Though I knew this debt-free journey wouldn’t be completely sans obstacle, I didn’t expect to get challenged so quickly. I’m just barely getting started! This week, when I was presented with some major home maintenance costs, I was reminded that this road will not be smooth.
“When you own a home and you’re broke, it is a curse financially. Homeownership by broke people makes them broke-r.”
~ Dave Ramsey, Dave Ramsey Show
I totally understand why Dave Ramsey suggests that broke people not buy houses. I also am completely on board with the reason Robert Kiyosaki encourages us to not view our principal residences as investments. When you are not renting, home care and maintenance costs are your own responsibility. When something isn’t functioning properly or breaks, the homeowner usually must identify and pay a service provider or fix it themselves. No leasing maintenance department will come to the rescue. Unlike an apartment dweller, a homeowner can’t just make a call and schedule service – at least, no broke homeowner who doesn’t have money in the bank. As Kiyosaki states, unlike a true real estate asset, my residence doesn’t produce income. I pay to live here. Until I eventually sell, assuming that the value continues to increase, I won’t see the true upside. I’m not complaining, because I truly believe there will be a financial upside to owning this condo (see below). I’m just saying that I can see things for what they are.
“If all your money is tied up in your house, you may be forced to work harder because your money continues blowing out of the expense column, instead of adding to the asset column, the classic middle class cash flow problem.”
~ Robert Kiyosaki, Rich Dad, Poor Dad
While I like my space and the convenience of my downtown location, this thing comes with responsibilities, beyond the mortgage payments (1st and 2nd mortgages, totaling $1,045.41 per month) and the HOA dues ($282.43 per month). Since I’ve moved back into my condo late last year, I’ve been very strategic and thoughtful about the handling of maintenance. I spent most of 2018 living in a high rise luxury apartment in a different area of town – an area in which I’ve wanted to experience and reside in for years. I called it my little “experiment.” It was an $1,850 per month (for a 1 bedroom!) experiment. I leased my condo to a tenant during that time for $1,620 per month. As the end of my lease and the lease with my tenant neared, I decided to move back into my condo. Though I would have loved to stay in my high-rise luxury apartment with concierge and valet dry cleaning services, I was coming to terms with the reality of my financial situation, and I moved out of the apartment and back into my condo.
Thankfully, Single Girl has generous man friends who prove themselves to be helpful. When I moved back into my condo, a friend of mine kindly (and without solicitation) bought me a new stove, 2 new ceiling fans, and a couple of other fixtures that needed to be replaced. (Yes, this was truly a friend. Though he expressed an interest in dating, we weren’t dating and weren’t physical in any way.) In recent weeks, my ex (who has been my friend since I was a child, and a friend for way more years that he was ever a boyfriend), fixed my dishwasher. I would have had to replace it, were it not for his determination to figure out what was wrong with the 19-year-old thing. About a month ago, Mr. Nice For Now fixed a leak I had in my toilet. He discovered the source of the leak, went to the store the next morning to buy the necessary part, then installed it for me. Whew! Thank God for man friends!
Before I even get into the recent home-related expenses being thrown my way, let me say that my mortgage payment just recently increased by over $200 per month, mostly on account of significant tax increases on both the county and city levels. Since my lender requires that tax payments be escrowed, I pay the increased amount every month, as tacked on to the principal and interest charges for my 1st mortgage. Apartment dwellers don’t usually experience such a significant increase in rent. For those of us who pay property taxes as homeowners, these kind of increases can occur.
New Issues On The Homefront
(1) The Air Conditioning Unit
This week, I was presented with bigger issues than a toilet or dishwasher. Lately, my air conditioning unit has not been cooling as well as it should. A new A/C unit was installed about 7 years ago (cost: $6,500, but Single Girl’s boyfriend at the time owned a construction company, so she didn’t end up paying for any of it), but I haven’t had it serviced since then. Sure, I’ve had the filters replaced, but haven’t really had someone come to inspect it and see if anything needed to be fixed or adjusted on it. Part of the reason it hasn’t gotten as much attention as is probably should is that part of the thing is located on top of my bathroom and the other part of the unit is located on the rooftop of our condo building. There’s no ladder or fire escape that goes to the rooftop, so it’s always a production when any service provider needs to get up there. With the unit not cooling well lately, I decided to get someone to come out and look at it.
Long story short: the first provider I had come and look at the unit tells me that the unit has a leak (although he doesn’t know exactly where it is) and that the unit is extremely low on coolant. The coolant is $95 per pound, and it looks like I’ll probably need at least 3 pounds. There are some other issues with the unit, including some rusty coil thingamajiggy. All in, the costs look like this:
- Leak Detection $430.25
- Leak Seal $207.90
- Coolant $95.00 per pound (3 pounds = $285)
- Replacement Coil $2,550.00
- TOTAL $3,473.15
Or, as the technician suggested, I should just consider replacing the unit entirely. As I mentioned, a new unit would be somewhere between $6,000 and $7,000. I paid the provider $99 for the cost of diagnosis and sent him on his way.
I usually get more than one quote when I’m having work done, so I got a referral from Mr. Nice for Now. His guy had much better news. To my delight, he didn’t even mention the possibility of replacing the entire unit or the rusty coil thing. He ended up putting 4.2 pounds of coolant (his price was only $55 per pound) into my unit, which should get me through the remainder of the summer and into the early part of 2020. This will buy me some time so that I can properly plan and save up for the fixing of the leak. I ended up paying him $320 for the diagnosis, the coolant, and the labor associated with putting the coolant in the unit. The system is now cooling well.
For September, I only budgeted $250 to diagnose the issue. I ended up spending a total of $419. To cover the budget shortfall, I took some money out of a sinking fund I have designated for personal care.
(2) Condominium Special Assessment
I also received news this week that I need to be prepared for a multi thousand dollar special assessment by my condominium association. Our building needs a new roof. Though we’ve known that the roof would, eventually, need to be addressed, we didn’t realize that it would need to be addressed so soon. Over the years, we’ve had it patched and repaired in pieces only to find that our patchwork approach caused additional damage. At this point, several of the units in the building (not mine, though) are experiencing leaking whenever there is a heavy rain.
In our homeowners’ association (“HOA”) meeting this week, the HOA Board presented potential solutions to the roof problem. The roof is going to cost $90,000 to replace. There are only 14 units in our building. Do the math on that. Each unit owner is going to be responsible for over $6,000 for this roof! The primary solution the Board is proposing is a special assessment for each owner’s proportionate share of the roof replacement. The Board is going to present more details in the upcoming weeks, including how payments can be made on this.
Single Girl, Why Don’t You Just Refinance?
The current Zillow value of my condo is $277,128. I owe $107,649 on it. Given the amount of equity in the home, one would think it would make sense to refinance and pay off about $150,000 of my debt.
(1) The terms of my modification would require that I share the “income” with the bank 50/50. Several years ago, I modified my loan. It was at a time when the market was still way down and people were buying similar units to mine in my building for less than half of what I paid. Since I’m a lawyer, and I actually read some things, I saw that the terms of my modification required me to hold on to the property for a number of years before selling or refinancing. If I didn’t wait for the requisite period of time, I would have to split any sale or refinance proceeds with the bank. I’m not willing to do that. I’ll just wait. The time period expires in 2021. That gives me time to continue to work through this debt repayment journey.
(2) I wouldn’t want to encumber my home on account of credit card debt or car debt. If I were to default on my credit cards, the credit card companies couldn’t foreclose on my home.
(3) I don’t want to use any of the equity in my home to help me clean up my mess. I want to use the next several years to develop the habits that I’ll need in order to have a productive and healthy financial life, moving forward. I want to use this time to become disciplined about using a budget, become accustomed to making sound financial decisions, and planning for the future. When I sell my home, I want that equity to be a gift to myself for working hard and taking my debt free journey seriously.
Now I’ve got to figure out how I’m going to come up with the money to cover both the assessment and the repair of the air conditioning unit.