Making New Plans

You know what they say about the best laid plans of mice and men....?

Well, after much thought, I have decided to back to school in September 2008 to do an MBA. This is going to be a huge undertaking in many ways, and financially is not the least of those. So now I am starting to look at my finances and make some preparations and adjustments to get ready for this step. Since there are so many variables, I am planning with the expectation of having to change or toss some of these ideas. But it is always easier to revise than to start from scratch, so I am going ahead even though there are still many unknowns.

Today I am going to discuss housing and related issues. I don't want these posts to become ridiculously long, so I will break it down into a few pieces.

The first part of my plan is that I am going to keep my house and rent the whole thing out. I have an opportunity to house sit for the next 5 months (paying only the operating expenses of about $300-$400 per month), and I am going to use this chance to move out and get my place fixed up and ready to rent. My goal is to have it fully occupied no later than October.

I am hoping for monthly rental income of $3000, and my monthly principal, interest and taxes are $1825. I am budgeting 10% or $300 per month for property management and forecasting 1 month vacancy each year. I will also need to keep my house insured, and cover any repairs or maintenance. I am budgeting $200 per month for these categories. Using these numbers, I am expecting a net cash flow of $5400 which is the equivalent of $450 per month. This may be my only income while I am in school.

Related to housing is my moving costs. It is going to cost me around $500 to move to the house sit because I have a few pieces that must be professionally moved, and I have to clean the carpets in the new house at a cost of about $200.

I also have a 3 year contract on my internet that I will have to break either this year or next year when I go to school. That will probably cost me $300+ since they will make me return my incentives plus penalties. I may also need to break a 3-year cell phone contract, but I don't know what that will cost.

The renovations on my old house are a bit of a question mark. I haven't been able to get a contractor lined up yet, and the last couple who looked at it were reluctant to give a price. I'm going to say that it will cost me $5,000-$10,000 to get everything done. I'm not doing any major items, but there are a lot of fix ups to do.

I may end up having to store items or pay to move some things to my new city. At this point I don't have dollar numbers for these, but I want to capture them.

Any finally, there is the cost of renting, or covering my house sitting expenses. I am going to plan on $400 per month for the house sit and $1000 per month after that. Again, these numbers could change when I get more information about where I will be going.

So as I went through this list, I have been creating a little spreadsheet for all these numbers. For me, the words are great but the numbers make it all come together. Perhaps I'll post it once I'm a bit further along in this process. Tomorrow we will take a look at education costs....