“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
After discovering that someone had made a bold preemptive offer on one of the coolest condos in San Francisco we’d seen, our real estate agents’ advice was to wait and see. Occasionally people make impulsive decisions and back out once they’ve had a chance to think it through. Miraculously, they were right. We discovered a few days later that the preemptive offer had been withdrawn. The sellers were still accepting offers—and expecting them to be submitted less than a week after the open house.
On Friday, November 4th we learned that 5 offers had been made, including ours, and that the sellers were going to do a multiple counteroffer to all parties. We were still in this game! Though we tried not to get our hopes up, we eagerly awaited the counteroffer. The night passed with no counteroffer. The weekend passed, no counteroffer. The more time that passed, the more our idle minds couldn’t help but imagine making it our home.
By midday on Monday, the belated counter finally arrived. It was a single page document requesting the purchase price be raised over our initial offer. And since it was a multiple counteroffer, we had no idea what the other offers had been, or what their counteroffers looked like. And we had to respond by 9pm the same day. This put us in an interesting position as we’d already made an offer at the top of our price range (not to mention over list price). Our real estate agents advised that if we really loved the place, we should consider responding with an offer over their counteroffer—to separate ourselves from the pack.
It’s easy to start down the slippery slope of “what’s another 10k?”, but if the purchase price went up, so would our down payment (which effectively acted as the upper bound on what we could afford). So we decided to split the difference, and made a counter-counteroffer slightly higher than our original offer but lower than their counteroffer. It was a funny moment, I felt good about sticking to our budget and countering their counter, but also wistful, figuring that we were effectively throwing in the towel (surely someone else would pony up).
So you can imagine our surprise the next day when our real estate agents called and said “We have some potentially very good news for you.” This was not the call we were expecting. They basically said that if we were willing to adjust one of the non-financial terms of our counter-counteroffer, the place was ours. OMG!!! Yes, yes of course we’ll do that. That night, November 8th, we were officially “in contract” on the coolest condo we’d ever seen, a mere month after starting our search. We were agog at our good fortune. We were in a complete state of disbelief.
Our condo will be the top unit of this cute two-unit buildingThe living room has a bay window and a wood-burning stoveWithout a doubt, this is the coolest kitchen I’ve ever seenThe dining nook/sunroom opens out to mini-deck
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).
Royal Dutch Mint 2011 Commemorative Fiver (obverse)
The photo above shows a commemorative, silver-plated €5 coin issued by the Royal Dutch Mint in honor of their 100th anniversary. As a concession to modern technology, the reverse features a QR Code that encodes a URL—apparently the first of its kind. This is a bold move, as coins presumably last longer than URLs (not to mention QR Codes!), a reality that doesn’t seem to faze the designer, Juan José Sánchez Castaño:
Some people are worried about the fact that QR Codes will disappear in the future, or the coin will not be connected or linked any more to this webpage. [The] internet can also change or disappear in [a] few decades, and so [can] the coins, who knows? The Roman Empire disappeared centuries ago, but nowadays we still enjoy their coins and we know their meaning. As Marshall McLuhan said: “the medium is the message”. The QR Code is the message. The representation of the time we are living is the message, no matter what is encoded on it. The QR Code is a part of the design, part of the message and a beautiful way to close the circle of the one hundred years.
Note: I actually wrote this back in December to post in January, but there was never a suitable gap in the travelogue to put up something non-trip-related. However, now that the dreaded tax season is upon us, I figured: better late than never.
Background
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. I believe it’s a useful practice, taking stock of the past while looking towards the future. It forces me to be honest with myself, and it acts as a data point that I can look back on, charting my financial growth. Money accrues very slowly, and these yearly posts are a reminder to check the status and adjust the heading of a ship that I can barely see moving. I find most financial advice to be far too one-size-fits-all. Learning how to save is a progression and everyone exists at a different point on that line. This is my way of showing how I’m approaching a long term problem stepwise.
Of course I chose my blog as the venue to record these ruminations because I like that it outs an often taboo subject. People tend to keep money and decisions about money close to their chest. Part of that’s cultural (Americans tend to conflate self-worth with net-worth), but I think a big part of that is pride. Most people are pretty bad with money and afraid of exposing their ignorance. Maybe that’s because open, frank discussion about money is so rare?
Last Year
All that said, last year I wrote about a change I made that I wasn’t completely forthcoming about (on purpose):
Why did I do this? So I could save for the trip that I’m currently on! I just couldn’t disclose that at the time. I wasn’t even sure if the trip would happen. But I knew I needed to bolster my cash savings (which were stagnating at “emergency fund” level) if it were to ever happen. By June of 2010 I also stopped contributing to my Roth 401(k) to turbocharge my trip savings before leaving my job in early August.
Having worked at Federated Media for 4 years meant that my initial grant of stock options had all vested. I’d exercised them periodically as they vested early on, but it had been over two years since I’d exercised any more. So I took a hit exercising the rest of them, and I’ll take another hit on my taxes (grrr AMT!). It’s all a bet that one day they might actually be worth something.
So at age 31 I find myself on a fixed income. Or as I said after our final paychecks: “Now we’re spenders.” Or as my parents jokingly call us: “Unemployed and homeless”. Luckily we planned for this. We have the savings to travel for a year or so, and we have some backup savings earmarked to help us transition out of our “early retirement”.
This Year
Looking forward, there are a few things on my plate for 2011. I’d like to roll the Roth 401(k) I had with FM over to the Roth IRA I have with Schwab. I’m assuming this is possible, and this year would be the best time to do it since I won’t have a full year’s salary (assuming I find a new job in 2011). I would also like to get away from using managed retirement target funds in my IRA and instead mirror the same index fund portfolio I have for my non-IRA investments (partly due to their lower expense ratio). And finally I’d like to update how I’ve allocated those assets based on something that resonated with me from the article, A Dying Banker’s Last Instructions:
Keep in mind that putting anything less than about half of your stock money in foreign securities is a bet in and of itself, given that American stocks’ share of the overall global equities market keeps falling.
Since mid-2008 I’ve had the money invested in three index funds at Schwab, representing an asset allocation of 60% large cap (based on the S&P 500), 20% international, 20% bonds. What I’d like to move to is: 40% large cap, 40% international, 20% bonds. With this I’ll continue to have the same 80/20 stocks/bonds split (a little more risk-tolerant than Scott Adams’ 70/30 rule), but I’ll increase my foreign exposure from a quarter of the money I have invested in stocks to a half. Let’s just hope the rest of the world doesn’t fall off the map (I’m looking at you, eurozone).
