How expensive of a house

[spike]

I have a home in a large city and a second home in the country. The country home was fine for weekends but not big enough to retire in. We are thinking of tarring it down and building a modest but comfortable home. Beautiful location, very private, and lots of land.

My big concern is a new home would not sell well in this area. I see other homes on the market for years. The local people cannot afford new homes and weekenders from out of state would be your best bet to buy it.

I am worried that if I build one, what happens if either me or the wife die or need assisted living and now we cannot sell the house. It's going to be hard to cash out. We discussed a possible reverse mortgage. But it's nice to have appreciation and be able to sell out. Maybe we might want to move to another state, who knows.

Kind of undecided what to do, even thought about a cheaper smaller home etc. What's the opinion of the forum?

 

[jIMOh]

If you get enjoyment oput of house, what would you pay for the enjoyment?

Houses are "bad" investments... so I would not look at it as an investment. I would look at it as an expense with residual value. The value may not exceed the expense, though.

 

[Milton]

There is a lot to be said for the wisdom of not building (or buying) the most expensive house on the street. If you really need a larger country house, and the neighbourhood doesn't support the kind of luxury residence that you have in mind, probably you'd be better off selling the property and buying a new one (preferably with an existing house meeting your specifications), in a more affluent location.

On the other hand, if you are attached to the land because of sentimental reasons, etc., then you can either make do with the existing house, or take a risk and build a new one, accepting that you probably won't get all of your money out when you eventually sell.

If you think about things hard enough, there are any number of negative contingencies that might occur. The majority almost certainly will not, so it isn't worth worrying about them. There may be a small number of negative contingencies that are more probable, and it is prudent to factor those into your decision making. If you and your wife are in decent health and have no particular reason to anticipate serious health issues in the mid-term, it would appear that the future prospect of a forced sale falls into the former category. But only you can make that decision.

I am worried that if I build one, what happens if either me or the wife die or need assisted living and now we cannot sell the house.

You will be able to sell the property, although you may not be able to get as much out as you have put in. At a fair price, there is a willing purchaser for essentially every real property (toxic waste sites being the rare exception). Of course, if you are greedy and insist upon more than market value, you will have difficulty selling the property ... but presumably you are a reasonable person, so that is not a problem.

 

[Brat]

What concerns me is your statement that property sits on the market in that area for years. It's not just that one of the locals can't aford the kind of house you would like to live in it's that there is little interest by others to live in the area at any price.

 

[justin]

Could you add on to the existing house?

Alternatively, leave the existing small house in place, and build a new, larger house nearby. Use the old house as a guest house for friends and family to visit. You'd have to periodically maintain the old house, but it will cost you to tear it down anyway.

 

[Lakerat Nomore]

My advice to you would be to live in the smaller country house for a period of time and make sure that you like living in the country setting before you tear it down and rebuild.

My husband and I had a city house and a lake house during the last few years that we worked. We loved our time at the lake house so much that we were there almost as much as we were in town. We decided that the lake would make a perfect home for retirement. We remodeled the lake house with that in mind and moved into it upon our retirement. A year later we admitted to ourselves that we had made a mistake. While the lake was a wonderful place as a weekend get away, it was not what we really wanted to do in retirement. Our only neighbors were "locals" that we had nothing in common with. It was an area that was divided by the "have's" and the "have not's." Or "Lake People" and "Town Folk". Even though we became locals, we were still the rich lake people to the others there. We just did not fit in as permanent residents. We had little social life and were bored most of the time. We are now back in town and much happier.

 

[spike]

Thanks for your responses. I like the locals very much by me, we fit in great, and fish together etc. It seems it's somewhat out of the way and large city folk rather buy vacant land and put up there own house. I thought about remodling the house but it has no basement and the house is on pilons overlooking the bluffs, on a small mountain top. There are many expensive homes by me, about 20 homes on 2000 acres. A big part of the land is corn. The lots have gorgeous views and vast vacant woods sourounding my house, clothes would be optional, it's so private. My wife and I spend 120 days a year there and we love all the same things. Or maybe she just humours me and pretends she likes them. But we fish, cut fire wood, cook, and watch the birds always together.

One of my concerns is leaving her a widow in the remote area. But I guess you never know who is going first. The locals have very few options for making good money, and the taxes on my seasonal home are very high. One good reason to tare it down, do not want two houses on the property.

My wife is accustomed to a nice larger home and has nice furniture and paintings she wants to fit in a new home. I just don't like being in a situation where my house may not sell or sell very very slow. I can pay cash for a new house but if the time came when I am older I would like to cash out and pass the money on to my children. They would have no use for the house. There is a very nice house by me that cannot be 10 years old and it's been on the market probably 4 years. Then there are some very wealthy people that are constantly adding on.

I was in realestate for 25 years and it was always nice to go to a closing and get a check. I have always sold property for more money than I paid for it, but in the sticks it doesn't work that way. That area is what I would call undiscovered, that could change, but maybe not in my lifetime.

 

[Meadbh]

Spike, have you considered buying a trailer that would add to your living space but wouldn't tie up all your money?

 

[Milton]

There is a very nice house by me that cannot be 10 years old and it's been on the market probably 4 years.

Perhaps you should consider making an offer.

One of my concerns is leaving her a widow in the remote area. But I guess you never know who is going first.... I can pay cash for a new house but if the time came when I am older I would like to cash out and pass the money on to my children. They would have no use for the house.

You know best what works for you. But FWIW, it sounds like you are pre-occupied with possible future concerns of other family members. That isn't to say that such things are entirely unimportant, but they should be balanced against your own desires.

Perhaps you will predecease your wife. Perhaps she will die before you. Or perhaps you will both live long lives, but suffer from serious health problems that require you to move to a more urban setting. Nobody can predict with certainty what the future holds. All you can say for sure is that you are both in good health now; you both want to live on the rural property now; and you both want a larger house on that property now. I'd be inclined to give those current, shared realities more weight than future possibilities.

Regarding your children ... most (all?) parents want the best for their children, that's natural. But assuming that they are mature, self-supporting people, I doubt that they would want you to sacrifice your pleasure in retirement for the sake of leaving them some extra money that can buy them a few toys some years down the road. Carpe diem.

 

[JustCurious]

What concerns me is your statement that property sits on the market in that area for years. It's not just that one of the locals can't aford the kind of house you would like to live in it's that there is little interest by others to live in the area at any price.

I find this very difficult to believe. Are you suggesting that people would not buy a piece of property in the area for $100? Of course they would, in a heartbeat. So the issue is not that there is no interest....the issue is whether the property is priced properly given the market supply and demand in that area.

I agree wholeheartedly with Milton's earlier comment that there is a willing buyer for every piece of real property, so long as the price reflects the market conditions. So when I hear people complain that they "can't" sell their house, it tells me that they are asking too much.

 

[kcowan]

Milton gives some very sage advice. However do not make the mistake of sinking in the big bucks and continuing to think about it. Consider the cost of your new home as an expense with zero residual value (except possibly the land).

As a realtor you probably realize that unsold houses in the area are competing with the alternative of buying a lot and building exactly what is wanted. So they must be priced at a substantial discount to that alternative. Building is what you are considering. How cheap would the house on the market have to be for you to consider buying it instead? Make an offer at 10% below that price.

If you are successful, give the existing property to your kids now.

 

[Texas Proud]

Spike... where it it located? I would love to get a nice place near a lake if it were convient to other locations etc...

Also, you said you might get a reverse mortgage.... don't think that this is the answer... you need equity in your property... so, if you bought the house for cash, then reversed mortgaged... not a great return.. they will value the house and any potential in that number... so if the resale is not good then the reverse mortgage will not be good...

 

[Darryl]

Definitely not thinking reverse mortgage here. You're saying the market is illiquid, don't add debt I mean stress to the retirement retreat.
I agree with the other folks that comment slow moving Real Eastate is often a pricing problem. With your knowledge of the business you are in the best place to know if that is true in this case.
I wouldn't focus too much on if the kids would want to inherit a place in the country. If it's free of debt so what if it takes them years to sell? Focus on if you can maintain a SWR and build the house that you and your wife who are both healthy would like to have.