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Mr. FAF and I went on a Friday night date two weeks ago.
We went grocery shopping and dropped by a Taiwanese cafe where Mr. FAF got a bento box for $10, and I got a green tea with boba for $4.
(Baby FAF and I had already eaten dinner before Mr. FAF got home from work. Our date cost $18 in total including tax and tip).
Mr. FAF and I were sharing the fried chicken from the bento box when he suddenly looked up and asked me in a serious tone: “Do you think we can buy another house in Northern Virginia later this year or early next year?”
I looked at him in surprise: “What? Are you serious?”
On our way to the Taiwanese cafe, Mr. FAF shared with me that he had heard a rumor that a big tech company might open a huge office in Northern Virginia in the near future.
Besides, the local government is expanding the Silver Line (Metro) in the DC area and is scheduled to complete the project by 2021.
If you know DC well, you will also know that living near a metro line is golden and adds a ton of value to your property.
Our plan to pay off the mortgage
I have talked about our aggressive plan to pay off our mortgage balance by the end of 2019.
Over the past couple of months, instead of putting only $2,000-$3,000/mo towards the mortgage principal like what I had discussed, we have consistently put about $6,000/mo on top of the monthly mortgage payment.
As you can tell, we haven’t really upped our existing 4-month emergency by that much. But we’re just so thrilled with the idea of being totally debt-free!
If we don’t have any big emergencies or lose our jobs, we could very well pay off our one and only debt by mid-2019.
That leaves a window from mid-2019 to the end of 2020 for us to buy our second home. If we wait for too long until the Silver Line extension is completed, the housing market near the metro line will have soared up too high.
We want to make this not only our new home but also an investment (appreciation & rental potential).
I later found out that Apple had already discussed possible plans with the local government to open a huge office in Northern Virginia, which would further boost home value in the area.
We also think that during that mid-2019 and 2020 window, the tech giant mentioned above (besides Apple) might have also picked the winner city for their new office.
Even if Northern Virginia is not selected, the Silver Line extension alone is already enough of a reason to consider buying a house there.
The extension will make transportation in Reston, Herdon and neighboring areas so much easier for the techies working and living in Northern Virginia.
The current Amazon building in Northern Virginia is within a 15-minute walk from the new Herndon Metro Station. Amazon just opened another building on the other side of this station (it’s huge!).
This new townhouse community is within a 5-minute walk from the new Herndon Metro Station. All of the units in this community have been sold although none of the townhomes are completed.
Another construction site near the Herndon Metro Station. Mr. FAF said just a couple of months ago, this area was full of trees.
Criteria and plan for the new home
Sometimes I feel ok with staying in our current home for the rest of our lives. But in times when Mr. FAF insists we need a better house which will also serve as an investment, I do get excited at the idea.
Below is our plan for the new home:
1. Within 1 mile from the Metro station: Our first criterion is that the house must be within a 20-minute walk from the Metro. Our house is currently a 15-minute walk from the Metro, and we can definitely see what it does to the appreciation and rentability of the house.
2. At least 4 beds and 3.5 baths: That’s the basic layout of our current house, so we prefer to keep it that way or move up in size.
3. A finished basement or in-law suite that can be a rental: A house by itself is a liability. We would like to change that and have a rental unit attached to the house. It’d be ideal if it has both a finished basement and an in-law suite for us to generate some passive income. I now look at houses on Zillow and Redfin, and look specifically for such features.
4. Relatively new construction: Our house was built in 1975, and it does show the wear and tear from the past few decades. We would prefer our house to be built after 2000 and as new as possible to avoid or minimize the maintenance and repair headache.
5. Single family: We currently live in a townhouse. We have looked at newly built townhomes and prefer to buy a single family home since it has more space and privacy. We will also consider a townhouse that meets all of the criteria above and has a low HOA fee (below$100/mo).
The average price of a house that meets all of our requirements would be at least $600,000. That means that from mid-2019 to the end of 2020, we need to come up with $150,000 in cash for a 20% down payment, closing costs, and related fees.
We don’t want to borrow money from family or friends, so that $150,000 will be all on us.
Saving $150,000 over 18 months or $8,334/mo is mathematically impossible given our income level and monthly expenses unless both Mr. FAF and I move up the career ladder and get a big raise, which is unlikely to happen anytime soon.
Below are pictures of some of the places we’ve looked at:
Below are the plans we thought about that can make the purchase happen:
1. Accepting to pay Private Mortgage Insurance on the home (~$190/mo) and lots of interest at the beginning of the amortization schedule
–> Cons: Paying almost $200/mo sounds painful to me, not to mention that almost $2,000 will go straight to the bank as interest (Down payment: $50,000; Mortgage: $550,000).
That’s not to mention all the maintenance and repairs that can come out of nowhere. I really don’t want Murphy to move into our new house (ever!).
2. Purchasing a new house and rent it out while living in our existing home
–> Cons: The mortgage rate for an investment property is higher than that for a primary residence, meaning we will pay even more interest to the bank.
Besides, given the median rent in the area ($2,700), it won’t even cover our mortgage, meaning we will have a negative cash flow on the house.
3. Take out a Home Equity Line of Credit (HELOC) on our current home to pay for the new house
–> Cons: This plan defeats the purpose of us paying off the house to have more security for our future. We don’t want a foreclosure on two houses at once and end up on the street.
To me, plan #1 seems the most feasible despite the high associated costs. If we can find a property with rental potential, it will help lower our mortgage payment. We can also rent out our current home and use the cash flow to further defray the cost of owning a second home.
Mr. FAF and I are not really into stocks, but we are really interested in real estate. That’s one thing we both have in common and seem to agree upon without much debate.
With a baby on the way, however, I find the thought of saving up and taking out a loan in the $500,000s extremely stressful.
Shizhuan gelatin & lamb kabob
Beef & ground pork noodles
We went to a Shizhuan restaurant after an afternoon of going to open houses in the Herndon/Dulles Airport area. It was $48.40 in total. Everything was delicious except for the noodles.
That night after we discussed buying a new house in Northern Virginia at the Taiwanese cafe, both of us just couldn’t fall asleep at night.
I stayed up until 1:30 AM feeling excited about our plan and thinking of every possible way we could make it happen.
The next morning, Mr. FAF and I both shared that we lost sleep over the plan and agreed we should take one step at a time and not get ahead of ourselves.
After all, we do have plans to move out of the DC area and have explored Austin, Raleigh, Pittsburgh, and Atlanta. So far, DC is still on top of our list since it meets most of our requirements.
The DC area has everything except for a big Google office for Mr. FAF (the offices Google has in Reston and Washington DC are for data centers, sales, and lobbying, according to him).
One thing I can’t deny, however, is that our plan to buy another more expensive house does motivate us to look in the same direction and save more aggressively to make our dream happen.
Sometimes I wonder what’s the point of living in a big house and sacrificing our wants at the moment. But at the end of the day, it’s not just moving up in housing and living a better quality life. It’s about investing in our future with real estate.
He said we should teach out kids how to fish instead of giving them the fish. The houses will be ours. Our kids will need to save up and buy their own homes. But deep down, I know that we will be happy to give our kids everything we have one day.
Our current plan is to work hard, save, pay off our mortgage balance, save for a down payment on a second home, and wait for the right opportunity/time to buy our second house whenever it might be.
We can dream all we want. But without action and money, nothing is gonna come out of that dream.