duration of the loan. Rent is far more unstable. With a strong enough inflation, rents would go through the roof, and my salary may not catch up for some time.
Food expenses may also go up, but I can adjust my eating habits. Cell phone expenses may inflate, but there are ways to communicate for nearly free. Health insurance may also go through the roof, but that’s what medical tourism is there for.
The Portland Condo Purchase
So… I am paying cash for this condo which I should be able to move into in a month or so. I needed to cash out a good chunk of my investments to pay for it. But after weighing the pros and cons, paying cash is the right decision.
I have about $180k invested in a private brokerage, and I’m about to cash out most of it.
I have also written about why renting might be a better idea than making a purchase. For me, the $140k price tag is small enough that I can justify it. I see real estate prices going through the roof in the next few decades.
I’m just predicting, so it means nothing. Let’s see how many decisions will play out in the next few years.
By making this cash purchase, I will have only the following overhead:
- HOA dues ($160/mo)
- Property taxes ($112/mo)
- Repairs/Maintenance ($80/mo)
Looking back at these numbers now in 2022, I didn’t account for special assessments or my HOA, which is nearly $500 per month. But I still love the PDX condo.
Homeowners Association Fees
HOA dues will be in the $160 range and usually go up yearly. Occasionally, there are ‘special assessments’ when major repairs/upgrades need to be done. These get added to the HOA either as a one-time lump sum or a monthly fee for a certain period of time.
HOA dues cannot be written off against taxes when the home is your primary residence. However, if I rent out the place in the future, then I can deduct all relevant expenses from the rental income.
Portland Condo Property Taxes
Property taxes are partially tax-deductible. It means that based on my marginal tax percentage rate, I can deduct that percentage from the total property taxes owed.
My prop taxes will be in the $2,000/yr range. I am in the 33% tax bracket, so for federal income taxes, I could deduct $660 from my taxes. My annual taxes would only be $1,340… technically.
As of 2022, my property taxes are approximately $3,000.
Property Maintenance Costs
Homes need to be maintained, repaired, and upgraded to keep their value. I am handy, so the labor, being the most expensive, is covered. However, I would still need materials and tools from time to time. It is recommended that 1% of the home value be set aside yearly for home repairs.
After this purchase, I still have about $300,000 saved up in my retirement accounts. I expect to max these out and contribute to my private taxable brokerage account with no mortgage payments. I still have about $17k left in student loans which I should be able to pay off quickly.
This Portland condo purchase was a way for me to control the cost of living. Because I could get my burn rate down to $1,500 per month, I was able to take more interesting risks, and perhaps that’s why I met some of the milestones I cared about.