“Money is like gasoline during a road trip. You don’t want to run out of gas on your trip, but you’re not doing a tour of gas stations. You have to pay attention to money, but it shouldn’t be about the money.” –Tim O’Reilly
I like to take some time at the end of each year (or in this case, well past the beginning) to look back on the financial decisions I’ve made and think about the year ahead.
Not much happened in the first eleven months of 2012 besides dutifully making our first year of mortgage payments. One down and 29 to go. It feels like an important milestone, though I can hardly fathom the next 29 years. Given how dramatically the housing market in San Francisco recovered last year, we started thinking seriously about refinancing before the year was up. If the value of our condo had appreciated to the point where we had 20% equity, then we could cease flushing nearly $400 down the drain each month paying for private mortgage insurance (PMI).
Once a year, I like to look back on the financial decisions I’ve made and think about any changes I anticipate making in the year ahead.
Financially speaking, not much happened during the first eleven months of 2011, besides the steady evaporation of my travel savings. I did, however, accomplish the few financial goals I set for myself in my last “Learning how to save” post: I increased my exposure to international equity—predictably right before the eurozone economies slumped, I sold off my managed retirement funds (in favor of index funds), and I rolled over my Roth 401(k) to my personal Roth IRA.
When Stephanie and I returned to the United States in August, we had $10,000 as a post-travel savings buffer, an arbitrary amount that seemed reasonable in order to restart our lives. That estimate turned out to be prescient, as there wasn’t much left of it when our first paychecks showed up in the middle of October. It goes without saying that we were both exceptionally fortunate to be offered jobs within a week and a half of our return to San Francisco.
That would be the end of this post, if it wasn’t for something I wrote way back in 2007 (and subsequently acted on), shortly after starting this “Learning how to save” series. In my post, Thinking ahead (about real estate), you’ll find this little gem:
My 31-year-old self would probably want to take my 27-year-old self out for a beer and thank me profusely if he looked at his savings account balance and found $50,000. Of course, between then and now, there’ll probably be a lot of plane tickets and other spontaneous large expenses to account for. So saving $50,000 might take a little longer.
Since starting to seriously look at real estate at the beginning of October, Stephanie and I made a habit of trying to check out at least one or two open houses every Sunday. We weren’t being lazy, it’s just that there wasn’t that much available which met our minimal criteria: a two bedroom flat for less than 700k (preferably much less) in a broad central swath of neighborhoods from NoPa to Dogpatch (and possibly parts of SoMa).
The blue box highlights our general area of interest
Once we’d gotten a good baseline of what was already on the market, and ruled most of it out, we realized that finding a place was going to depend wholly on something new being listed while we were looking. We also knew that the market was going to cool down around Thanksgiving and not pick up again until after the Superbowl. I pretty much expected we’d still be going to open houses in the Spring.
And then, just before the weekend of Halloween, our fourth week of serious looking, I got an email alert for a new listing with the following blurb:
Modern meets Historical in Hip Mission Dolores! This 3BR 1BA completely renovated home features soft & hardwood floors, new electrical, central heating, new windows, period details, wood burning stove in the living room, TONS of storage, chef’s kitchen w/Wolf range, stainless appliances & counters & Scavolini cabinets. A bright sunroom features built in shelves & an eating nook w/custom table for 8-10 people. Ship stairs lead to the attic bedroom which features roof windows, walnut floors & ample storage. On a quiet street with a Walkscore of 94, it’s close to Dolores Park, Bi-Rite, Delfina, MUNI, BART & more! Add to that the active street community with an active Google Group & annual block party and all that’s missing is YOU!!!
Real estate descriptions tend to be pretty formulaic, but something about this one caught my eye. And good thing too, because there were no photos. I pinged our agents for more details, and they said that the photos would be up on Saturday. When I finally saw them, they took my breath away. We went to the open house on Sunday, and it was even better in real life. The kitchen was to-die-for. There was a cute sunroom/dining nook. There were two bedrooms downstairs, a lovely single bath, and an attic-space upstairs that had been converted into a third bedroom. People were crawling all over the place to get a look at it. This was going to move fast.
The obvious appeal and popularity of the condo tempered our initial reaction. Nothing else we’d seen either in photos online or in person came even close to the level of finish and character of this place. We figured we didn’t stand a chance, so we figured, let’s give it a shot. I emailed our agents that afternoon to say we wanted to make an offer. They called back to tell us that someone had made a preemptive offer for more than 100k over list price, well above our price range.
We arrived in San Francisco on September 16, exactly 13 months after we left. I took one look at the rental market on Craigslist and gasped. It seemed that rents had doubled in the time we’d been gone. Well, not exactly, but two-bedroom apartments were going for more than double what we first paid for our one-bedroom five years earlier. Even if we stuck with another one-bedroom, we’d easily be paying $600-800 more per month than a year before.
And so, at the end of our first week in San Francisco, we found ourselves attending a four-hour long first-time home buyers class. We didn’t even have jobs yet! But I knew that eventually we would. In the meantime, I had nothing better to do than get educated. More than anything, I didn’t want to fritter away a year or two of rent hemming and hawing if we pictured ourselves eventually paying into a mortgage. Let’s bite the bullet now (while housing prices have stabilized and mortgage rates are at historical lows).
By the middle of our second week in San Francisco, we both had respectable job offers. So I called up some mortgage brokers and explained our special situation. If we had to wait a year or two to rebuild our financial history, I wanted to know that sooner rather than later. But on the contrary, I got the sense that given our spotless credit, lack of debt, and my remaining savings, our year-long absence from the workforce wouldn’t pose that much of a problem as long as we could provide documentation of our previous salaries, had at least a month or two worth of paystubs from our soon-to-be new jobs, and hadn’t changed careers. This was a watershed moment. If the banks would lend us the money, we could do this.
On our third week in San Francisco, I met with a team of two real estate agents that had been recommended to me by my tax accountant. They seemed professional and straightforward—so I decided to start working with them. That weekend (Oct 9th) we visited more than half a dozen open houses. Nothing really won us over, but we got a good sense of the properties on the market and within our price range. The very next day I started my new job (Stephanie had already been working for a week) and the day after that, we moved into a furnished studio with a month-to-month lease (after having spent the previous three weeks crashing with several very generous friends).
Officially I’ve joined their “core services” group, which is responsible for the financial and database code that underlies kiva.org. I’ll be getting my hands dirty in the financials to start, but I’m also looking forward to helping tame their ever-growing database.