November 6, 2017
The last week or so has been a busy, somewhat frantic, glorious blur.
You may remember, I said previously that we may start renting at some point in the future.
Well…we decided, instead of humming and harring about it or waiting for the right time, we’ll just do it!
Since I knew it was going to be a costly exercise, it was easy to delay to sometime in the future. But I guess we grew sick of our own procrastination. And we deemed the downside to be relatively limited, as we can always move back to our old cosy situation.
It’s been a whirlwind of full-to-the-roof car trips with bags/possessions, organising works at our old place, and packing/unpacking. Since we’ve only been here a couple of days, there’s still plenty of unpacking to do. And safe to say, the Strong Money blog has been a fair way down the priority list.
Now that some of the madness is over, I decided to carve out an article about what’s going on.
Well…we’re not selling it. We’re getting it a little bit spruced up to rent it out. There’s a couple of reasons for this.
We’re not sure if we’ll like renting, so we want to be able to go back to our old house. Also, Perth property prices have gone nowhere for ages, so we have little equity in the house (we kept borrowing from equity in our house to use towards deposits on other properties).
Therefore, we have little to gain by selling it.
After spending a couple of days furiously cleaning and tidying up the courtyard, putting some new plants in and getting some painting done…it looks great. So nice in fact, that it almost makes us want to move back!
Interestingly, it’s my first time moving a whole house-load of stuff. And it’s my partners first time renting. She’s always been an owner.
I’ve never had much in the way of possessions. And after this experience, I really feel like I’m very much a minimalist type of person.
Before we moved, we donated a bunch of clothes and dvds. We also recycled some old electronics and cables that were clogging up some drawers. We even got to throw a few things away, which I was overjoyed about 😉
After moving, it still feels like we have way too much stuff for my liking. But it’s not all about me, and household peace is more important than my urge to have less stuff!
Here’s a few reasons why we decided to relocate Strong Money HQ…
Despite sounding like the middle of nowhere, we’re actually only 25km from Perth City. And only 10 minutes from the largest shopping centre in all of Perth.
Here’s our lovely new outlook…
Front gate out to the reserve
Lake/wetland area of the reserve
Long-view aspect of the reserve – our dog’s new playground
Since we’re already homeowners, many would say we’re going backwards by renting.
I don’t think in terms of “rent money is dead money”. To be honest, I think that’s a rubbish statement in isolation. It pays to look at the total financial picture, before deciding which is better – renting or buying.
Because this is an experiment, it doesn’t make sense to buy. Maybe we’ll try a few locations, before we decide where to settle more permanently.
Renting is just another version of try-before-you-buy. And with hundreds of thousands of dollars on the line, plus massive transaction costs, it’s not a decision to take lightly.
Besides, most of our savings are tied up in other investments. And no bank would want to talk to us anyway, since we’re not working. Sure we have some investments, but also plenty of debt and no job income.
It’s a messy picture, and most financial institutions would likely smile politely and proceed to decline any requests we made. We’re in the classic Equity Rich, Cashflow Poor situation.
Things will be quite different. A few things are happening simultaneously here.
In 5-10 years time we will own much less property, meaning lower debt and drastically-reduced expenses.
We’ll also have much more shares, meaning much higher dividend income. There may even be some part-time work or hobby income as well.
Basically, the cashflow situation will be reversed. All our investment equity/savings will be easily accessible. We could probably even qualify for a new mortgage if we choose.
Around this time, we’ll have decided how we want to live, and where to set up Strong Money headquarters more permanently.
So we’re giving ourselves a lengthy period of experimental-renting, that should time nicely with having converted our equity into a juicy dividend income stream.
Later on, I’d prefer to be an owner because I really want to have a large solar power setup, with battery storage.
And I may even treat myself to an unnecessary new car…an electric one of course! Our current car is almost 20 years old, so hopefully it makes it to 2025 😉
A side bonus of moving further away from Perth City, is that housing is generally better value.
This 800sqm reserve-facing 4 bedroom house, is only $400 per week to rent. In total, it’s about $21,000 for the year. And our other living expenses are roughly $20,000 – $25,000.
So our annual spending is around $40,000 – $45,000.
That’s my rough guesstimate anyway. I’ve said before how I don’t meticulously track everything on a spreadsheet. But instead, I keep a running estimate with pen and paper, of our bills as they grow or shrink over time.
Out of interest, I’ll be auditing myself at the start of next year, to get a clear picture of how our spending differs from my estimate.
Maybe it’ll be way off! Who knows? We’ll have to wait and see.
Update: See our full annual spending here.
Anyway, this level of spending can be covered by around $700k worth of good-quality, dividend-focused Aussie LICs (under current franking rules). So although we consider it a great life, it’s not exactly expensive to maintain 🙂
So far, we love the location. With the lake/reserve effectively an extension of our front-yard, it’s really tranquil.
And since the local shops aren’t far away (15 min walk), it feels as though we’re still close enough to enjoy the convenience, without as much traffic and other hassles of urban living.
Our dog seems to enjoy it now, after a panicky first night. Yesterday, I noticed how nice it is to walk around the yard at the end of the day with a drink and look at the trees.
There’s been quite a bit of interest in our old place so far, which is nice. The rental market in Perth is quite tough, so a short vacancy would be great. Fingers crossed!
We’re looking forward to settling in, unpacking properly, and setting up a new veggie patch. There’s still a fair bit to do, but that’s ok. It’s sometimes nice to have a boost of frantic productivity, among an otherwise cruisy early retirement.
Speaking of which, I think I’ve earned myself a beer!
Those boxes can wait…