Natalie Slagle (00:00):

Man, I'm convincing myself to not buy a home. Why would I want to buy a home? It's so expensive and I want to do other things with our money right now.

And then you bring up the feelings and I'm like, "Oh but owning a home and raising our daughter and having the little tick marks on the wooden panel of her height.” Oh, that sounds so sweet.

Dan Slagle (00:21):

You can do that if you're renting, you just rip off the panel at the end and just keep bringing it with you.

[Music Playing]

Natalie Slagle (00:32):

Welcome to Money Dates, the podcast that makes money conversations with your partner feel a little less taboo. I'm Natalie Slagle, a certified financial planner, and I'm joined by my husband and business partner, Dan Slagle, also a certified financial planner. Say hi, Dan.

Dan Slagle (00:47):

Hello.

Natalie Slagle (00:48):

In each episode, we'll share honest stories and practical tips to help you and your partner feel more connected and confident on your financial journey. So, grab your drink, get comfortable, and join us for our money dates.

Dan Slagle (01:02):

Hi Natalie.

Natalie Slagle (01:04):

Hi Dan. How are you today?

Dan Slagle (01:06):

I am doing really well. I haven't seen you yet today.

Natalie Slagle (01:09):

That's a lie. Obviously.

Dan Slagle (01:14):

I just wanted to throw in the pleasantries that every podcast has at the beginning.

Natalie Slagle (01:20):

We should do our own pleasantries, which was what we were talking about before I hit record.

Dan Slagle (01:26):

I have no idea what you're talking about.

Natalie Slagle (01:28):

That we don't have any lunch this week.

Dan Slagle (01:33):

Conversations behind the scenes, it is Tuesday afternoon at 1:25. We went to the grocery store this week, but we failed to get anything for lunch. So, therefore this week we have been eating all of our snacks for lunch, basically until the cupboard is clean. And then we'll have to figure it out.

Natalie Slagle (01:57):

I mean, that's a great way to do it. I think maybe by not buying lunch, we're going to eat the things that we would otherwise ignore. But I don't think you appreciate that strategy.

Dan Slagle (02:08):

It's a difficult strategy. I'm more of a grab and go. If something is ready in the fridge, whether it's leftovers or pre-made, that's my style. Like me scavenging the cupboards for food, like tortilla chips. Yeah, I mean, it was great, it was good lunch, don't get me wrong, but not my preferred thing to do. I'd like to have a pre-made meal.

Dan Slagle (02:32):

Anyways, we're not here to talk about lunch today. Are we? We're going to talk about home ownership. A hot topic.

Natalie Slagle (02:39):

Yes. And we're going to share a little bit about our story because home ownership is not just a financial undertaking, but quite an emotional one as well.

Natalie Slagle (02:55):

And what's frustrating for us and our clients is we make good incomes. We're doing well, but it feels like it's not enough to own the home we want or to move out of our first purchased home into that, I don't know, in between the first home and the dream home. It's hard for people to even do that. And then not only getting to the point of owning a home, but then the upkeep as well.

Natalie Slagle (03:29):

So, that's what we're going to talk about today.

Dan Slagle (03:32):

That sounds really fun, but also very stressful.

Natalie Slagle (03:36):

It is. Let's talk about our journey first. And we have been homeowners in the past for a very short time. I think it was about a year.

Dan Slagle (03:48):

It was like 11 months.

Natalie Slagle (03:50):

It was 11. That's crazy. Our home ownership journey started the year before we moved out west. So, we owned a home in Minnesota. And the reason why we sold it is because we decided to get up and leave and go do our new jobs and our new positions out in Portland.

Natalie Slagle (04:13):

And so, then we went back to the renting lifestyle, and we've been there ever since. And now we're back on the, should we buy a home?

Dan Slagle (04:24):

What do you think has changed that mindset?

Natalie Slagle (04:28):

What has changed that mindset? I think having our daughter makes me want to have a home. And I hear this from our clients a lot too. Our clients who are renting, who have kids. And as cheesy as it's like I want a home to raise my child in.

Natalie Slagle (04:49):

And I don't know why it can't be a home that's rented. I don't know why all of us are like, "Oh, in order to give that lifestyle to our child, it needs to be owned." But that's the story we all tell ourselves.

Natalie Slagle (05:03):

And then at least for me as a mom, I think there's some underlying security that I want to make sure my daughter feels. And that is one way to provide it. Is we own this home and therefore it's unlikely that things are going to change. But when I say that out loud, I'm like but things changed for us.

Dan Slagle (05:25):

Yeah. I totally agree with you. I think both of our mindsets have changed in the last 12 months of, if we want to buy a home or continue renting.

Dan Slagle (05:37):

Obviously, it's a very difficult environment to want to purchase a home in. That's the hard part. If we had home prices like we had 10 years ago, or interest rates that we had that long ago, we'd buy a home.

Natalie Slagle (05:53):

We probably would. Yeah.

Dan Slagle (05:55):

But that's not the environment we live in anymore. So, going back to when we first owned our home, I don't know if you and I loved it. I'm trying to think of, like did we really enjoy it? I think we enjoyed aspects of it. Was it the home? Was it the feeling we got from the home? I loved doing the landscaping and being outside. I think you had some fun projects that you had worked on.

Natalie Slagle (06:24):

Yeah. I didn't love, and no surprise to anyone who knows me and how I operate financially. I didn't love the financial surprises that came with owning a home. And our last episode we talked about planning for travel and planning for flexibility.

Natalie Slagle (06:41):

So, maybe that was what was missing financially is we should have our emergency fund and then also have kind of the slush fund because we're homeowners and we don't want it to tap into the emergency fund. Maybe that's what was missing and being naive and first-time homeowners, we just didn't realize how much comes up as a homeowner.

Dan Slagle (07:04):

Yeah. I remember one night I was in the attic for some reason, I don't know why. It's weird. And I did not keep myself on the boards up there. And I remember putting my knee right through the ceiling and I was like oh gosh.

Natalie Slagle (07:20):

Right in our kitchen.

Dan Slagle (07:23):

It was just like another project, and I was like, "Oh, got to go to the hardware store again for the fifth time this week."

Dan Slagle (07:31):

Some people love it though. Let's give credit to the people who love the upkeep of a home who are really good at it and really talented at it. I have a friend who's amazing at these things. And gets so much joy out of it, that's just not me.

Dan Slagle (07:49):

So, we're talking about our experience, but if someone is really into it, then that's just an added perk of home ownership.

Natalie Slagle (07:58):

So, maybe not only do you need to evaluate your financial capabilities of home ownership, but it's also just your handyman abilities and handyman, handywoman of home-

Dan Slagle (08:13):

Handyperson.

Natalie Slagle (08:14):

Handyperson. Thank you. Home ownership, and if you are not handy, then you need to make enough money to pay people who are handy. And that might be the bucket we are in, no offense.

Dan Slagle (08:28):

Yeah. Maybe. No offense taken. I think people get that impression off of me anyways.

Natalie Slagle (08:35):

Yeah. And so, hey, we tell it like it is, we tell it like it is. We all have our strengths and weaknesses. There's a lot of emotions that go into home ownership. There's a lot of money that goes into it. Right now, every year we make more money. That's been our journey. Except for when we quit our jobs and started our business, we made very little money.

Natalie Slagle (09:01):

But now going forward, it's like we're doing well financially. And so, we're at this point where it's like how could we not afford a home? There are people who make a lot less than us who can afford a home.

Natalie Slagle (09:16):

We talked a little bit about this. I really liked how your figures in one of our episode kind of split out how much goes to home stuff and stuff like that. But what is it about making over 300,000 and still feeling like you're in a place where you can't afford a home?

Dan Slagle (09:36):

Well, the first thing that comes to mind is you can rent, whether it's an apartment or a home, and let's just use an example. If you pay $4,000 a month for rent and you're in a four bedroom, three-bath home.

Natalie Slagle (09:57):

You mean this is our example. This is literally our situation.

Dan Slagle (10:01):

Oh, well that's funny how it worked out that way. Okay. So, you can pay that amount and you can probably be finding yourself in a home worth 900,000 to a million dollars.

Natalie Slagle (10:16):

Living in Portland.

Dan Slagle (10:18):

Yeah. Living in the west coast.

Natalie Slagle (10:20):

Living on the west coast. Yeah.

Dan Slagle (10:22):

Okay. Or you could buy the same exact home at today's interest rate and have a monthly mortgage payment double what you're paying from a rent perspective.

Natalie Slagle (10:35):

It's around 8,000?

Dan Slagle (10:36):

Yeah.

Natalie Slagle (10:38):

That is insane.

Dan Slagle (10:40):

I know in these conversations there's going to be the people who are like well, you get the equity in your home when you sell it. I'm not talking about that; I'm talking about right now I'm comparing prices. That gap of needing to pay double what you're currently paying from a renting perspective. That seems overwhelming and-

Natalie Slagle (11:04):

That's a good word.

Dan Slagle (11:05):

The other question is, what else could I be doing with that $4,000 that I would now be assuming for living in this home? So, the 8,000 in total that I'm now paying to own this home versus the 4,000 I'm paying to rent this home. What could I be doing with the $4,000 difference? The gap in between.

Dan Slagle (11:30):

And when you have a child, when you have inflation, when you like to invest money in yourself, collectively your business, there are a lot of other options to do with that difference right there, right?

Natalie Slagle (11:47):

Yes. And I want to bring up something that a lot of folks our age, in your 30s and 40s, you don't get to see into you and I get to see as financial planners. And that is what do people do with the equity in their home? When we're all in our golden years enjoying retirement. Because that's a lot of the argument of owning a home is, well, I have all this equity.

Natalie Slagle (12:12):

And I'm not throwing money away. Oh my gosh, I can't stand it when people say I'm throwing money away as a renter. No, you're not. No, you are not.

Natalie Slagle (12:21):

Anyways, the thing that we see, because we do work with a handful of people who are in retirement, they have their home, and their mortgage is paid off. So, there is that aspect that you don't have this mortgage payment, still have the taxes and the insurance, but not the principal and interest.

Natalie Slagle (12:40):

And so, then it's like well, what are you doing with all that equity? What are they doing with it? They have it now, and it's kind of just living on their balance sheet. Because most of our clients, whether it's the clients like us or us in 30 years from now, they don't actually utilize that equity.

Natalie Slagle (13:04):

Our clients in their 60s and 70s aren't saying like, "Okay, it's time to tap into that." They're like, "No, no, no, no, no, I'm going to give my home to my kids." So, I just want to give perspective on what actually happens with that equity that we're also excited to get access or to build. And most of the time with the type of people that we work with, we're not ever utilizing that.

Natalie Slagle (13:33):

So, then to your point, you're like, "Okay, what would we be doing instead?" So, this is an example for you and I, we're in this home, it's worth 900, 2 million, we could buy it and our mortgage be 8,000 a month. Or we could continue renting it for 4,000, and what would we do with the other four? We could invest it into a brokerage account.

Dan Slagle (13:56):

Yeah. And we're just literally comparing the differences between the monthly payments of renting and buying, a current situation that we are literally living in. We're not even talking about the financial resources needed to buy the home. That's not even a factor.

Natalie Slagle (14:16):

We haven't even talked about that yet.

Dan Slagle (14:16):

We haven't even talked about that yet. That is, let's call it 20% down, 10, 20% down of a million. It's like a hundred to $200,000 that you have to have readily available at closing.

Natalie Slagle (14:32):

Yes. Plus closing costs, which a lot of people forget to add when you come to the table, you need your down payment plus closing costs, which can be as ... usually the max I see that is around 5%. So, that's another chunk of change to add, another 50,000 or whatever it might be.

Natalie Slagle (14:55):

So, this is why it's difficult. This is why couples making over $300,000 who aren't in a home yet, or maybe they are in a home, but they're looking to increase the bedrooms about whatever. This is why it's really hard to make that decision.

Natalie Slagle (15:15):

Oh, and by the way, inventory is down, interest rates are up, this whole interest rate game, not game, but just like situation or environment that we're in, it plays a huge part. Interest rates I think it's below 7% now on average. But when we first launched our firm, our clients were getting two and a half to 3% and now it's double. So, your interest payment has doubled. Yes, that's significant.

Dan Slagle (15:49):

Let's talk about your favorite topic. Feelings.

Natalie Slagle (15:53):

Yay.

Dan Slagle (15:54):

Okay. I believe at the start you had mentioned you now wanting to buy a home because of the sense of security that it provides. Did I capture that correctly?

Natalie Slagle (16:07):

You did.

Dan Slagle (16:08):

Taking really good notes on my side.

Natalie Slagle (16:11):

Cute. Thanks for listening.

Dan Slagle (16:14):

Sense of security. When we sold our first home and we then we started renting. I think we had this sense of adventure and flexibility. The feelings that renting gives you on a positive note for me personally, are those two things.

Natalie Slagle (16:37):

Yes.

Dan Slagle (16:38):

And why I'm also kind of shifting back to buying a home is the security piece from home ownership. But I feel like it doesn't have to be one or the other to have those feelings. In your opinion or your thoughts, why does renting not feel as secure as owning the home?

Natalie Slagle (17:02):

Because that's not the American dream, Dan. And I mean that honestly. I think it is so pounded into us that owning a home is the way to raise a family. And there's the perception that you own versus renting. There's all of that.

Natalie Slagle (17:28):

And it would be wrong for me to say that that doesn't impact me, because it does. Our previous conversation or what we were just talking about, I'm like man, I'm convincing myself to not buy a home. Why would I want to buy a home? It's so expensive and I want to do other things with our money right now.

Natalie Slagle (17:49):

And then you bring up the feelings and I'm like, "Oh, but owning a home and raising our daughter and having the little tick marks on the wooden panel of her height." Oh, that sounds so sweet.

Dan Slagle (18:00):

You can do that if you're renting, you just rip off the panel at the end and just keep bringing it with you.

Natalie Slagle (18:07):

It is. And I hate to get all mushy gushy, but all of this is tied to mushy gushiness. And that is, I want the sense of security for my child. And if I looked at baby J and I said, "Hey, what's going to provide you security?" She would say, my parents being there for me, being able to rely and trust on my parents. It would have nothing to do with the home.

Natalie Slagle (18:33):

And in this situation, I'm assuming my little baby can talk, and she would just be like, "I just need you to come grab me from the crib when I'm upset." She's like home, rent, I don't care.

Natalie Slagle (18:46):

And so, maybe the security I'm saying I need or I want for my daughter. I'm not valuing the security she already gets, or I hope she gets from us. And so, is owning a home really worth it? Worth this desire to have security? I would imagine someday we own a home again, right?

Dan Slagle (19:16):

Yes. I have no idea. Who knows what's going to happen in a year from now? Who knows what's going to happen tomorrow?

Natalie Slagle (19:23):

Well, and that's a pro for renting, is our life could change for whatever reason. And if we need to move, it's very easy. But we've also owned before, and we owned a home, and we also moved and we moved across the country.

Natalie Slagle (19:40):

So, whatever situation you're in, whether it's renting or owning, at least what I'm gathering from this conversation is you can have the feeling of security in either situation and you can have flexibility in either situation.

Natalie Slagle (19:57):

And so, it really just comes down to how do you want to live your life? I think it's more of, maybe not more, but I do think there's more emphasis than there used to be. That owning versus renting is much more than a financial discussion now, it's a how do you want to operate, how do you want to live your life kind of thing.

Dan Slagle (20:21):

Yeah. Do you feel like in order to have the flexibility that you're able to have as a renter, meaning getting up, leaving, if something's wrong, someone else is going to take care of it. In order to have that similar flexibility from the home ownership side, do you need to have more financial resources to be able to hire people to do these things for you, to allow you that time?

Natalie Slagle (20:46):

Yes. You may need more financial resources. There's some things that happen in a home where you just got to address it. You can't wait for the plumber to come stop the pipe that's leaking or whatever. But it's nice as a renter to know that even if you don't get to it right away, it's not really your issue.

Dan Slagle (21:09):

Yeah.

Natalie Slagle (21:10):

But there's aspects of the home we live in now that we're not doing or maybe we would paint this room, but we're not, or we get really nice furniture for this space, but we don't own the home.

Natalie Slagle (21:22):

So, there's things that I'm like man, if we just knew where we were going to be for a long time, that would help our decisions.

Dan Slagle (21:36):

Yeah. You know who has the final say in those decisions and the control of it, it's you. Like hypothetically you, not you in our relationship.

Natalie Slagle (21:47):

Oh, I was like I would hope that you feel like you can talk, don't make it sound like-

Dan Slagle (21:53):

I had to get that out there. No, I was speaking-

Natalie Slagle (21:56):

I'm like wow, you're truly-

Dan Slagle (21:57):

Like you are the one with that say. If you wanted to have something permanent to be able to buy nicer furniture and to furnish the whole place, make it your own, you're the one who has that final say.

Natalie Slagle (22:12):

Yes. Absolutely. I do want to provide some context and some numbers. I think this would be important for people to be aware of. And that is true affordability because I think there's the textbook answers and then there's just what we see from just our clients. Because I don't think textbook matches, I know that textbook doesn't match how-

Dan Slagle (22:40):

The real-world works.

Natalie Slagle (22:42):

How the real-world works. So, can you talk on that a little bit, Dan?

Dan Slagle (22:47):

Yeah. I can talk on that for a little bit. I think where you're going with this is talking about some of the metrics, numbers around-

Natalie Slagle (22:57):

Yeah. So, you're household making 300,000, what should you plan on for a mortgage payment or a rent payment?

Dan Slagle (23:07):

The textbook answer is 28%, which if you do the math on 300,000, I think that breaks it out to a $7,000 a month payment. Whether from a rent or mortgage standpoint.

Natalie Slagle (23:23):

That feels like a lot.

Dan Slagle (23:24):

It feels like a lot. It is a lot. So, 28% is like textbook, this is the cap of where we would want you to go. There are some people who would argue, if you live in a higher cost of living area, Bay Area, New York City and those two come to mind, you could go a little higher than 28%. Some people might argue that as high as 36%.

Natalie Slagle (23:55):

Wow.

Dan Slagle (23:56):

But to me, 28% is again, textbook answer, the cap. I think what we see from our clients is 20% is what is most comfortable from a cashflow standpoint of money coming in, expenses being paid, you're still saving, you're still having some fun money. You still have a lot of freedom in your life. I think we tend to see 20% is like that number really hits for clients. So, on $300,000 of household income, that's $5,000 a month.

Natalie Slagle (24:32):

That feels much more reasonable. I mean, I'm thinking about it from our perspective, 7,000 plus daycare, all the money's gone. After daycare, in a home 5,000, I'm like whew, I can breathe a little, we can still travel, we can still save appropriate. So, I like the 5,000 or I like the 20%.

Natalie Slagle (24:59):

And then I wanted to also map out because there's the cashflow perspective, how it impacts you from a monthly basis and then there's the actual purchase of a home. So, if we wanted to find a home with a $5,000 mortgage, what could we afford and what's the down payment?

Natalie Slagle (25:20):

And so, these are the kind of numbers that we run all the time for our clients because everybody's down payment is a little different. And then the cashflow perspective, what they can afford is a little different. So, if our target is $5,000, essentially, we work back.

Natalie Slagle (25:38):

And what we've found is that an interest rate at 7%, which is being conservative, because I think interest rates are a little lower than now. Our purchase price affordability, assuming a 10% down payment would be 650,000. And that includes, we're mapping out property taxes, home insurance, the down payment of 65,000 closing costs on the high end at 5%.

Natalie Slagle (26:04):

So, we'd need almost a hundred grand at closing, because some of that's going to the down payment and some of that is going to closing costs. Interest rate at 7%, that's a mortgage of 5,000, a purchase price of 650. That would mean, at least in our current situation, Dan, we could not purchase this home.

Dan Slagle (26:26):

You just buy the basement in the first floor of this home. And again, that's where the conversation is also. What resources do you have for a down payment and where do you live? That's a big factor; that's a huge factor into this whole conversation.

Natalie Slagle (26:45):

It does, because if we were back in Minnesota, if we were back in my hometown, a $650,000 home would be really nice. It's just not the case here.

Natalie Slagle (26:57):

So, I think the other thing before we take off today that I think is important is that what we see from our long-term projections is that the decision between should you buy a home or should you rent, doesn't make a significant difference in the long run.

Natalie Slagle (27:18):

Because we've done this, we've run this for our clients, hey, if you rented for the rest of your life versus if you owned a home starting next year. And it's not a significant difference.

Natalie Slagle (27:29):

And so, I think you do have to make plans in the short term of how are we going to get this down payment? How are we going to afford the mortgage payment?

Natalie Slagle (27:37):

So, there is planning in that perspective, but I think for listeners' unique situation, I'm not convinced one way or the other that one is better financially.

Dan Slagle (27:51):

Yeah, I agree.

Natalie Slagle (27:52):

So, you got to do what's best for your family and that's I think what you and I still need to figure out, Dan.

[Music Playing]

Dan Slagle (27:58):

Thanks Natalie.

Natalie Slagle (28:00):

Thanks Dan. Will see you next time.

Voiceover (28:04):

Hey, if you've enjoyed this episode and are looking for personalized financial guidance, schedule a free complimentary consultation using the link in the description below. Natalie and Dan Slagle are the founding partners of Fyooz Financial Planning, a registered investment advisor. The information provided in this podcast is for informational purposes only, and should not be considered investment advice or a recommendation to buy or sell any securities. Investing involves risk, including the potential loss of principal. Advisory services are offered to clients or prospective clients where Fyooz Financial Planning and its representatives are properly licensed or exempt from licensure. For more information, including our disclosures, please visit our website at www.fyoozfinancial.com.

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