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Old 10-12-2011, 08:53 AM   #21
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Don't be too sensitive, gator . Its just a bit of fun. You are clearly serious about getting your house in order but we have seen plenty of posters who are just looking for validation hence nords' comment.

Your pension is highly valuable,but it will not get you out of trouble now if it happens. I would count it in your net worth when you start tracking it, but that does not change the fact that you are in the caution zone right now.

I think you would be well served to figure out where you want to be in 15years and then black out what you need to do to get there. I will bet that greatly reduced debt is a big piece,but you really need to spend time on excel to see for yourself.
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Old 10-12-2011, 10:02 AM   #22
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You are 43 which is still young and you and your wife are putting away significant money each year into both retirement vehicles. You currently have socked away $160K, I assume in a relatively short period of time since you stated you only recently started doing this.

My questions:
1. Do you have to generate cash for a specific purpose that is somewhat forcing you to sell something? If you sell something are you just going to turn around in 5 years and buy it again? If so, why sell?
3. How significant is the hurricane risk to you? If significant, then sell. Isn't the hurricane risk just as great with the rental beach house?
4. What will your savings picture look like in 5 years? Does this increase your comfort level at all if you held onto your properties?

Thoughts: The lot is paid for. The rental beach house is not. Right now the lot is only costing you property taxes. Another way to look at the rental beach house is to
calculate the amount of loan interest that will be paid during the lifetime of the loan. I'd say it is close to or over $500,000. That is the amount you are taking out of future earnings to pay for it. If you include the principle amounts....then it is more like $1 million. Granted rents are helping you pay that right now...but not if a hurricane knocks it down. This "future liability" amount of principle and interest to pay it off....may look a little different to you thinking of it in these terms.

If you are not planning on using one of these for your retirement and if there is significant hurricane risks to both, I would put them both on the market. Selling the lot gives you a $200k loss but also gives you $200K in cash (roughly) while eliminating hurricane risk. Selling the rental beach house eliminates future liability and hurricane risks. But only if you do not plan on buying another in the "near" future.

What happens if something happens to either one of you.? Do you both have insurance to cover the liabilities for the other?

The only other consideration I have is that some say there will be a housing shortage in 15 years. Depends on who you believe and if you can predict the future. None of us can.

Sit down, get quiet and do what your "gut" tells you to do. What version or combination of things makes you the most comfortable? Just remember that in retirement, liquidity and "cash flow" is the name of the game.
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Old 10-12-2011, 10:32 AM   #23
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Lots of "tough love" on this board, I see that as a good thing. It's not a "mainstream" board, you can get info and advice that isn't common in the finance world. That's why I've been lurking here for over 5 years.

The key here is for you to take a good look at your real estate bias...
You totally blew off the post that put your net worth at 70k. And the one that said you are over-heavy real estate. You also commented it's our only debt....we don't owe on other things...if you had any more debt, you net worth would go negative.

Also, I am wondering about the 140+ you have in 2nds, was this to avoid PMI and make a low down payment? Or was some of it used to "pay cash" for your empty lot? Another sign of being top heavy in real estate.

Also, your use of the terms "fire sale" and depressed markets and rental income, along with the idea of building on the empty lot, lead me to believe you are in denial about the true state of the real estate market. Fire sale is market price...

BTW, don't shoot the messengers because you aren't happy about what they are telling you. You won't hear any advice like this from bankers, or real estate people, or builders.

As to what you should do, your call of course, just be aware of the messages you are getting from people here, I don't think they answer posts to make fun of you or mock you. I have found this board to be a mix of pretty neat people
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Old 10-12-2011, 11:14 AM   #24
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Quote:
Originally Posted by lostgator View Post
I take it that you think I mean, "but I plan to do what I want anyway." Ok. You are entitled to your opinion, but you are wrong. I meant exactly what I said. I hope the "boys on the board" got a good chuckle out of your hilarious dig at the newbie who hasn't lived the frugal, disciplined life that you have.
Ah, shooting the messenger. Good one! Very therapeutic. Never seen that here before either.

You received advice earlier on this thread from an experienced Wall Street financier who's forgotten more than I ever expect to learn about risk. (Of course many on this board claim that I have a lot to learn about risk.) We were reading newspaper stories about Wall Street's problems over the last few years. He was watching his friends, co-workers, and families take on risk and live with the consequences. He's about ready to ER at an age younger than me, and without my pension benefits. I think that makes him better at ER than me. I listen to his advice.

You also received advice from an alumnus of a very large tech organization that prides itself on taking a justified risk. He worked down the hall in daily contact with execs whom I consider to be giants in the field of tech risk assessment. Speaking of risk, he just bought some risky real estate after a thorough public discussion on this board about... the risks and downsides. He's been ER'd longer than me, and without my pension benefits. I think it makes him better at ER than me. I listen to his advice all the time, and I've personally watched a lot of other people listen to it too.

Here's the answer you came up with:
Quote:
Originally Posted by lostgator View Post
Thanks for the replies everyone. I really appreciate that you took the time to consider our situation and let me know what you think. What is most helpful to me is it seems that selling the beach lot seems to be a sort of obvious solution.
I am definitely going to strongly consider what you are telling me.
Where I was working we also followed that up with "And you've given me a lot to think about!"

But in my opinion your words appear to be semantically equivalent to "Nah, I don't want to do that."

So you got your feelings hurt. How do you think those two felt after you kissed them off with those platitudes?

After a few years on this board, we've seen more than a few posters ask your type of questions. In case you're wondering where the hole/shovel/digging comments came from, there's a famous Internet thread about the poster who's stuck in a hole and asks for advice:


Quote:
Submitter: "Help! HELP! I'm stuck in a well!!!"

Posters1-4: "Climb! Climb up and take our hands!"

Submitter: "I'm thinking I should dig... should I dig?"

Poster5: "NO! I was trapped in a well, and digging is a bad idea! Climb out!"
Posters6-8: "We're lowering ropes! Take hold of a rope!"
Poster9: "I've even tied a harness to the end of this one!"

Submitter: "I can feel the ropes, but I don't want to hold onto them... should I dig?"

Poster10: "No! If you dig, you'll hit water, and then you'll be hosed. I should know, I almost drowned."

Submitter: "I dug a little bit just now, and I haven't hit water. I'm gonna keep digging..."

Posters11-18: "No! Climb! Climb out!"

Submitter: "Guys, I'm seriously stuck in this well! Help! HELP!!!"

Poster19: "I was trapped in a well once. It took me two years, but I managed to build a climbing machine that pulled me to safety out of a well bucket and a pocket watch. I'm dropping the blueprints, extra buckets, and an assortment of pocket watches."
Poster20: "I've engineered a jet-pack that will rocket you to safety. Stay where you are and we'll lower it down!""

Submitter: "Thanks for your help, guys. I'm gonna keep digging. I'll find the Mines of Moria and I'll just walk to the surface."
... and it gets worse from there.

Your situation is not unique, and it's certainly not unprecedented. Over the years we've watched a number of posters ask similar questions and then give responses very similar to yours, especially using the words "definitely" and "consider". Then they've gone off to blow themselves up in spectacular fashion, often while agreeing that it sure feels like they're tap-dancing in a minefield.

We're offering advice and suggestions to your question, but thousands of people are reading the responses. I think we owe it to you as well as to them to give you a frank assessment of your options, as well as to call you out when you seem to be fooling yourself.

Quote:
Originally Posted by lostgator View Post
I suppose any helpful advice will now stop now that "nords" has weighed in and ridiculed me. That is the kiss of death. Cast me off into the vast know-nothings who fail to LBYM. Look, I've got 15 years to go before I hope to retire and I am trying to get things on the right track. I am a reasonably intelligent guy hoping to join the club. Why jump on me right away?
No, I think the helpful advice will continue... until people decide that you're not gonna listen. It takes a while for people to determine that's what's happening, so you probably have another 30-40 posts coming your way.

We're not jumping on new guys. Sorry, buddy, it's not about you at all. We're pointing out the flaws in suboptimal plans and the outsize adverse consequences of taking on unnecessary and unmitigated risks. We think we know what we're talking about due to the process of survivor bias. We got to ER via a huge number of different paths, but very few of them involved taking outsize risks. Many of the ER failures involved taking outsize risks. I suspect those correlations have a causation.

This is one of the Internet's best resources for an unemotional and unvarnished assessment of your ideas. My ideas have been shot down here plenty of times, and I managed to turn their advice into an accomplishment that I (let alone my shipmates) never expected to be able to achieve. So here's some more advice gleaned from that experience:

You have two ways to react to the advice you're given. You can take it on board and make sure you understand it by analyzing it to its logical conclusion. (We'd appreciate a followup someday to let us know how it's working out.) But if you're offended by the analysis, let alone compelled to resort to personal attacks, then you'll probably get your feelings hurt frequently around here. You would hope that the quality of your plans would stand on their own merits without requiring your emotional involvement, let alone your ad hominem assaults.

Quote:
Originally Posted by lostgator View Post
Aren't you a moderator on this board? Is this the message you want to send to new posters?
Used to be, hence the word "emeritus". But I still deliver messages-- hopefully to those who are willing to listen to them.
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Old 10-12-2011, 11:37 AM   #25
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Quote:
Originally Posted by panacea View Post
Gator-
The thing about banks is they don't care at all about your overall financial circumstances, only that you can scrape together enough money to make the mortgage payment. Even if you can't send your kids to college or afford to retire until your 80, they're good with that. They also don't consider a number of cash flow issues in their debt to income calculation that really are important... like the amount you pay for daycare or a nanny. Are you setting aside money every month for your next car? If not you'll have a nice car payment that wasn't included in the original calculation. Also, what if you are disabled and can't pay all your bills? Maybe you get 60% of your salary in a LT disability benefit but that won't cover much after taxes, especially if you're stretching right now. You'll probably let most financial obligations slide except the mortgage payment. And in the worst case, the bank gets the house back anyway. In short, don't let the bank determine you much you can afford, because it'll only get you in trouble.
I look at a lot of bank loans and banks and I can tell you that all banks care about is that you can make the payments. They don't care if you can get ahead long term, meet your goals, etc. They don't morally judge, they just want the money. Ignore their views of your creditworthiness when setting your sight on your goals and figuring out how to meet them.
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Old 10-12-2011, 03:58 PM   #26
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I look at a lot of bank loans and banks and I can tell you that all banks care about is that you can make the payments. They don't care if you can get ahead long term, meet your goals, etc. They don't morally judge, they just want the money. Ignore their views of your creditworthiness when setting your sight on your goals and figuring out how to meet them.
+10
Agree 100%.
Banks absolutely do not care. They are interested in getting you into debt up to your eyeballs. More money for them.
You are in a "competition with the banks and other lending entities....to get and keep getting your money. Guess who typically wins?
Be atypical.
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Old 10-14-2011, 03:08 PM   #27
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Hi all,

As a quick update, I sent in the listing agreement on the beach lot. It will be interesting to see if it sells quickly or if it will just languish. In the meantime, we are holding tight to the cash, as we may need it in the future for emergencies. I appreciate everyone providing me with your insight, I really do. Thank you.

I would have gotten back sooner (and addressed some of your more specific points) but we just got some bad health news on a member of our family and have been in a bit of a whirlwind since. I will come back and do so as soon as I can.
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Old 10-16-2011, 11:12 AM   #28
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Hey Gator,

As nice as it would be to reduce your interest rates, I think using all of your savings (plus having to borrow more) might not be a good idea. While you have solid jobs, you never know when you may have some kind of financial emergency and you'd have nothing to fall back on. Maybe you could build that cushion back up again, but I get the sense that there isn't necessarily a lot left over each month based on all of your real estate... IMO, a comfortable amount of property for a $200,000 income is maybe $500,000, excluding rental property (assuming it cash flows). Although if you've got no kids and your retirement will largely be taken care of with DB plans, maybe more works okay. Am I wrong about the saving / spending? Anyway, not sure if there's a good answer for this but that's what first came to mind for me. There are lots of smart people here though that might have some other thoughts.
I too feel that they are over extended with the amount of real estate they have taken on. Although selling sounds like that is not an option for them at this time. Wow! Talk about being caught between a rock and a hard place! Would packaging a refi. be a possibility?
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Old 10-18-2011, 12:48 AM   #29
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Whoa, that's a lot of real estate for your income level.
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Old 10-18-2011, 06:46 PM   #30
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Don't worry about Nords, he's a harmless recovering submariner! But, he knows his stuff. Hell, he wrote the book on it!
IMO, the beach lot has to go. It was bought as a gamble, and didn't work out. Time to cut your losses. Property that produces income would be another story though.
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Old 10-18-2011, 09:25 PM   #31
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Ditto, too much property. "House poor" comes to mind.

I'd sell it all and start fresh. Just do the end calculation of interest on all your loans, prop taxes & insurance and tell me you feel good about the next 15 years...

I always hated making the bank rich on interest payments. Made us pay off my home in 4 years...
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Old 10-18-2011, 10:36 PM   #32
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Like everyone else, Nords has his biases and prejudices. His guidance is not infallible nor is his word final, and you are free to disagree with him.

For whatever it may be worth, I concur with his view that you already have too much in real estate and that it would make no sense to build on the beach lot in the hope of increasing the proceeds of a sale.

Quote:
Originally Posted by lostgator View Post
I sent in the listing agreement on the beach lot. It will be interesting to see if it sells quickly or if it will just languish.
Absent toxic waste or similar unusual situations, all real property will sell at the right price. If the lot hasn't sold after a reasonable time has passed, I suggest cutting the asking price until it moves.
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Old 12-06-2014, 01:51 PM   #33
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Quote:
Originally Posted by lostgator View Post
Hi Everyone,

I tried to respond to my original thread but after I had written everything out I got a message that it was too old to reply to. My original post, outlining our situation back in 2011 is here: Hi...Trying to decide whether or not to refinance
....
How'd I do it then?

I always see this message:
Quote:
Old Thread Warning

This Thread is more than 1145 days old. It is very likely that it does not need any further discussion and thus bumping it serves no purpose.
If you still feel it is necessary to make a new reply, you can still do so though.

[ ] I am aware that this Thread is rather old but I still want to make a reply.
I just check the box, and it allows me to post. Of course, you should heed the warning, but I think it makes sense to continue the original thread if it is relevant.

-ERD50
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Old 12-06-2014, 02:12 PM   #34
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How'd I do it then?

I always see this message:

I just check the box, and it allows me to post. Of course, you should heed the warning, but I think it makes sense to continue the original thread if it is relevant.

-ERD50
To thwart potential scammers, there may be a minimum post threshhold that the OP has not reached (being at only 7 posts now) before the option of posting to an old thread is available as it is to the rest of us.
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Old 12-06-2014, 02:15 PM   #35
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To thwart potential scammers, there may be a minimum post threshhold that the OP has not reached (being at only 7 posts now) before the option of posting to an old thread is available as it is to the rest of us.
Ahhhh, thanks. I always wondered why people said they couldn't respond to an old thread.

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Old 12-06-2014, 02:37 PM   #36
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Lots of "tough love" on this board, I see that as a good thing. It's not a "mainstream" board, you can get info and advice that isn't common in the finance world. That's why I've been lurking here for over 5 years.

The key here is for you to take a good look at your real estate bias...
You totally blew off the post that put your net worth at 70k. And the one that said you are over-heavy real estate. You also commented it's our only debt....we don't owe on other things...if you had any more debt, you net worth would go negative.

Also, I am wondering about the 140+ you have in 2nds, was this to avoid PMI and make a low down payment? Or was some of it used to "pay cash" for your empty lot? Another sign of being top heavy in real estate.

Also, your use of the terms "fire sale" and depressed markets and rental income, along with the idea of building on the empty lot, lead me to believe you are in denial about the true state of the real estate market. Fire sale is market price...

BTW, don't shoot the messengers because you aren't happy about what they are telling you. You won't hear any advice like this from bankers, or real estate people, or builders.

As to what you should do, your call of course, just be aware of the messages you are getting from people here, I don't think they answer posts to make fun of you or mock you. I have found this board to be a mix of pretty neat people
++1

Agree and agree with other posts. OP, listen and learn. This site has
quite a few posters with "real live" experience. Not pure academia.
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Old 12-08-2014, 06:36 AM   #37
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++1

Agree and agree with other posts. OP, listen and learn. This site has
quite a few posters with "real live" experience. Not pure academia.
And nothing to gain by leading you astray, like all the bankers, brokers, and realtors do.
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