Loop Lawyer
Dryer sheet aficionado
- Joined
- Jan 16, 2011
- Messages
- 49
One of the few things -- perhaps the only thing -- that keeps me w*orking now that I'm "FI" is the cost of maintaining a second home in perpetuity. I certainly don't "need" a second home. If I did, I wouldn't be FI yet. But I do "want" a second home in the south, probably in Florida, and have begun to scout out locations, neighborhoods, even particular properties.
Here is how I estimate the costs:
$400K acquisition cost, all-included: Obviously a person could spend more or less than this amount. I will probably spend less. But this is a safe assumption, based on my other real estate experience and market insight. So I need to save an additional $400K, after current taxes, in order to pay for this second house.
One percent of the acquisition cost is my estimate of on-going maintenance per year. That's $4K.
Two percent of the acquisition cost is my estimate of real estate taxes, insurance and HOA dues per year. That's $8K.
The sum of $4K and $8K is $12K. The pre-tax income required to produce $12K is something like $15K. The principal amount required to produce $15K per year is 40 times that amount, assuming a 2.5% withdrawal rate, or $600K.
Therefore, by my estimate, the total amount required to acquire a second residence in Florida is something like $1 million. Accordingly, I believe that I need to save something like $1 million more than would otherwise be the case in order to buy and maintain in perpetuity a second residence in Florida.
I have ignored the costs of utilities and such on the ground that I will mostly save in the north what I will spend seasonally in the south.
Any comments or suggestions on my analysis and conclusion?
Here is how I estimate the costs:
$400K acquisition cost, all-included: Obviously a person could spend more or less than this amount. I will probably spend less. But this is a safe assumption, based on my other real estate experience and market insight. So I need to save an additional $400K, after current taxes, in order to pay for this second house.
One percent of the acquisition cost is my estimate of on-going maintenance per year. That's $4K.
Two percent of the acquisition cost is my estimate of real estate taxes, insurance and HOA dues per year. That's $8K.
The sum of $4K and $8K is $12K. The pre-tax income required to produce $12K is something like $15K. The principal amount required to produce $15K per year is 40 times that amount, assuming a 2.5% withdrawal rate, or $600K.
Therefore, by my estimate, the total amount required to acquire a second residence in Florida is something like $1 million. Accordingly, I believe that I need to save something like $1 million more than would otherwise be the case in order to buy and maintain in perpetuity a second residence in Florida.
I have ignored the costs of utilities and such on the ground that I will mostly save in the north what I will spend seasonally in the south.
Any comments or suggestions on my analysis and conclusion?