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Old 08-06-2013, 07:34 PM   #21
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+1@midpack. The % of net worth isn't what matters. How big is your non-housing portfolio, can it sustain your future budget needs, and is the spending on the house (taxes, maintenance, upkeep) affordable.
Another +1

Our home is about 11-12% of total household net worth (8-9% if you just look at the equity) but it's our ability to meet the expenses (including the last 7.5 years of mortgage payments that matter).
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Old 08-06-2013, 07:50 PM   #22
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I agree it's living expenses that matter, but using today's values we'd end up at the house being about 17% of our net worth at retirement.
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Old 08-06-2013, 07:52 PM   #23
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Same here. About 40% as I live in the Bay Area . It's paid off. But I realize that I'm leaving a lot of income on the table by staying here, but I love the house so ill probably stay here.
I feel the same way about Seattle. It provides for a nice retirement plan B or C though. If nest egg projections are off, you can sell the monster house and buy a cheaper home elsewhere.

Not that this is a plan A.
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Old 08-06-2013, 08:21 PM   #24
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If we assume a 4% SWR and use the old rule of thumb that housing costs should be about 1/4 of your gross income; then 1% of your liquid net worth would be available for maintaining the house. If the house is paid off, property taxes, insurance, and average annual maintenance should not exceed 1% of your liquid net worth.
My housing operating costs actually run less than 1% of NW right now, barring unexpected maintenance costs (knock on wood).

But I have been thinking that having just one home would have freed up more money for foreign travel, and gas for my motor home.

I am too greedy, and want too much for my 3.5%WR. What to do, what to do?
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Old 08-07-2013, 09:52 AM   #25
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My housing operating costs actually run less than 1% of NW right now, barring unexpected maintenance costs (knock on wood).

But I have been thinking that having just one home would have freed up more money for foreign travel, and gas for my motor home.

I am too greedy, and want too much for my 3.5%WR. What to do, what to do?
Well, which has the most value for you?

1) having the second home, or

2) foreign travel + gas for your motor home + a rental home near your second home when you want to vacation in that area?

Good luck as you think about your decision of what to do!
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Old 08-07-2013, 02:31 PM   #26
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It is difficult to give up the value of having a 2nd home in the high country to escape the summer heat whenever I want to. Or to go watch snowfall in the winter.

Another option is to get off my butt and go see what we will get in SS (which is still a few years away, even for early SS). This will allow me to justify going higher than 3.5%WR.

Or should I cut down on charity donations to free up more gas money?
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Old 08-07-2013, 02:44 PM   #27
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It is difficult to give up the value of having a 2nd home in the high country to escape the summer heat whenever I want to. Or to go watch snowfall in the winter.

Another option is to get off my butt and go see what we will get in SS (which is still a few years away, even for early SS). This will allow me to justify going higher than 3.5%WR.

Or should I cut down on charity donations to free up more gas money?
What's wrong with taking that RV up to "the high country to escape the summer heat whenever I want to."? Works great for us...
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Old 08-07-2013, 02:59 PM   #28
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Driving an RV back and forth is cumbersome, not like hopping in a car without even packing a toothbrush. Some people do keep an RV in RV parks up here. That could work.

Or I could have just bought a piece of empty land. But back then, the thought of RV'ing never crossed my mind. And then, nice lots with a view may be in subdivisions that disallow living in a parked RV.

I think those donations have got to go (I do not go to church, so it is not tithing).
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Old 08-07-2013, 06:00 PM   #29
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My primary homes are about 40% of my new worth - the real issue will be: does the home percentages effect your retirement - while 40% is a high, when you are high net worth, it does not effect anything. With high 7 figures, two house (Houston/Europe) does not effect my retirement at all.
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Old 08-07-2013, 08:44 PM   #30
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In case you wonder, my Quicken screen told me that in the last 12 months, our charity donations ran exactly 0.5% WR.

I was half-joking when I said this should stop. The above included some cash gifts for special occasions to a couple of organizations that we supported. We certainly do not expect that to be recurrent, nor can afford it. It's too hard to fit that in a 3.5%WR budget.
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Old 08-08-2013, 10:12 AM   #31
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Thanks for the replies. For those interested in this topic, the older thread referenced earlier by bbbamI contains a wealth of information and is a must-read.

This thread brought up one of my primary concerns about this, since I live in Texas (I was outside yesterday for three hours and lost 5 pounds of water weight despite drinking water and Gatorade non-stop):

Would I rather have one 11% home in Texas, or an 7% home on Texas and a 4% summer home in the mountains of Colorado :-)? My wife and I disagree on this topic. There is an argument for one really nice home where you spend most of your time rather than two less nice home you split, but I want a summer home.
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Old 08-08-2013, 10:31 AM   #32
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Since I have lived in the SF Bay Area my whole life, I am not planning on moving. I don't really care about the value of my house, I just saved and invested until I had enough to retire based on my expenses. Also, if I were to run out of money, I count my house as an ace in the hole.

Home % of NW: 35%
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Old 08-08-2013, 10:51 AM   #33
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Since I have lived in the SF Bay Area my whole life, I am not planning on moving. I don't really care about the value of my house, I just saved and invested until I had enough to retire based on my expenses. Also, if I were to run out of money, I count my house as an ace in the hole.
This is DH and me, in the DC Metro area. Love our neighborhood, feel like it's somewhere we could age in place well (except for our staircase), and our house, although we still a long ways to go on the oft-refinanced mortgage, has a big amount of equity in it.

But if necessary, we are prepared to sell and move somewhere with a much lower COL, to get our hands on the house money that then could go a lot farther somewhere else.

We also have no kids, and so want to do our best to spend what we have rather than pinching too much and leaving way more than we'd like. So who knows, maybe at some point we'd dip into the equity and go out with a bang!
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Old 08-08-2013, 11:16 AM   #34
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Would I rather have one 11% home in Texas, or an 7% home on Texas and a 4% summer home in the mountains of Colorado :-)? My wife and I disagree on this topic. There is an argument for one really nice home where you spend most of your time rather than two less nice home you split, but I want a summer home.
I do not know about real estate in Co, but some summer areas can be quite expensive. As stated several times, my summer home in the boonies is 1800 sq.ft., but has the same value as my main home of 2700 sq.ft. in a metropolitan suburb area. Each is 11% of net worth, and just a bit above average for their subdivision.

I was initially shocked when we first looked into this. You would think boonies homes are cheap, but a popular summer area that we first looked into sent us scrambling. An empty 1-acre lot back in 2005 cost $100K to $150K. A shack (literally!) on a tiny 1/8 acre lot had the asking price of $100K. Nice homes ran from $300K to $1MM+. Condos or town homes were $250K+, and all sold out. Prices have come down though since that bubble.

Anyway, I bought it in 2005 when my stocks were going great gun, I still had good part-time income, and I never thought of retiring early. Now that I am fully retired, I don't think I would spend 11% of net worth to buy another home. Of course, if my net worth is in the high 7 figures, it would be another story.

So, how about an RV to let you sample the cool air of CO before committing?

PS. I ended up buying out of the above area, so that I could get a large hillside lot with a panoramic view of a national forest from a 1000 sq.ft. rear deck. It was 2X what we first thought we would spend, but I felt in love at first sight. The house was a spec home, and was half-finished when we made the offer. By the way, it was 15% of net worth back then, but my portfolio has grown while the home price has dropped a bit.
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Old 08-08-2013, 11:38 AM   #35
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My home equity is <10% of NW, though the real estate market is going up while stocks go down, so that is a dynamic ratio. I am a one home guy. One abode is trouble enough, two would turn me into a refuges. I left for good the only places I have lived where climate was pretty bad either winter or summer, or too often both winter and summer.

If my kids were ever to move from Seattle, I suppose there is a small chance (< 5%) that I would move elsewhere in WA, or back to the beach in SoCal (if I could pay the rent currently), or to Reno NV . Otherwise I am here, and will stay here, and only here.

Seattle rain bothers some people, but not me to any meaningful degree. We have a huge preponderance of good days. The main issue for me is not rain, it is winter darkness. But ramping up the social life helps with this.

Yesterday we had a glorious sunny summer day. I was talking to a middle aged Asian woman from Mendocino on the bus. She had come here to consider moving up, but she said that she did not think that she could handle the heat in Seattle! I asked her why he was considering moving, and she said Mendocino was too far from city attractions for her.

So, unless you are very wealthy or have learned to live cheaply in rented quarters or have a low tax California home on the coast, few places are perfect. One just takes the selection that is most important to him.

Ha
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Old 08-08-2013, 11:44 AM   #36
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This is DH and me, in the DC Metro area. Love our neighborhood, feel like it's somewhere we could age in place well (except for our staircase), and our house, although we still a long ways to go on the oft-refinanced mortgage, has a big amount of equity in it.

But if necessary, we are prepared to sell and move somewhere with a much lower COL, to get our hands on the house money that then could go a lot farther somewhere else.
My SO and I did just that. We have two homes in SF Bay Area, the equity of which is about 55% of our NW ($1.7m of $3.3). Thought I'd live in the SF house forever (despite the stairs and hilly hood). Quite suddenly we decided to sell the SF house to create cash to invest/live in for our ER. I decided I wanted to be able to access that cash in my 50's and not wait for my 60's. [Who knows what my health/etc will be like then?) Now we are living in the second home in the Russian River area and adjusting to life in the country. The city is still only 2 hours away when we want it. Big changes but we are happy so far. Crossing our fingers that the SF house sale goes well. Week two and counting ...

Oh, back on point, after the house sale, our home equity will be about 10-12% of our NW.
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Old 08-08-2013, 11:45 AM   #37
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So, how about an RV to let you sample the cool air of CO before committing?
This has been my wife's suggestion. We have spent gobs of time there, and think we would love it, but are not sure where we would want to purchase a home. She wants to spend several summers RV'ing it to decide if we actually want a summer home. I am 100% OK with this, but am trying to make her understand that if we buy too much winter home, this will torpedo the summer home down the road, if we so decide that it what we want to do.

I am all about preserving options and keeping fixed cost as low as reasonably possible.
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Old 08-08-2013, 11:57 AM   #38
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Like others in CA, we live in a paid-for house that is about 30% of NW. We have lived here 30 years, and Prop 13 has worked out well for us.

Downsizing isn't really an option, as far as I'm concerned. With only 1440 SF, the walls already start to close in on overcast days. We would really like more space, inside and out.

Over the past 3 years, we have looked pretty seriously at relocating to Oregon, to gain that extra space and to be closer to family and friends. We may still do so, but our state income taxes would nearly quadruple, the utilities would just about triple (and that is with septic and well!), and property taxes on that larger place we want would also be about triple.

We might end up with a little extra money in the bank, but that's not how we want to spend it.

For the time being, we are staying put.
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Old 08-08-2013, 11:58 AM   #39
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This has been my wife's suggestion. We have spent gobs of time there, and think we would love it, but are not sure where we would want to purchase a home. She wants to spend several summers RV'ing it to decide if we actually want a summer home. I am 100% OK with this, but am trying to make her understand that if we buy too much winter home, this will torpedo the summer home down the road, if we so decide that it what we want to do.

I am all about preserving options and keeping fixed cost as low as reasonably possible.
It's not a bad idea to RV'ing it first, particularly as you do not yet know where you want to be.

As for me, I splurged because I initially thought I would eventually downsize to that mountain home. The winter is not harsh, even though it is at 7000 ft. The dry climate of AZ means that there's mostly clear blue sky even in the winter, and while snow is on the ground!

I now realize that full-timing up there as an old retiree would not be a good idea, due to long distances to get health care. However, I do not see myself giving it up, as it is only 2-1/2 hr drive away, and we can go up and back even in the same day. How can one beat that?
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Old 08-08-2013, 12:12 PM   #40
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No offense to people on the West Coast, but years ago, I had a job offer with a 25% pay raise to relocate there, but I declined. The housing cost was so high that the pay raise would not be enough. I can have two houses here for the price of one there. And as I like to be out of the city, I am not missing anything, and even pay less.

Of course if I had chosen to relocate, I would grow root in CA, and probably would not want to move. A survey somewhere said that most retirees stayed in their home, and when they moved, they mostly stayed within the same state. I now believe that.
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