Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Help with a real estate decision
Old 07-11-2014, 07:11 PM   #1
Moderator Emeritus
 
Join Date: May 2007
Posts: 11,036
Help with a real estate decision

Here is the dilemma. DW works downtown. We currently live down the street from her work, so her commute is very short. We are thinking about buying a house in an area 20 miles from downtown. That location would be great for retirement, but it would require a serious commute for DW, which we don't want. If traffic is light, it could be a 30-40 minute commute. But during rush hour, it would take significantly longer. That's probably why the area is still affordable. We have talked ad nauseam about it with DW and I feel like we have lost the perspective on the problem.

Here are the 2 options:

Option 1 - buy later. Keep renting close to DW's job, save a bunch money, and buy when DW retires - cash hopefully. It sounds like the right thing to do, but it seems to be a very conservative plan. On one side, this could allow us to take advantage of a softening of the real estate market if interest rates go up in the next few years. On the other side, prices could continue to increase and outpace the savings we are allocating for the purchase. So, with this option, there is the fear of being unable to afford a home in that area by the time we are ready to purchase.

Option 2 - buy now. As long as DW keeps her current job, continue renting a small apartment close to DW's work and list the house on airbnb for example to offset some of the carrying costs. Positives: with DW still working, we have a very good income and we could lock in a mortgage with an attractive rate. So we would not have to dip much into our savings. We would also lock in a purchase price that is still attractive. Negatives: we will have to pay for rent on the apartment and PITI on the house for a while, which is doable on our income. When DW retires, we can then move into the house and pay it off.

Most people tell us to go for option 2. But I would rather have the perspective of people I know are good with money. And maybe you can come up with a 3rd option.
__________________

__________________
FIREd is online now   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-11-2014, 07:20 PM   #2
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,846
Option 1 is the only one that makes sense to me.

Bear in mind that I am not there, so I have no feel for the local real estate market. I do know that it is easy to get "real estate buyer fever" and feel as though you HAVE to buy right away. Been there, done that. You don't, and if you feel you do then IMO maybe you are gambling. Also, I am a fan of keeping things simple and remaining as unencumbered as possible when in a location where you have not lived for very long.
__________________

__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is online now   Reply With Quote
Old 07-11-2014, 07:29 PM   #3
Thinks s/he gets paid by the post
 
Join Date: May 2006
Location: Largo
Posts: 1,945
For me, the potential additional cost of buying the other house at a later date is much lower than the waste of my life spent commuting and sitting in traffic. You may be dead tomorrow. Don't throw time away today! Money (usually) grows over time. Time doesn't.
__________________
Buckeye is offline   Reply With Quote
Old 07-11-2014, 07:50 PM   #4
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,077
Quote:
Originally Posted by W2R View Post
Option 1 is the only one that makes sense to me.

Bear in mind that I am not there, so I have no feel for the local real estate market. I do know that it is easy to get "real estate buyer fever" and feel as though you HAVE to buy right away. Been there, done that.
I'm in this camp, too.

You and your DW have recently experienced a couple of major changes in your thinking regarding when and where you will retire, right? Although you "know" you want to live in that location when the time comes, isn't it possible that could also change?

I suggest leaving all your options open until you get much closer to pulling the plug. Yes, there is some risk you'll find yourself on the wrong side of the curve on the next housing boom/bust cycle, but you are young and can always adjust, bide your time and wait for the right opportunity.

OTOH, that soul-sucking daily work commute will surely hasten your DW's target retirement date.
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 07-11-2014, 07:51 PM   #5
Thinks s/he gets paid by the post
Senator's Avatar
 
Join Date: Feb 2014
Location: Eagan, MN
Posts: 3,045
Option 1.

If interest rates go up, prices will come down. Is that the only place that would be good to retire at? Two house payments, 2x the taxes, etc.

You might decide to move somewhere else in two years anyway.
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
Senator is offline   Reply With Quote
Old 07-11-2014, 08:05 PM   #6
Moderator
Walt34's Avatar
 
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 16,511
I'm also in the "keep my options open" camp. Of course eliminating a bad commute is high on my priority list. That's why I was essentially "house poor" for ~5 years after my divorce. But to me it was worth it.
__________________
I heard the call to do nothing. So I answered it.
Walt34 is offline   Reply With Quote
Old 07-11-2014, 08:22 PM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2006
Posts: 11,017
I also vote for Option 1. Stick with the conveniently located rental apartment while DW is working. Walking to work is a huge plus. Why take on the financial and economic burden of a second property? You don't really want to be a landlord, do you? When DW retires, you have all your options open, including staying put, buying a house at the other location, or moving somewhere else entirely.

I recommend you avoid property porn and open houses while DW is still working!
__________________
Meadbh is offline   Reply With Quote
Old 07-11-2014, 08:26 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,410
I guess it depends how sure (or not) you are about the area where you want to be once you both retire.

How about a couple other options? If you're sure about the area then my favorite would be to buy and rent out the house and continue to rent/live near DW's work. Another possibility would be to buy a building lot in the area you want to protect you from increased prices (this assumes that building costs will not increase as fast as the value of the lot).
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 07-11-2014, 08:45 PM   #9
Moderator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee Bah Gum
Posts: 21,085
I'm also in favor of option 1. We went through a similar move of moving into an apartment when we moved State for my job in 2004. DW retired at that time so it was me with the 10 minute commute. We had 6 years before I ER'ed but there was no way I would have swapped a rented apartment we liked and was really convenient to where I worked than move out to the 'burbs' and have a 30 minute commute in Houston traffic if I was really lucky.

A few weeks ago we had an 8:30 appointment at Houston International Airport for an interview to get Global Entry status. It is normally a 20 minute drive, even at 7:30, so we left at 7:30 and got stuck in traffic 'cos of a wreck and we only just made the appointment time. We are currently staying with our daughter in Santa Monica and today ventured out for a 25 minute drive to the Science Museum and fortunately the grid-lock was on the opposite side each time. I am so pleased not to have face possible traffic grid-lock on a day to day basis.

I also had the same thoughts as REW that it could hasten the time it takes for your DW to quit work if she had an awful commute.....
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Now it's adventure before dementia
Alan is offline   Reply With Quote
Old 07-11-2014, 08:47 PM   #10
Moderator Emeritus
 
Join Date: May 2007
Posts: 11,036
Quote:
Originally Posted by pb4uski View Post
I guess it depends how sure (or not) you are about the area where you want to be once you both retire.

How about a couple other options? If you're sure about the area then my favorite would be to buy and rent out the house and continue to rent/live near DW's work. Another possibility would be to buy a building lot in the area you want to protect you from increased prices (this assumes that building costs will not increase as fast as the value of the lot).
I thought about buying a piece of land and building later. We could buy a couple acres in a good location for cash right now. I have decided against it for several reasons however (concerns about access to water, very restrictive building codes, etc...). As for renting out the house, I would only consider short term rentals (rent to tourists for a week). This location is too tenant-friendly for my taste, so I do not want to become a traditional landlord.
__________________
FIREd is online now   Reply With Quote
Old 07-11-2014, 09:03 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2006
Posts: 11,017
Quote:
Originally Posted by FIREd View Post
I thought about buying a piece of land and building later. We could buy a couple acres in a good location for cash right now. I have decided against it for several reasons however (concerns about access to water, very restrictive building codes, etc...). As for renting out the house, I would only consider short term rentals (rent to tourists for a week). This location is too tenant-friendly for my taste, so I do not want to become a traditional landlord.
They are the highest maintenance type of rentals. Many of them want to party. You will be commuting to the house frequently to maintain it and deal with problems. This is a Really Bad Idea.
__________________
Meadbh is offline   Reply With Quote
Old 07-11-2014, 09:13 PM   #12
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,862
Option 1, unless the new house is your ideal home and you are willing to pay for it.
__________________
Animorph is offline   Reply With Quote
Old 07-11-2014, 09:17 PM   #13
Moderator Emeritus
aja8888's Avatar
 
Join Date: Apr 2011
Location: The Woodlands, TX
Posts: 7,148
Option 1, then save as much cash as you can and when the time is right, just buy the house. Rates may be higher, prices lower, cash is King.
__________________
aja8888 is offline   Reply With Quote
Old 07-11-2014, 09:54 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Option 1 Keep it Simple Stupid.

I'll make the same caveat W2R I don't know anything about your local real estate market maybe it is undervalued and very hot.

If you do end up with Option 2. Make sure you are very familiar with tax rules with respect to converting a rental property in a primary resident and vice versa. There are some significant benefits the primary one being able to exclude $500K in capital gains, but there are also some gotcha with respect to recapturing depreciation.
__________________
clifp is offline   Reply With Quote
Old 07-11-2014, 10:00 PM   #15
Moderator Emeritus
 
Join Date: May 2007
Posts: 11,036
The results so far support my gut feeling.
__________________
FIREd is online now   Reply With Quote
Old 07-11-2014, 10:14 PM   #16
Thinks s/he gets paid by the post
 
Join Date: Jan 2013
Posts: 1,044
A lot of things could change in the next few years. Saddling yourself with a piece of unoccupied real estate would not make sense to me. Taxes, maintenance, insurance and utilities all add up. What if you change your mind or a health issue arises and the market has not changed or has gone down? It would cost you a lot of money to sell something you did not use.

Buy a house where you want to live when it's time to move. If that area appreciates out of reach, you will find somewhere else just as nice. Without having to worry about commuting then, a lot more options will be available. And you will have a lot more in savings and investments available to put in the purchase.
__________________
Another Reader is online now   Reply With Quote
Old 07-11-2014, 10:33 PM   #17
Moderator
Ronstar's Avatar
 
Join Date: Aug 2007
Location: A little ways southwest of Chicago
Posts: 9,341
I would do Option 1. My BIL and SIL are doing a variant of your Option 2 and it's not going well.
__________________
Ronstar is offline   Reply With Quote
Old 07-12-2014, 04:07 AM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 5,172
Option 1. Your needs and wants may change in the future, and renters could be hard on your house anyway. I would've suggested buying land if you had the right location so you could build what you like as the time gets close, but I see that you've considered that already.
__________________
RunningBum is offline   Reply With Quote
Old 07-12-2014, 04:30 AM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,260
How much longer does she plan to work

You can do a long commute for a year pretty easily...


But, if she is planning to work many more years.... I would not buy right now... unless you are SURE that is where you want to be...

You did forget option 3... buy the house and rent it out until you retire... and keep living where you are...
__________________
Texas Proud is offline   Reply With Quote
Old 07-12-2014, 05:56 AM   #20
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 24,424
Is this a dream house or unique opportunity? If so, perhaps you should buy it now.

Otherwise, your search for housing unavoidably includes the commute to work as a requirement. What are the chances that, once retired, your profile of a desirable location changes? With no commute needed will consider different options?
__________________

__________________
MichaelB is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
The REAL Real Estate Appreciation Rate honobob FIRE and Money 158 06-21-2009 09:46 AM
Update on my real estate investment decision thefed Other topics 16 09-30-2008 04:07 PM
Real Estate Agent in Down Real Estate Market TromboneAl Other topics 4 06-09-2007 11:20 AM

 

 
All times are GMT -6. The time now is 05:49 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.