Archives for March 2009

As you may know, I own a house in an expensive area of the country. I love my house, and I love where I live, but I also admit that I occasionally daydream about moving somewhere with a lower cost of living.

In my experience, many people don’t like the idea of moving elsewhere because it involves something unknown and unfamiliar. However, if you ask people to think back to the places they have been, they’ll speak fondly of those places. Specifically, I think about moving back to a place that I spent several childhood years in – Austin, Texas.

Now, there are many things to consider before moving besides costs. These may include:

• Can you find a job there? If so, how will the pay change? Will it offset the change in cost of living?
• Do you enjoy the local culture? Can you easily participate in your hobbies and interests?
• Love, family, weather, traffic, nightlife, cultural diversity, etc.

I think a lot of people who haven’t lived in Texas (and most other areas) may have a misconception or stereotype of what it’s like to live there, and that is especially true of Austin. What I like about the area includes the relatively temperature weather, a large university center, a strong tech industry, and of course a low cost of living and tax burden. As for the financial details, I grabbed some graphs from the Austin Chamber of Commerce website, which were based on independent data.

Cost of Living Index, 4 Quarters Ending Q2 2007

The index takes into account the combined costs of housing, utilities, transportation, healthcare, and other factors. According to this CNN calculator based on the same index, if you are earning $100,000.00 after tax in San Jose (CA), the comparable after-tax income in Austin is 61,217.

Average Home Price, Middle Management Housing, 2007

(For the chart, a “middle management house” is a single-family dwelling model with approximately 2,200 sq.ft., 4 bedrooms, 2 1/2 baths, family room, and 2-car garage.)

These might have changed a lot since 2007, but the median home price in Austin is still a shade under $200,000. If a house in California costs $600,000 that only costs $200,000 in Austin – how many more years of work would it take to pay for an extra $400,000 plus mortgage interest? Would you move to Texas if it meant you could retire an entire decade earlier? Hmmm…

Tax Burden: State & Local Taxes Per Capita, 2005

So not only do things cost less, but I can also earn a lower salary and still get the same after-tax results. In general, Texas ranks 45th out of the 50 states in terms of total taxes per $1,000 of income. With no personal income tax, the primary taxes in Taxes are property and sales tax. In Austin, property taxes are about 2.2% of appraised value per year.

Quick Summary
Going by the numbers, moving somewhere else can certainly seem attractive. For me, not only do things cost less as a whole, but my income would take much less of a tax haircut as well. Now, I don’t think everyone should move, and I have no plans currently to do so myself. But if you are re-examining your financial situation, it can be worthwhile to keep an open mind and consider the possibilities. Everything is a trade-off, and what you gain may be worth more than what you lose.

If you are are a renter in this market, you may be able to lower your monthly housing costs with a little research and courage. Mary Pilon of the WSJ Wallet Blog recently showed how she reduced her rent by 11% by writing a convincing letter to her building manager’s office. She even shares a form letter that people can use themselves. I reverse-engineered some of it to see what types of ammunition might be useful when negotiating with your landlord:

Provide local statistics. A quick Google News Search with the keyword of your city and “average rent” or “rental vacancy rate” should bring up some useful stats. For example, according to Forbes, Atlanta is the nations 3rd most empty city, with rental vacancy rate of 16.1%.

Provide concrete, real examples. Use rent-comparison tools like Rentometer or Zilpy to find out how your rent compares with local properties. (Zilpy also provides rental trends by zip code, as shown below.) Try to find places that are very similar or better than yours, but which are renting for less than you pay now. You could even provide the exact Craigslist page.

Of course, the best comparison is with another person in your complex. Ask what your neighbors what they are paying. That’s how Pilon found out her neighbors were paying $300 a month less than her. If you’re not that close to them, perhaps start up a conversation with “Hey, how’s it going. Isn’t it a bummer that our rents are going up?”. You might get a “Yours too?” or a “Really, mine’s still $XXX…” I don’t see people being overly uptight about sharing rents.

Show why you are attractive renters. Some landlords try to squeeze out every last penny of rent, and deal with the resulting turnover, but 99% of the casual landlords I know would gladly give a discount to low-maintenance tenants. I know some who literally haven’t raise rent in a decade because the renter pays rent like clockwork, takes care of the house, and never bugs them unless it’s really important. You’ll want to show why you should get a discount too.

Remind them that you have a solid rent payment history. Perhaps you have excellent credit scores, or maybe it has greatly improved since you first moved in. Point out any minor repairs or maintenance that you have done on the house, or offer to do some in exchange for a rent reduction. Provide reasons why you want to become a long-term renter, or even agree to extend your lease.

These tactics may not work in all areas of the country, but in lots of places it should at least be worth a shot. The worst thing they can say is no.