Wednesday, October 12, 2016

I Bought a House for $40,000!!

I bought a house! Does that mean I'm a real grown up now?
I bought a house!
Yes, I did in fact buy a house for less than many of my co-workers buy a car or truck. Now, you're probably thinking, 'it must have be a run down, falling apart house, with terrible crime in the neighborhood, and on wheels.' However, that's because everywhere I have lived the last 12 years has a decent housing market where houses always cost well into six figures if it isn't falling apart, and it's not uncommon for houses to sell for more than the asking price. Rural America is different.

The Dining Room and Living Room
Independence, Kansas had 9483 people in the last census in 2010 and my guess is it will be under 9000 people for the next one in 2020 due to some recent business closures in the last few years. That will be the smallest population in the town since 1910. Montgomery County peaked at over 51,000 people in 1930 and has been on a slow and steady decline since then to an estimated only 33,000 now. A huge driver in housing costs are population growth, or decline. The house that you can get in this county for $300,000 is incredible! On the one hand you can get a nice sized three bed two bath house a little older on 80 acres, or a newer four bed four bath 3000 sq. ft. show home monster on a half acre, or what about this five bed five bath on 20 acres! Did you see the kitchen in that last one? It's incredible. Point being these houses were built and haven't really appreciated in value, many even depreciated, so your dollar goes a lot farther.
Master Bedroom
Point being, you can buy a house in move-in-ready condition for a fraction of what that same house would cost in other parts of the country. That doesn't mean everything is perfect, but it does mean that overall you can save lots of money versus housing in a more aggressive market.

I want to dispel a myth, that houses are investments. Investments are things expected to go up in value, preferably faster than the rate of inflation, such as owning stock in a company or a bond. Expenses on the other hand are the things paid for to sustain your standard of living, such as rent, or car payments. In between investments and expenses are something I like to call hedges, or insurance, and that's where a house falls in my opinion. You can't really look at a house as an investment because it could easily go down in value, and you may have to put a lot of time and effort into the house to keep it in decent shape. On the other hand, if you live in the Bay area, your house's price could double in less than a decade, like a very good investment. The biggest difference between rent and a mortgage is that if you fail to pay your rent you can be kicked out in a month, but in a bad situation you could use the equity in your house to enable you to stay in it longer without paying your mortgage. Certainly an undesirable situation, but owning a house is a nice hedge against that sort of bad situation.

Maybe I should say I Stole a House?
So there you go, my mortgage details. Can you believe I got a 2.5% interest rate? What about a mortgage of only $35,000? Something interesting I discovered, on a mortgage below $50,000 you can't get a fixed rate mortgage. Which initially I was a disapointed about, but my adjustable rate mortgage is so good, fixed rate of 2.5% for five years and max of 7.5%, and it's only a ten year loan. It's the lowest interest rate I've ever heard of someone having in person, although online people have had even lower interest rates

My mom came down to help paint and move my stuff in, which was great! There are some things I have to do, the detached garage is leaning and there is no dishwasher, so those are high on the to do list. It is a small house only 1000 square feet, two bedrooms, one bathroom, and a small basement for tornadoes, and with a 1.9 car detached garage. It's a nice little house.


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