Abstract: I start a
new job on April 10, in Wisconsin. Whenever you relocate to a
different place, cost-of-living is an important issue. Madison and
Houston are comparable to each other, in that regard. Cost-of-living
websites give contradicting information. Nuance is required to
understand why a given website says that a certain town costs more or
less to live in than the other. To buy or to rent is considered.
Madison seems a better place to buy than rent, especially if you plan
to live there longer than a year. Due to the short time scale, I will
use AirBNB for short-term housing needs until a longer-term solution
is found.
The long version:
Sometimes, you have to move. Especially, if an aerospace company
makes an offer that you shouldn’t refuse. I start on April 10.
Having done the research on moving, certain things are clearer than
others.
For example, the
cost of living. I’ve not yet reached a point in my life where I’m
willing to move to a town, then look for work. In the case of
Madison, I am following the job offer. During salary negotiations, it’s
important to know what kind of quality of life a given salary would
allow in the new town. Well, I know what I make in Houston, and would
prefer my quality of life to be similar, if not better in Madison.
So, is Madison more
expensive than Houston?
According to
BestPlaces.net and Bankrate.com, Madison costs 7 to 15%,
respectively, more than Houston. According to Numbeo.com, Madison
costs 8% less. The average among the three is 4.7% more expensive than Houston.
BestPlaces
attributes most of the higher cost of living in Madison to an
increase healthcare costs. Healthcare is more expensive in Madison,
according to them. Fortunately, I’m in good health for now, and not
paying for healthcare with the same kind of frequency as a mortgage.
BestPlaces says that housing is less expensive in Madison than
Houston.
Bankrate begs to
differ. Average or median (not sure which) homes prices are much more
expensive in Madison ($362,264.33) than Houston ($263,601.33). Rent
prices, however, are slightly lower in Madison ($957 vs $998).
Numbeo goes further,
showing that rent prices in Madison are 12% lower than in Houston.
I suspect that the
cost of living in Madison is more like Houston’s than not. No
dramatic increases as found in San Francisco or New York City.
To continue with the
nerdiness, the next question is: buy or rent? This get really heavy
into the math. Thank goodness that there are online calculators that
will help you figure out how expensive of a house you can afford. The
process that I used is as follows:
1) Gather or have
available your gross salary offer and cost of benefits (health
insurance, etc).
2) Use a paycheck calculator to determine your take-home pay. Whichever calculator you
use should let you choose the State for Withholding, the
pay-frequency, whether health insurance is taken out of your gross
income (before taxes), and so on.
3) With the
hopefully realistic estimate, find a mortgage calculator that
includes taxes, property taxes, PMI, etc. Play with the numbers,
until you find a house price that you can afford.
In terms of how much
money one should devote to housing, Bankrate says that lenders
suggest no more than 28% of your income before taxes. While property
taxes and interest are tax deductible, they are only deductible if
you itemize. Sufficiently low taxes and interest may not be worth
itemizing. Personally, I maintain that until one can pay a mortgage
with pretax income on a monthly basis, one should stick with post-tax
income in these analyses. The income that actually pays the mortgage.
4) With the house
price, go to a real estate website, and have at it. If and when you
find something attractive, note its price, number of bedrooms, square
footage, age of building, and anything else you find important.
Now, it gets really
nerdy.
5) Go to the New York Times Rent vs Buy calculator. Enter in all the relevant
information, guessing or Googling for information as you need or
want. The calculator will tell you in no uncertain terms that if you
can find a similar place (number of bedrooms, square footage, age of
building, etc) at the indicated monthly rent, then you’re better
off renting.
6) Go back to the
real estate website, and look for rentals in that price range.
In my situation, it
became clear that if one is sticking around in Madison for at least
two years, then one is typically better off buying. If you plan on
living in Madison for only just a year, then renting might make
sense. But, squinting at the details, it’s not clear one way or the
other (for 2017).
Until I talk with a
real estate agent and a loan officer, the really fine, local,
specific details won’t be known. In the meantime, I will be staying
at an AirBNB. Much cheaper, and more interesting than hotels.
The summary: With
the job start date known, find out all the numerical information that
you can about your expected take-home income, cost of living, and
housing options. Use online calculators to determine your financial
boundaries. When it becomes clear that you need to speak with local
people (real estate agent, loan officer, etc), wrap up your research
with information that you find particularly important (maximum cost
of house, maximum monthly rent, minimum amount of bedrooms, etc). The
clearer you are with your requirements and limits upfront with the
real estate agent, the faster the overall process can be otherwise.
At this very moment,
I’m prioritizing making sure that I have a place to stay for at
least the next month. I temporarily leave my house in Houston on
April 5, and arrive in Madison by April 7. Housing should be ensured
for at least the April 7 through 18 time period. Thank goodness for
AirBNB.
No comments:
Post a Comment