Thursday, August 2

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....

6 comments: said...

Congrats Diva on taking the plunge and going back to school. After you finish your MBA, what do you plan to do?

mOOm said...

Cool. Why not include the internet in the rent?

My movers are coming today for my move to Australia!

telly said...

Best of luck Diva! You have done very well financially so I'm sure this will work out well for you and you really won't need any luck.

How far is your move?

Anonymous said...

Don't forget about taxes on that rental income (after applicable deductions like mortgage interest etc).

People seem to frequently overlook the taxes on rentals in their up front calculations.

the money diva said...

Thanks for pointing out the taxes. You are correct in noticing that I had forgotten about them. Although, as a student I may end up not needing to worry about this I still want to have a line for it.

Congrats on your move! That's a good idea on the internet. i just might do that...


Houses For Sale In Calgary Alberta said...

Congrats Diva on taking the plunge and going back to school. People seem to frequently overlook the taxes on rentals in their up front calculations. Don't forget about taxes on rental income.