Final Stages of 2nd home purchase-Need Input

[Hobo]

The thought came to me that this is a very expensive second home/tranquility house. A second home in the Outter Banks is just about as "Great Gatsby-ish" as you can get - very opulent purchase.

Even if you have the income and savings to allow you to do this, I wonder if this house might be pushing you financially a little too close to the edge? Maybe you feel you must justify your purchase with a little extra income. That, you feel, would justify the purchase... but in your heart you know that renting it may cause you more headaches than profit.

So you are stuck, going round and round caught in a circle. It's a dream house, no it's a rental, no it's an investment, no its all three - but that doesn't work either. Okay, its a dream I have always wanted. You have expensive dreams! It's a problem that only 1% of the people in America have... but $700,000 is a very expensive second home. Unless of course, you are like my high school friend, Hank Paulson. He doesn't rent out his million dollar vacation home.

 

[sheehs1]

Hobo...it wasn't $700K, final contract price was $520K but your point is still well taken.
After...filtering out everyone else's wants, I finally got to the place...of determining my comfort level. Have canceled everything as of 30 minutes ago. Wan't excited about it...particularly of having to spend pretty big bucks to refurbish it. Decision made on this particular property. Relief.....
To everyone that posted...thank you for your thoughts and comments. Much appreciated

 

[Hobo]

Good decision. You weren't comfortable with the decision. You can always buy a different house in the future. But you can't always easily sell a house that you are unhappy with. Next time you will be a lot wiser about what to look for - so your dream doesn't turn into a night mare.

 

[W2R]

Good decision, though I know you must feel so upset at this point. Seems like closing on a home is always such a stressful and miserable experience, and not closing on one sounds even worse.

 

[sheehs1]

Thanks Hobo and W2R2. It is the right decision at this point. The seller has the right to try to get his price ...but a buyer has the right to only offer what they are willing to pay.
It's been an interesting experience in real estate purchase. Seller trying to sell an "as is" house he has not maintained for 15 years while trying to get pretty close to fair market value. Who can blame him...right? When I offered him my "as is" price..I could tell I made him mad...as he shot it back my way with a $70K difference and instructed his listing agent that if I didn't take it to take the property off the market. Then after I agreed to that....he went "out of pocket" for further negotiations and can't be reached. Just wasn't feeling good about it. Heck...we could not even agree on all of what needed fixing. For ex: The fiberglass deck on the main floor needed to be reworked and resloped as water was puddling and wicking up the cedar shakes contributing to moisture problems (according to my contractor and an appraiser). His solution...that he put back in writing to me? "Go sweep it off" (as if I was going to be there every day which I'm not).
I'm the second buyer....who has walked away from this house. One walked away in March and now me.

 

[Brat]

I think you did the right thing. There will be another, better house, when the time is right for you.

There are a lot of sellers with unrealistic expectations out there. The seller just wasn't committed to the sale. If I was his realtor I would discharge this client.

 

[sheehs1]

Thank you Brat. I feel relieved so ..that tells me a lot!

 

[ivinsfan]

Many thanks to sheehs1 and hobo for their comments on this thread.
I think it brings up the number one question people have about owning a second home, will it be a blessing or a burden in my life. The answer is different for everyone.
Discussions like this help everyone who is thinking about purchasing another home. This board really does put a "different" spin on many questions about retired life.

 

[MasterBlaster]

I don't need that kind of information. The price speaks for itself. Personally, I would prefer a grumpy seller who stays out of the way. I can't imagine what he can pull on you. Real estate is highly regulated and you have done inspections to make sure you are aware of any the physical problems - like leaky roof, failed septic tank, etc.

Your real estate agent is crying because (from what I read) he/she is missing out on quite a large commission during hard times for a RE agent. I think your agent was just trying to start a conversation to find the details of the deal. It is kind of like wanting the hear the latest gossip. I don't care!

I suspect that the nosy realtor was just trying to size you up. They have to read the tea leaves to make sure that you will indeed qualify for a loan on the house. If your credit is marginal the down payment can make all the difference. They really don't have anything to go on except your word.

They hate it for a deal to fall apart after a months work due to someone being unqualified. The seller and the sellers agent hate you tying up their property for naught.

- Can you blame them ? Put yourself in their shoes.


Regarding vacation properties, I used to work with an older person who had owned a mountain cabin/chalet/house for decades. The thrill of going there was long past. Whenever he spoke of the house it was always of all the work that he needed to do on the house. Much of his vacation time was spent going there to work on the house. Evidently the thrill was gone.

So the moral is... Make sure that you really want this thing. Vacation homes can be difficult to sell. Also don't underestimate the maintenance on a home. You will then either have to pay someone to do it or do it yourself.

 

[sheehs1]

I suspect that the nosy realtor was just trying to size you up. They have to read the tea leaves to make sure that you will indeed qualify for a loan on the house. If your credit is marginal the down payment can make all the difference. They really don't have anything to go on except your word.

They hate it for a deal to fall apart after a months work due to someone being unqualified. The seller and the sellers agent hate you tying up their property for naught.

- Can you blame them ? Put yourself in their shoes.


Regarding vacation properties, I used to work with an older person who had owned a mountain cabin/chalet/house for decades. The thrill of going there was long past. Whenever he spoke of the house it was always of all the work that he needed to do on the house. Much of his vacation time was spent going there to work on the house. Evidently the thrill was gone.

So the moral is... Make sure that you really want this thing. Vacation homes can be difficult to sell. Also don't underestimate the maintenance on a home. You will then either have to pay someone to do it or do it yourself.

Actually Mathblaster...my realtor ...had already received several pre-qualification letters from the bank with verification of funds on another property we had been interested in prior to this one. That's done fairly early in the process. She was trying to rush the appraisal process before due diligence ran out and to question the bank as to why it would take so long.
The moral of your other comments are very much spot on.

 

[tryan]

Seller trying to sell an "as is" house he has not maintained for 15 years while trying to get pretty close to fair market value

Easy to see why there is defered maintenance. 36k of rents on anything north of half a million dollars will leave the owner straped (as you saw with your estimates).

Single season vacation rentals never made sense to me. You HAVE to give it up - rent it - the only time you REALLY want to be there.

 

[calmloki]

We went round and round on a second or different place. Ended up that we couldn't believe that owning a house and renting it out would work for us as a second home - we want our stuff in a place and don't want to move our stuff (cookware,furniture, bed, clothes, rugs, art, etc.) in and out of a place any time we want to visit. Visit. There's the point - we want to live in a place, not visit it. We considered having locked sections of a house or a duplex but ultimately went with a single family home that suits our desires without stretching our financial abilities.

It is 1100 miles from our other house - suspect the drive will get tedious - but it is a winter home - in the summer only golfers and madmen wander around down there. I have the idea that as we get more and more settled down there we will get to the point that we, well, I, will be able to get on a non-stop flight with not much more than a wallet and door key and be ready to live for a season in either place. Last move back north we also took a few computers and file drawers, it would be nice to trim that weight. Should adjust my desires though - while my vacation packing is of the paper grocery bag, toothbrush, 4 pairs socks, 4 t-shirts, 2 skivvies, done; SWMBO's planning is more reasoned and accounts for the possibility that we might take up scuba diving, State dinners, ballooning, ballroom dancing, and polar exploration. Must say that while I travel light and just hunker down when the freak snow storm blows in to the beach it has been much more comfortable sharing her space blanket that she just happened to bring with her.

 

[DAYDREAMER]

We bought a second home on the beach 2 years ago. It is 5 miles away from our 1st house. I knew the maintenance for 2 houses would be a hassle, and asked if my parents would be interested in living at the beach during their retirement, and just pay property taxes and keep the yard up. Our deal also included allowing us to come there anytime to enjoy the place.

So far-So good. We are there after work everyday to do our work out routine of rowing (sculling) and kayaking. Every weekend we have the boat on the bouy, and enjoying the place to its fullest.

Lessons learned-----Even with my convenient setup, I still incur alot of upkeep on the beach house. I am glad it is only 5 miles away, because some of the upkeep takes time. My real problem is finding time to work on my primary house because i'm always on the water playing.

 

[chinaco]

...

There was a really good article on the link Hobo gave me...on how to identify whether the price is a good price for purchase with rental in mind.
annual rent / purchase price = 3% means do not buy, prices are too high
annual rent / purchase price = 6% means borderline
annual rent / purchase price = 9% means ok to buy, prices are reasonable

I'm at 6.9% ....so...borderline......
Yes...want it for qualify of life...but also don't want to overpay....

In Berstein's Investor Manifesto, he indicates that a home is probably over priced if it costs more than 15x the yearly cost of rent for the same home.... which is 6.7% of the cost of the house. He further states that this would be 3.7% after all expenses (maint, tax, etc). Although I think his context is the price of the home one intends to live in... when trying to determine if one should buy or rent (for their personal use).... not a piece of property to be used as a rental in a business.

http://books.google.com/books?id=WV...&resnum=1&ved=0CC4Q6AEwAA#v=onepage&q&f=false

 

[sheehs1]

we want our stuff in a place and don't want to move our stuff (cookware,furniture, bed, clothes, rugs, art, etc.) in and out of a place any time we want to visit. Visit. There's the point - we want to live in a place, not visit it. We considered having locked sections of a house or a duplex but ultimately went with a single family home that suits our desires without stretching our financial abilities.

I struggled with that also calmloki. The only place I could lock off with any space would have been 1 of the 2 garages...but there was humidity control issue with that.

Must say that while I travel light and just hunker down when the freak snow storm blows in to the beach it has been much more comfortable sharing her space blanket that she just happened to bring with her.

I tend to take everything for every one's needs including my own. Need nail clippers (I got em), scissors (got those too), food to snack on (yep)...

 

[sheehs1]

Lessons learned-----Even with my convenient setup, I still incur alot of upkeep on the beach house. I am glad it is only 5 miles away, because some of the upkeep takes time. My real problem is finding time to work on my primary house because i'm always on the water playing.

Convenient setup DAYDREAMER....!

 

[sheehs1]

In Berstein's Investor Manifesto, he indicates that a home is probably over priced if it costs more than 15x the yearly cost of rent for the same home.... which is 6.7% of the cost of the house. He further states that this would be 3.7% after all expenses (maint, tax, etc). Although I think his context is the price of the home one intends to live in... when trying to determine if one should buy or rent (for their personal use).... not a piece of property to be used as a rental in a business.

The Investor's Manifesto: Preparing ... - Google Books

Thanks for the link chinaco...I'm book marking it.

 

[MasterBlaster]

Perhaps it would be prudent to hold off on any Outer-Banks decisions until the storm passes.

 

[sheehs1]

I would say you are right MathBlaster. Hoping Irene jags a bit more to the east ...to spare the devastation from a direct bulls eye hit. Have been watching...and getting a little prepared myself...as we are in southeastern Virginia...an hour or so inland from the coast.

 

[tryan]

My Aunt had a rented house on the outerbanks during the last evacuation. Cut the week in half. Only "compensation" was "off peak" time.

Says she'll NEVER go back. Way too much money. Way too much risk in hurricane season.

 

[Steven]

I just read through your post. I realize this is an older thread but could you share how were you able to cancel a purchase contract.
I didn't think that was possible unless the home failed inspection.

 

[ducky911]

I just read through your post. I realize this is an older thread but could you share how were you able to cancel a purchase contract.
I didn't think that was possible unless the home failed inspection.

Most or at least all of mine have a do diligence( sp) period for inspections. During this time , like a ten day period, you can get out for any reason. Maybe you heard a dog bark or plane fly over. Most likly you will not even have to say why only inform them that you are dropping the deal. Point of intrest is you have not given up the right to get out for these reasons even if the time period has been used up.....it is up to the seller to request on a form that you are done with your inspection period and when you sign that then you are in contract to buy with the only thing left is your loan...of course for some reason if you can not get a loan you can get out also....i live in california...may be different in your state.