Cousin’s Dream House

I recently wrote about a path to get rich for the average wage earner (like me) to follow.  While I play a good financial game, this is one of the areas in my past financial path where I didn’t do the best that I could have.

For a few years, I rented a 1 room apartment for a few hundred dollars a month.  This path (renting the one-room apartment) wasn’t bad, but then shortly after I got married, we rented a small apartment for around $410/month.  Even though $410 was a great price, instead we should have tried to build up some equity!

We should have purchased an affordable “cheap” house that we could have built up equity with instead.  Now in our defense, we didn’t know how long we were going to be in the neighborhood (let alone state).  It turns out we spend about three or so years there.

Contrast this with my wife’s cousin Anna.  Anna and her husband didn’t go to college and decided to start working after high school.  After a few years, Anna and her husband decided to purchase a mobile home and save money.  Anna scored a pretty good job, while her husband tried to start a few businesses while they were young.  He failed often, but never gave up, and eventually his last business attempt succeeded.

This was their Housing Plan:

They decided that they would buy a mobile home.  Since their payments on the mobile home were low, they also started to sock money away for their dream home.  Their annual income was inconsistent, but they always managed to save some money for their dream home each year (some years they saved more than others).  After 7 years they were able to sell their mobile home and buy their dream house just before they decided to start a family.  Their new house was in a cute suburb in a good city with an above average educational system.  Their two-story house is a little over 1,850 square feet, but compared to their mobile home the new house is huge.

Doesn’t sound too incredible huh.  Well, here is the interesting part!  They were able to pay off over 60% of the cost of the house, so their mortgage was relatively low.  They did this while making less than $45,000.  Their property size is about 1/2 acre and the kids have plenty of room to play (especially versus the mobile home in the mobile home park).

Since their mortgage expense was relatively low, they opted for the 15-year mortgage instead of the 30-year mortgage.  Anna’s husband’s business is still growing, so they are increasing their income every year.  But even if his venture doesn’t pan out, they can still afford (barely) the house payment with Anna’s salary.

My wife’s cousin had a better housing plan than I did, and although they had to sacrifice for a few years, the result turned out to be a huge win for them!

Would you sacrifice your housing situation for 7 years to buy your dream home?  What do you think about their housing plan?

Cheers,

MR