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House Upgrade
Old 04-10-2009, 12:34 AM   #1
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House Upgrade

I'm trying to decide when to pull the trigger to upgrade from starter home to dream home.

We have a 3BD/1.5BA Cape Cod. ~1700 SF plus unfinished basement. 1 stall garage in a cold climate (basically used for storage, not cars). Lived here a whoppin' 5 years, in Aug.

2 small kids. Mortgage rates at historic lows (just refinance?). Property values decent after a small decline locally.

Dying to buy the right amount of land and build.

My perfect case scenario is to sell the city home for a 40k profit, find 40-80 acres, wooded or enough to block the wind. High and dry. Scenery: creek, woods, etc. Build a 2k-2.5k SF concrete-insulated-form abode. Double garage attached or ... larger, not attached.

How did you decide when to move from your "starter home" to something different?

Advice? Regrets?

-CC
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Old 04-10-2009, 01:22 AM   #2
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What is a "starter home" exactly?
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Old 04-10-2009, 07:29 AM   #3
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Quote:
Originally Posted by CCdaCE View Post
I'm trying to decide when to pull the trigger to upgrade from starter home to dream home.

We have a 3BD/1.5BA Cape Cod. ~1700 SF plus unfinished basement. 1 stall garage in a cold climate (basically used for storage, not cars). Lived here a whoppin' 5 years, in Aug.
Just parenthetically, if you are using your one-car garage for storage now, there is a strong probability that you will use a two-car garage (or larger) for storage in the new home.

Also thought I'd point out that mortgage payments for the first five years on a mortgage are mostly interest.

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2 small kids. Mortgage rates at historic lows (just refinance?). Property values decent after a small decline locally.
I'd refinance based on a new appraisal at your $40K higher home value, if possible, and invest the difference. Of course, you could become "upside down" on such a mortgage if housing prices decline in your area. So maybe not.

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Originally Posted by CCdaCE View Post
Dying to buy the right amount of land and build.

My perfect case scenario is to sell the city home for a 40k profit, find 40-80 acres, wooded or enough to block the wind. High and dry. Scenery: creek, woods, etc. Build a 2k-2.5k SF concrete-insulated-form abode. Double garage attached or ... larger, not attached.

How did you decide when to move from your "starter home" to something different?
Given that your present home is 1700 square feet, and that this is not as uncomfortable for a family of four as might be, say an 800 square foot home, I'd say that living there is not a hardship. So, I hate to say it but I'd suggest that the best time to move to your dream home might be when you are FI and have enough money to remain FI after buying the new home.

This is one of those "Do I want to live as though I could afford xyz, or do I want to actually be able to afford xyz?" moments.

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Advice? Regrets?
Sort of the opposite. A few years ago I realized that since my starter home was paid off, and I was still working, I could sell my house, use all of the proceeds as a down payment, and then with another mortgage I could afford an absolutely elegant mansion (well, relative to my present house) in a snooty upscale section of town. It was tempting because of my desire to bolster my own self-confidence in my ability to make it on my own after my divorce, but I didn't do it. I am SO GLAD. I would have been trading about six years of my retirement for the house the day I signed the contract, and Katrina wiped out that entire part of town anyway.

My advice is to realize that most people cannot achieve all of their financial goals in life, decide on your true priorities and keep your focus on what is the highest priority to you (which for me is FIRE), until you have achieved that financial goal.
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Old 04-10-2009, 08:46 AM   #4
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What is a "starter home" exactly?

Starter home - Wikipedia, the free encyclopedia
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Old 04-10-2009, 09:13 AM   #5
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Our house is the size of yours, CCdaCE, and is the only home we've ever owned. After raising our two kids from birth til they left the nest, we realized we should have moved if only for more bathrooms--those small kids get big and they get active and they accumulate their own stuff. Of course we don't regret not having done it now that they're out on their own and our home is now what some people say they want to downsize to, but we probably lost out financially on the appreciation of a larger home.

How are the schools where you live now vs. where you want to build? That is one consideration that kept us in our house, but also among people we know their primary reason for moving besides the space issue. Also taxes, cost of moving, potential appreciation, commuting distance, etc.

But I would say do it sooner rather than later if you decide to do it. Put your house on the market and see what it would fetch.
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Old 04-10-2009, 10:56 AM   #6
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Old 04-10-2009, 11:29 AM   #7
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We still live in the first home we ever purchased. Could we afford a bigger house in a more "upscale" neighborhood? Undoubtedly, but I'd rather retire sometime soon.

If your house serves you well right now and the neighborhood is acceptable, I would recommend refinancing and staying put. Although, if you are bursting at the seams and there is a crack house next door, I could understand moving.

You say you are "dying to build". Is there some non-financial thing about a brand new house that drives your desire? If that is the case, you shouldn't listen to me, since my own house is 152 years old and I've never understood the drive to "build new".
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Old 04-10-2009, 11:43 AM   #8
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We still live in the first home we ever purchased. Could we afford a bigger house in a more "upscale" neighborhood? Undoubtedly, but I'd rather retire sometime soon.

If your house serves you well right now and the neighborhood is acceptable, I would recommend refinancing and staying put. Although, if you are bursting at the seams and there is a crack house next door, I could understand moving.

You say you are "dying to build". Is there some non-financial thing about a brand new house that drives your desire? If that is the case, you shouldn't listen to me, since my own house is 152 years old and I've never understood the drive to "build new".
Ewww. You live in a used house? Reminds me of a dealer in old caucasian rugs who told me about a lady who came in, looked all around, and said - "these are all used rugs - don't you have any that aren't used"?
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Old 04-10-2009, 01:31 PM   #9
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The definition is rather vague. It just sounds like another marketing ploy to encourage people to constantly upgrade their dwelling, always bigger, always better, always more expensive.

For me, the concept of a starter home is completely foreign. You either like your home or you yearn for another one. I would certainly never allow subjective labels to force me out of a home I like.
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Old 04-10-2009, 02:30 PM   #10
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How did you decide when to move from your "starter home" to something different?

Advice? Regrets?

-CC

I moved from my starter home when I got remarried . We wanted a house that was ours not mine or his . It came at a great time because my children were growing and we needed the extra space . No regrets at all it was the perfect neighborhood and schools for my children and close to both our jobs . Only you know what is right for your family . I've never built a house but I have always wanted to so maybe I'll build the next one .
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Old 04-10-2009, 06:45 PM   #11
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The definition is rather vague. It just sounds like another marketing ploy to encourage people to constantly upgrade their dwelling, always bigger, always better, always more expensive.

For me, the concept of a starter home is completely foreign. You either like your home or you yearn for another one. I would certainly never allow subjective labels to force me out of a home I like.
It's more of... you buy a less than ideal initial(starter) home because that's all you can afford and you hope later to upgrade to a better/nicer house after you've built equity and increased salary.
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Old 04-10-2009, 07:36 PM   #12
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40-80 acres, wooded or enough to block the wind. High and dry. Scenery: creek, woods, etc. Build a 2k-2.5k SF concrete-insulated-form abode.

This sounds wonderful to me! I always wanted a home that was designed to our specs, though the FIRE dream has pre-empted that.

Anyway, if you want lots of land around you, and your lifestyle permits living where such real estate is available (example: in the D.C. area, it would mean commuting 2 hours each way to work!) then go for your dream, is what I'd say. For some of us, there is something about the lure of One's Own Place that is like no other desire in life.

Bear in mind that more land could bring more responsibility (will you allow hunters, for example, or want to keep them off the property? Then you not only have to put up No Tresspassing signs, but you have to patrol, and get the local law enforcement on your side in case tresspassers persist).

At bottom....you know that where you live and what you choose to live in, is a matter of your own unique needs and priorities. The rest of us can just tell you about our priorities as points of comparison to your own. Good luck!
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Old 04-10-2009, 08:29 PM   #13
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Ive been in my 1400 sq ft ranch for 15 years. I'd love a nice colonial or cape but get spoiled by the low payments I enjoy now.

Bigger house, more taxes, more maint, etc. Not sure if it will bring happiness, that is probably why I have not done it yet.

That and this was my grandfathers house I bought cheap from family. Sentimental value I guess.
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Old 04-10-2009, 10:20 PM   #14
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Like Amethyst said, at the end of the day I think it's just about what's important to you.

DW and I don't care about nice cars or the latest designer clothes, but we both really do like a nice home that is low maintenance and has the amenities we value. After living in a rather new 'starter' home (that really was convenient and very decent quality actually) for 6 years we made the move to our current place 10 months ago that we hope to stay in for a LONG LONG time. Can't really ask for much more (big private/woodsy back yard with wet weather creek, great schools, still close to friends,etc). It's a little further out in an established neighborhood but we don't work central so the appreciation from the previous place went a long ways.

Anyways, bottom line for us was being able to keep saving as much each month (biggest priority), and still be able to live on just one person's salary if we had to. Yes we have a little less disposable income each month but we're happy with the trade-off. We got a great rate thru PenFed and that made the difference between the old and new mortgage payments less prononounced despite a bigger loan.
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Old 04-10-2009, 11:08 PM   #15
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Quote:
Originally Posted by CCdaCE View Post
I'm trying to decide when to pull the trigger to upgrade from starter home to dream home.
We have a 3BD/1.5BA Cape Cod. ~1700 SF plus unfinished basement. 1 stall garage in a cold climate (basically used for storage, not cars). Lived here a whoppin' 5 years, in Aug.
Is there a problem here that needs solving? Four people sharing a shower? Neighborhood quality? Schools quality? Work commute? What about waterproofing/finishing the downstairs with an additional bathroom-- would that make your current home more of a dream home? Refinancing with a construction loan can take care of a lot of infrastructure issues.

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Dying to buy the right amount of land and build.
My perfect case scenario is to sell the city home for a 40k profit, find 40-80 acres, wooded or enough to block the wind. High and dry. Scenery: creek, woods, etc. Build a 2k-2.5k SF concrete-insulated-form abode. Double garage attached or ... larger, not attached.
Actually the best time to upgrade is when the whole neighborhood's home values have dropped by the same percentage. If you lose 20% on your $100K starter home then you've lost $20K. But the $150K upgrade home has lost $30K, so technically you just "saved" $10K on the purchase and on lower realtor commissions.

And although you'd be selling into a buyer's market, you'd also have that much more opportunity to find a foreclosure/short sale bargain. But you're looking at two closings, a move, and a pretty challenging mortgage application. With two small kids. And a day job. And assuming that you pull it all off, is there even the slightest possibility that work would transfer you or "encourage" you to relocate for career enhancement?

Our lot is a third of an acre, and we have more yardwork than we really care to tackle. I can't imagine the workload of caring for 40-80 acres.

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How did you decide when to move from your "starter home" to something different?
Advice? Regrets?
You decide when you've spent years preparing for the day that opportunity smacks you upside the head.

When we bought our Hawaii home at the height of the 1980s real-estate bubble, a year later we found an even "better" place. It's a North Shore trophy property and we lost our minds. We were DINKs at the time and were seriously planning to sell the house we'd just bought, sink everything we had into the down payment, take out two mortgages, and rent out the basement. Even then we'd be facing an hour's commute each way to work and a "local" hardware store was a 45-minute trip. Oh, and we wouldn't be saving anything for retirement-- let alone for ER. Even with our beach-bum lifestyle, adding that mortgage to our budget would have sucked down both our paychecks. But it's a really really nice house.

We did a lousy job of predicting our futures. Two years later we were parents, working 70-hour weeks, and barely able to keep up with the minimum routine on a 25-minute commute. We had a lot of childcare expenses and our budget would've been under serious pressure. A couple years after that the Navy decided that we needed to do our jobs in San Diego. We would barely have survived any of these situations, and if we'd had that North Shore home then even 2-3 simultaneous occurrences would have put us over the financial edge.

Luckily (!) the North Shore deal fell apart and we lost our contract deposit (ouch). Best tuition payment ever. We finished fixing up our original home, dealt with work & parenting, and survived both the transfer to San Diego and the transfer back to Hawaii.

Beginning in 1998, as local real estate values sunk back to the 1980s, we started researching school districts and going to open houses at least twice a month. Over two years later spouse found "the house" and we knew within 10 minutes that we had to buy it. By then we were much more financially stable, our kid was much easier to parent, and we didn't expect any more Navy transfers. We knew the home-buying process better and, more importantly, we had our emotions under control. We also got a much better location for a lot less money than in 1990.

If you decide that your current home isn't worth fixing up, then you could prepare yourself for the unexpected home-buying opportunity by researching what you want in a dream home, and by going to open houses in the neighborhoods you'd want to live in.

I have no idea what to do with 40-80 acres, but I know I wouldn't be very happy with my property taxes!
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Old 04-11-2009, 10:52 AM   #16
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I have no idea what to do with 40-80 acres, but I know I wouldn't be very happy with my property taxes!

Not a problem one's likely to encounter, in HI!

There's a big difference between 40 wooded acres and 40 acres of fields, too. You don't have to do much with woods except post and patrol them. Fields have to be mowed and brush-hogged; otherwise, they will try to revert to woods, which takes 20-30 years of hideous overgrowth.

Some states, like PA, have a "clean and green" provision that lets you pay reduced property taxes in return for promising to use your property in a "green" fashion (no commercial development, for example). MD allows reduced property taxes for "agricultural" use, but you have to actually do something farm-related (grow corn, board horses, etc.) Something else for "da CE" to investigate
(Can you tell I like land?)
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Old 04-11-2009, 11:52 PM   #17
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Ewww. You live in a used house? Reminds me of a dealer in old caucasian rugs who told me about a lady who came in, looked all around, and said - "these are all used rugs - don't you have any that aren't used"?
Caucasian rugs
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Old 04-11-2009, 11:58 PM   #18
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Caucasian rugs
It's not an ethnicity or a color, but rather a part of the world.

Like this one of many websites: Authentic Caucasian Rugs from the country of its origin>Caucasian Rugs & Caucasian Carpets
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Old 04-12-2009, 03:39 AM   #19
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Caucasian rugs
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An area north of Turkey & Iran, between the Black & Caspian seas. Home of the Caucasus mountains.
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Old 04-14-2009, 08:23 AM   #20
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Thanks for all the response. Over the Easter weekend, I didn't have much time/access to a computer.

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<SNIP>

My advice is to realize that most people cannot achieve all of their financial goals in life, decide on your true priorities and keep your focus on what is the highest priority to you (which for me is FIRE), until you have achieved that financial goal.
That’s what I’m tryin’ to get nailed down. "Rich" with less desirable house vs. happy in a house with slightly less money.

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<SNIP>

But I would say do it sooner rather than later if you decide to do it. Put your house on the market and see what it would fetch.
Why do you say this? These are my thoughts too, but only because it seems like it’ll get harder and harder to move as time goes on.

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It's more of... you buy a less than ideal initial(starter) home because that's all you can afford and you hope later to upgrade to a better/nicer house after you've built equity and increased salary.


That’s kinda what I’ve been thinkin’. Nothing “wrong” with this one, I just see so many other features that would be nice (2+ stall garage, new driveway/sidewalk for easier shoveling, etc.)

In this house, we’ve redone the upstairs bathroom, reshingled and other real minor things. Now it needs paint/siding. Windows would be nice. It has the original 1949 windows. All of the appliances were brand new or relatively new when we bought it. Not sure how much more I want to put into it. Basement leaks in the spring, but no sump. Lots of stuff that I don't feel like dealing with. So, I want to build a new house my way, rather than someone else's bad driveway layout, poor site grading, etc.

Schools are all about the same (I think?). Sure there’s variation from school to school, but it’s all the same district.

Neighborhood has a bunch of city lots for sale that were bought out years ago from a natural disaster. Now they’re starting to rebuild. So, I’m thinking of waiting awhile, saving a little money for new acreage/house/etc., and selling when all the adjacent lots are built on, and our house looks as good.

My job is here as long as I am. I think the golden handcuffs are pretty tight; last time I looked, I’d take a 20% paycut if I wanted to move to my “dream location”. Plus, cost of living seems a lot higher there, although the online calculators don’t tell you that.

Mostly, I grew up in the country and the city, and prefer country for me, and for our kids. I want more room to store a boat, or camper, room to shoot a rifle, have a campfire, drink beer and howl at the moon.

We’d probably only move 10 mi. from town or less (short commute).

Thanks again for the responses.

-CC
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