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Too much right now?
Old 04-04-2015, 10:42 AM   #1
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Too much right now?

Hi all, I'm a long time lurker,first time poster, and having a bit of a financial dilemma. It's amazing to also realize I have no one in my life to openly discuss financial issues and I realize I respect the opinions of the folks here so, here goes...

Background first, I'm a 52 yr old single female, divorced no children, except, of course the cats. Own my own business, a furniture rep firm and I live in AL. I have apprx $925k in vanguard, mix of $600k Ira/$325 brokerage in a mix of mutual funds. Own my home (no morg) worth about $300k. Bought 2 rentals last year, a town home and another single family home, owe about $120k on each, have positive cash flow on both on 15 yr notes. Together they're valued at approx $400k. I like my job, been in the industry for about 25 yrs, but just owned the business about 5. Last year grossed about $110k for pretty easy work. Plan to keep on in some capacity for 5 yrs or so.

I just put a contract on a small lake cottage for $215k that needs some paint and carpet, but after that wild be with roughly $300k. The lake is about 45 min from town, so will be primarily a weekend place. I am getting a20 yr note at 3.5% so payments are $1350.

Feeling pretty good about things until last Weds one of my major lines fired me last week due to a reorg in the industry. One manuf bought out another and are changing how they're represented, blah,blah,blah. This manufacturer accounted for about 40% of my income. All of a sudden, my comfort level with buying the lake house is much more tenuous. Also, I had been planning on putting my house on the market and moving to the town home, partially to get rid of the maintenance and also so I would have some level of deductions for taxes. When I signed the contract for the lake house, I thought I would pay off the townhome with the proceeds of my current home an put the rest in vanguard...but now I'm a little concerned about having a mortgage at all on the lake house with my total gross reduced to about $60-70k a year. I can't tell if its just the stress of everything at once or having a mortgage again after so long without, but I'm super concerned about my ability to manage. I've run firecalc every which way and every time, it says I'm fine....why doesnt it feel that way.

Sorry for the super lengthy post but would welcome your thoughts.


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Old 04-04-2015, 11:08 AM   #2
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Welcome to the forum !

Here are my suggestions:

- Take a deep breath, you should be okay.

- Take a hard look at your expenses

- Since you were planning on doing it anyway, sell the house
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Old 04-04-2015, 11:21 AM   #3
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... Also, I had been planning on putting my house on the market and moving to the town home, partially to get rid of the maintenance and also so I would have some level of deductions for taxes. When I signed the contract for the lake house, I thought I would pay off the townhome with the proceeds of my current home an put the rest in vanguard...but now I'm a little concerned about having a mortgage at all on the lake house with my total gross reduced to about $60-70k a year. ....
Seems to me that having a second home is asking for maintenance issues. Why not just rent when you want to take off? Less hassle and maybe even more economical.

If you cannot get out of the contract but would like to, consider selling at some point down the road. Losing a bit on the real estate turn might be better then getting stressed or feeling trapped.
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Old 04-04-2015, 11:28 AM   #4
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Another option - if the cabin will really be worth close to $300k with only $5-8k worth of improvements you could try to sell that for a profit - your own mini flip.

My concern there is that most of the time it's not that easy to really create that much positive value from paint/flooring.
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Old 04-04-2015, 12:27 PM   #5
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Is it feasible to put a little more into the lake house than you planned to and make that your home and sell you main home? If you work out of your home or can tolerate the 45 minute commute that might be an option and you can enjoy the lake year round.

Otherwise, I think I would sell the main house and move into the town house and keep the other rental and the lake house.

Our home is our former lake house so I might be a bit biased, but being on the lake full time is wonderful.
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Old 04-04-2015, 01:11 PM   #6
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Here is what I would do.

Get rid of the cats, get a dog.

Sell the house. Live in the lake house. Let the other two properties stand on their own (assuming they are occupied). Keep the rest of the cash liquid to see where your income stabilizes.

Fix the lake house up for potential flipping. If the 45 minute commute is too much, sell it a year from now (or whenever prime selling time is). That way you gave it a shot. I have seen lake properties sell every 3 or 4 years. Nothing strange or alarming about a place where somebody didn't like the drive everyday. If you love living there, see what your business is doing at that time and plan accordingly.



Did you mean 110K Gross business income? Or that you take 110 income from the business.
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Old 04-04-2015, 04:48 PM   #7
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+1 on the breathing. That's very important.

I think you just need a little faith in yourself. It might take some time to get over the shock of the lost business source, but you seem very savvy and successful. I expect you'll either adjust fine to this setback or you'll find another opportunity shortly to fill the gap and continue to excel.
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Old 04-04-2015, 04:48 PM   #8
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Here is what I would do.

Get rid of the cats, get a dog.
Naaaa... Keep the felines. They are way better then dumb dogs

And BTW you are one smart lady. You have a nice chunk of money for AL (with low cost of living)
and managing on your own.
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Old 04-04-2015, 06:51 PM   #9
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Oh , but cats need their boxes cleaned, whereas dogs just eat their .......Oh never mind, we're not falling for the old cats vs dogs troll....
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Naaaa... Keep the felines. They are way better then dumb dogs

And BTW you are one smart lady. You have a nice chunk of money for AL (with low cost of living)
and managing on your own.
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Old 04-05-2015, 07:40 AM   #10
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I think you just need a little faith in yourself. It might take some time to get over the shock of the lost business source, but you seem very savvy and successful. I expect you'll either adjust fine to this setback or you'll find another opportunity shortly to fill the gap and continue to excel.
+1 As successful as you have already been, I am betting with a little effort (and IF it is what you want to do), you will find another opportunity to replace the lost one. OR, you will decide it's time to reap your rewards.
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Old 04-05-2015, 11:00 AM   #11
Confused about dryer sheets
 
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Thanks for the replies and I think you're right, I need to take a deep breath and relax. Got a little nervous about taking on a mortgage after taking a hit to my income, but really I have plenty of options. Will see about living at the lake full time and see about keeping the townhome rented after the sale of the primary home. Since I do work from home this should be a good option, even just until things smooth out. I appreciate everyone's level headed reminders....thx!


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Old 04-05-2015, 11:23 AM   #12
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Thanks for the replies and I think you're right, I need to take a deep breath and relax. Got a little nervous about taking on a mortgage after taking a hit to my income, but really I have plenty of options.
If you are applying for a mortgage, all you need to not qualify is let the mortgage company know you just lost 40% of your income. Mortgage companies don't particularly like self-employed people anyway so losing income just feeds their prejudice. Not qualifying should terminate any contract pretty quickly and without penalty.

I agree with taking a deep breath and deciding what you want to do and be. You should be fine to retire now with or without a reduced business income.
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Old 04-05-2015, 11:31 AM   #13
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Since the relationship has changed just recently, it won't be reflected in the OP's income until the future. If she decides she wants to go forward with the deal then getting a mortgage shouldn't be affected unless the lenders ask if there are any recent changes in her income between now and closing. If they don't ask, she is under no obligation to tell.
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Old 04-05-2015, 11:41 AM   #14
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Since the relationship has changed just recently, it won't be reflected in the OP's income until the future. If she decides she wants to go forward with the deal then getting a mortgage shouldn't be affected unless the lenders ask if there are any recent changes in her income between now and closing. If they don't ask, she is under no obligation to tell.
2B will be along shortly to correct me if I'm mistaken, but I think his point was that if the OP decides she does not want the house and mortgage, that's an easy way to get out of it. Just tell the lender that "Oops, 40% of my income just went away! Do you still want to make that loan?"
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Old 04-05-2015, 12:04 PM   #15
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How bout renting the lake house as a vacation rental .... it can carry itself (mine does) and be there when you want it. Look at VRBO and homeaway for competing rentals to see vacancy rates and costs. You're already in the rental business so this will be "easy". Best part is - no cash; no keys. You'll never have a dead-beat in the vacation rental business.

Regarding the business loss ... where one door closes another opens. Is there a "former" competitor you were locked out of. Like a competeing line you can pick up. My brother had the same thing happen (40% loss of he largest client) so he took his knowledge of his former client to a competeing line. He now sells the competeing line BELOW the known costs of the one who dumped him. He's eating thier lunch!
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