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| Saturday, July 12, 2008 |
| M.P. Dunleavey finally admits to buyers remorse for the 2nd house |
The New York Times article: Sleepless and Worried in My House has M.P. Dunleavey finally admitting to buyers remorse over the purchase of her second home. It’s the rest of the package that keeps me up at night. Seven months ago the market was too soft to think about selling our old home; hence the idea of renting it out. Although we found reliable tenants — knock on wood — I’m not sure we really examined the true cost of maintaining a rental.
It’s a headache. And a bank-ache. We are going to put at least $4,000 into the rental house this summer alone. We can deduct that as an expense, and it will partially offset the $9,000 we’re getting in rental income. My accountant thinks we’ll break even, but I still fret. I hate knowing that we are on the hook if anything goes wrong. Can our emergency fund cover all the calamities that might strike two properties: foundation trouble and roof leaks and clogged plumbing, oh my?
WE assumed that we could sell the rental house in a year or two when the market perked up, thus preserving our equity. But there’s no perking in sight. Now we think sanity is more important than profit. “Even if it’s a wash, let’s unload it next spring,” my husband said. At this rate, let’s hope it’s not a loss.
As happy as we are in our current home, sometimes I question the tens of thousands of dollars that went into buying it. What if we had put that money into our old home instead, and renovated it rather than moved? Would that have been a smarter investment? If we had stayed where we were, our mortgage and heating bills would have been about half — half! — of what it will cost us to live in this big barn of a place. Sigh, she answered her own question. Of course her family would be better off financially if she was paying far less for her mortgage and heating costs. We are all in for a very bumpy ride in this economy over the next twelve to twenty four months. M.P. works in an industry that is announcing layoffs on a regular and increasing basis. She lives in a rural area with few local job prospects. Her husband seems to works in a couple of part-time jobs. She has already experienced what unexpected medical bills can do to a self-employed insured persons emergency fund. Add to that her now stretched far-to-tight budget for the more expensive home and mix in rising food, gasoline, and utility costs - no wonder buyers remorse has finally hit.
However, her plan of trying to sell the 1st home in the Spring does not seem like the smart solution to me. Instead, she should take this time now, while the home is occupied by the tenants, to continue the necessary repair projects and make any improvements she feels are necessary. Then, in the Spring, she should move her family back into the affordable smaller home and put the expensive 2nd home on the market. If it is as attractive and seductive as she has made it seem, finding a buyer for it should not be a problem. Once back in the smaller home, MP and her husband can be a bit more creative in finding solutions to their space problems. Two options I would explore would be putting a "writers shed" in the yard of the cottage. Obviously it would be insulated, heated, and fully wired. The other possibility would be to look into adding a sun room onto the cottage to expand the living space and use that as an office. Either solution should be within MP's means and help add value to the cottage.
Most importantly, MP and her family would be back in an affordable home. A home which will allow them to save more for retirement, put something away for her young son's college education, and enable her to maintain a plump emergency fund. What could be more seductive than that?!Labels: MP |
| posted by Boston Gal @ 12:47 AM *
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| 21 Comments: |
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Alas, math is not persuasive to MP. She's very do as I say and not as I do.
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I hate to say we told her so, but everyone except MP could see this coming a mile away...
-Russ
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I wonder if MP knows about or reads your blog. Anyway, with $4k of repairs I'm sure she'll break even. I'm an accountant and have done a ton of schedule E's. In MA and NY where there are older homes w/higher repair costs and high real estate taxes, my clients rental expenses washes out any rental income they have about 80% of the time. Every time I read an MP post, I just shake my head cuz I agree w/everything you say about her. I think the Globe should hire you to write a weekly personal finance column =)
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This sounds like sage advice Gal. I hope she takes it. It makes me think though -- I wonder how writing about her financial choices and knowing she has an audience has impacted the kinds of changes she's made. Do you ever find yourself swayed to make different financial choices, or stick with choices you've made, because of your own blog?
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I just don't get her. Back when she bought the second house, the readers on the WIR boards pointed out just these issues. Now, lo and behold, it's dawning on her.
How can this larger home be an improvement in their quality of life if they're sleepless over how to pay for it all?
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You so called this Boston Gal! I remember back when she first bought that house you pointed out the flaw in her logic about "avoiding" all of the repair work needed on the now rental home.
What did she think? Her and the husband could be slum lords to her tenants for a couple of years then sell the cottage "as is" for a profit? My theory is she was smokin' something (or under the influence of something) when she convinced herself that she could afford that new house and somehow the new expensive home would make all of the problems with the other home disappear.
I am sure it would kill her and the husband to give up the pretty "barn", but I think you are 100% correct. They made a big stupid mistake 7 months ago, they need to get out of that mistake and go back to the sanity of the affordable home.
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What amazed me most was the original leap of logic she made that the "market" was so soft that her old house wouldn't sell, but that she got in a bidding war and paid over market price for her new house.
How can the market be that soft -- and yet that hot -- in a single town? Oh, right, it can't.
She still must be hiding her head in the sand, because her NEW house is now worth less than she paid for it, as well -- and she hasn't realized that yet. The shock will hit her at some point; perhaps when she attempts to take out a HELOC to pay the check she's going to have to write when she sells the old property?
M.P., if you're reading this, housing goes in 16-YEAR cycles. 16 years! There is no "wait a year or two" to sell a house when you're 2 years off the top of the biggest housing bubble the world has seen in the past 100 years.
She should have sold the old house and rented. Even a rudimentary understanding of economic cycles would have prevented this -- a knowledge that can easily be gained by reading blogs online, for free.
-Erica
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As my last MP comment was very snarky, I'll say this instead...it's hard to watch someone ruin themselves--even a complete stranger.
I do hope she gets it together & realizes that she's never going to have her 'dream' lifestyle just because she wants it & makes horrible decisions to get it -- you've got to be able to pay for it. Hello?!
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You can tell she hasn't come to her senses since she said, "We could have stayed in the old house and used the money to renovate." I don't understand why people's homes have to be so perfect. Buy a smaller, cheaper, less "awesome" house and have financial security.
DH and I did that 6 years ago and we're going to pay it off in 4 years, then we'll do a few small reno projects to make it more likeable, paying it off is first priority.
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Perhaps she's not a "real" person. Perhaps she is some writer writing to represent everyday Mary Dough and what Mary may be going through in today's economic landscape.
Perhaps Mary does read this blog and others and play's right into it.
That's my guess.
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Hi Kayleigh,
To answer your question: Do you ever find yourself swayed to make different financial choices, or stick with choices you've made, because of your own blog?
I would have to say yes, my blog has prompted me to make some changes and then stick with them. A couple of examples that come to mind is maximizing my 401(k) contributions and paying off my investment condo mortgage. Those are some big changes, but I have also made numerous smaller changes as well.
Having this blog and seeing what it has done for my own finances is why I really don't understand MP. She documents how she has restrained her shopping impulses and even proudly proclaims that she owns only one pair of jeans. But then she turns around and releases all that impulse energy on purchasing an unaffordable home.
While unchecked shopping can get you in trouble, it is still far better to treat yourself to an expensive outfit than an expensive home! It might take you a month or two to recover from a shopping spree, but it will take her decades to recoup from this purchase - given that she is in her 40's and has a young child, she may never really recover.
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I find the timing of this article interesting. She released it in the dog days of summer when far fewer people are reading.
I hope she takes your advice BG. She really does need to unload that barn and go back to a home she can comfortably afford on her self-employed writers income.
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I find the timing of this article interesting. She released it in the dog days of summer when far fewer people are reading.
I hope she takes your advice BG. She really does need to unload that barn and go back to a home she can comfortably afford on her self-employed writers income.
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I'm pretty sure this was what my last landlord was thinking, too. And the one I had in 1999. And the one in 1995. All three of these folks were first-time landlords, renting out places they had lived in for a long time, and all of them seemed to see their investment properties as maintenance-free cash cows. Of course, it didn't turn out that way. We're fairly low-maintenance renters; if we can replace a $3 faucet handle or something and not have to call in the landlord, we'll do it. But any time large issues came up that we didn't think were our responsibility to handle, all three landlords dragged their feet and never got around to doing anything about it.
While I think this was not a particularly wise situation for MP to get herself into, I'm glad she's writing about it. Maybe it will keep some other people from embarking on the same path and making renters miserable. :-)
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I don't know which would be worse - knowing that MP is a financial writer who is hopeless with finances or this is all some big conspiracy theory and she is really very well off and has no money woes.
I am going to assume this is not a conspiracy theory since it just all sounds far too real and stupid to be an act for column inches.
I did notice her article seems buried this weekend. I think the NYTimes is finally embarrassed by how silly their own columnist is with regard to her own finances.
I am really bad at cooking, do you think I could become a food writer at the Times?
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Bostongal:
You should consider a personal finance book, if you haven't done so already. You already have a fan following. You could giv.e commonsensical financial advice and make decent money, like Suze Ormon. If MP can make money, then you can can too! Just stay anonymous because I love the idea of the 'mysterious' boston gal. If your ID is exposed, I will no longer read your blog
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*shrug*
I think the bigger house was a good idea, because the first house was so small. The timing? Horrible. But now that they have 2 houses, I'd keep both and treat them as investments, if she can keep up with expenses. It sounds like she is, if just barely, and if they can tough it out a few more years things should get better.
The very human-ness of MP, her imperfections and slips, are actually what keeps me reading. She'd not a guru high atop a mountain who never fails. She is human, she stumbles and falls (OK, a little too often) but she gets up, brushes herself off, learns something, and passes it along to the rest of us.
Maybe that's her formulaic way of writing articles, so she plays up those stumbles as major falls to make the turnaround even more dramatic.
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I was a BIG MP supporter when she first purchased the 2nd home. I defended her vigorously on the WIR message boards. But now, I just don't know about her. Even when she sells the 1st house, she is still too stretched in that "barn". Yes, she won't have to worry about huge repair bills for the 1st house once it is gone, but the 2nd home is still too much month to month for her and her family.
Let's hope the NYTimes burying her article this weekend is not a sign that she might be one of the columnists "let go" in the next round of layoffs.
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She's "not sure that they really examined the true cost of maintaining a rental". She estimated that the total cost would be $0. How can there be any doubt? They definately did not examine the true cost.
Although belatedly, it is to her credit that it has begun to dawn on her that houses do indeed require maintenance. Now let's hope she does something sensible about her situation.
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wow - i really thought mp was going to defend her decision to the end and somehow this would all work out because she believed in it so much. now i see that no one is exempt from this sort of buyer's remorse.
i remember that in her column when she announced her decision to buy the second house, she declared that they would now own a "proper home." i believe she needs to "reframe" her expectations of what a "real" home, and "real" lifestyle are. she bought into the bogus american dream of bigger is better. i'm sure a lot of readers can identify with her. thank god i cannot!
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Sometimes I think MP, like me, makes unwise decisions because she is trying to fulfill wishes and dreams without being prudent.
But I limit my crap to dining out for lunch every day to quell my emotions at work by stepping out for something to eat. I didn't run away to the country to a dream house and increase my driving costs and my mortgages. That's just crazy.
BG, you were spot on from the very moment you got wind of her house buying misadventure. This is why I respect what you have to say, way more than anything MP has to write.
To all those that think we are/were slamming MP for crazy financial decisions, what have you to say now? Are you also sorry you were living vicariously through MP's dream house purchase?
I'm sorry but why do I have Dana Carvey as GHWB running through my head saying over and over 'It wouldn't be prudent'?
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Alas, math is not persuasive to MP. She's very do as I say and not as I do.