Expensive Retirement Home

[Danmar]

I guess it depends on how much enjoyment you would get from this "dream" house. Also, whether you would have enough "earning" assets left to support your desired retirement.

We have several homes and when we bought the last one 3.5 years ago , I was concerned that our remaining "earning" assets would be enough. No regrets at this point. Personal use real estate represents about 20% of our net worth. What percentage would it be for you?

 

[rb35]

I guess it depends on how much enjoyment you would get from this "dream" house. Also, whether you would have enough "earning" assets left to support your desired retirement.



We have several homes and when we bought the last one 3.5 years ago , I was concerned that our remaining "earning" assets would be enough. No regrets at this point. Personal use real estate represents about 20% of our net worth. What percentage would it be for you?

It'd be 20% max. I think the remaining investment assets would support us fine. I just wouldn't have all my money working for me which is what I'm used to. But, I have to remember that the reason I've had my money working for me while we LBYM is so that we can enjoy a nicer lifestyle later.

Thanks to everyone for their thoughts / opinions!


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[Delawaredave5]

The fact that you call it a "forever" home means it has a lot of attributes you really value. 15% of net worth is hardly excessive and wouldn't compromise other retirement objectives.

IMHO (which doesn't matter), it is the direct opposite direction I want to go. Older I get, the more I value smaller, simpler, more flexible, "lighter" assets and lifestyle.

My friend stayed in their "starter" home, never did "McMansion" and now has come full circle - this home is more than comfortable for two people.

Two times a year they rent a 3 month stints in different parts of the country. Then do about 4 individual weeks of "vacations". Rest of time, about 5 months, at historical home.

I think they find furnished 3 month short term rentals in "nice but not resort" locations for $2k/month or less. His historical house is worth about $300k - so has a annual cost of $21k (using your 7% metric). Add the short term rentals and he's still under $30k.

This has a lot more utility and desire to me than anchoring in a "forever" home (but again, only your opinions/desires count !)

 

[Danmar]

Unless you've lost interest in spending on "luxuries", which I certainly have. Buying a luxury car last month and dropping way too much this month on remodeling (needed though it may be) have taught me I will not be doing either of these things again. The level of satisfaction is just not there anymore when buying "things", stuff, or luxury anything.

Nowadays, I'm much more interested in experience, and not the manufactured kind that has always been available to me. This newfound mentality probably comes from living almost half my life five minutes from the third most expensive zip code in the country (with everything that goes along with that).

So isn't the only alternative to give it away? Either during your life or after. Couldn't you also view this as a luxury? As far as I know you can only spend it or give it away?

 

[hesperus]

Unless you've lost interest in spending on "luxuries", which I certainly have. Buying a luxury car last month and dropping way too much this month on remodeling (needed though it may be) have taught me I will not be doing either of these things again. The level of satisfaction is just not there anymore when buying "things", stuff, or luxury anything.

Nowadays, I'm much more interested in experience, and not the manufactured kind that has always been available to me. This newfound mentality probably comes from living almost half my life five minutes from the third most expensive zip code in the country (with everything that goes along with that).

+1
There's a lot to be said for choosing experiences over 'things'. I think that the emotional returns that we often expect in buying luxury items often aren't there or just don't last.

 

[ggbutcher]

Fundamentally, if the particular house you buy is in a market that will at least preserve your capital when sold and you don't need that money to be or generate income, go for it. Life's short.


Us, we bought small as a family and have shed kids to fit. Well, 'cept for being a long-term storage unit for some of their treasures... After thinking it through, we decided we already have the house we want, until we need the one-story job with the wide doorways for the wheelchairs...

 

[Bestwifeever]

My wife and I are in what I hope to be our final couple of years before FIRE. We plan on moving to a different state and buying our "forever" home. This will probably cost about 700k to 1 million.

I'm conflicted about a few things and would like to hear other members' thoughts.

1. An expensive home seems like such an inefficient use of resources. If I pay cash for the house, the opportunity cost of those funds is going to be about $50k / year. Add in 20k for maintenance, taxes and insurance and we're talking 70k / year to live in the type of home we're considering.

I think this bothers me so much because I'm extremely investment oriented and virtually 100% of our net worth is currently working for us in some sort of investment. Do I just need to come to terms with the fact that we planned to splurge more during retirement and so it's time to quit being so frugal and just spend the 70k per year on our dream housing?

The few people I know who bought homes like the one you describe also made a boatload of $$ when they sold them, so I don't know if the opportunity cost would really be that high. You could consider it shifting money into another investment.

2. We plan on traveling a lot more during retirement. I could easily see us being away from our home 3 months a year (multiple trips). I'd be worried about having an expensive home vacant so much. It also compounds my feelings expressed in point 1 as paying that much for a house and not enjoying it for 3 months a year seems like a colossal waste.

May I suggest the Bestwifeever Housesitters for the three months your luxury home will be unoccupied ?

 

[W2R]

Personally I found that my wants and needs in a home changed a lot once I was retired. My suggestion would be to retire, and then spend at least a year or two decompressing and relaxing before burdening yourself with the maintenance requirements of such a big home.

You may find that you enjoy spending your remaining years doing home maintenance instead of traveling or having fun in other ways; some people do, some don't. I thought I would garden in retirement, and honestly I haven't spent 10 minutes gardening. I find that it no longer appeals to me as much as it did when I was working.

 

[Sunset]

When my mom "retired" she moved into a 2 bedroom condo highrise from a 4 bedroom house. For her it was perfect as she literally would lock the door and was free to travel.
She travelled to many countries and places over the years, never having to worry about the lawn/garden/break-ins/repairs.

Plus her apartment was 1 level and the building had elevators, so if her mobility had decreased that would be no issue.

 

[Koolau]

I'm with W2R. Give your retirement a little time to sort itself out. I too suggest you find out what you like most about retirement. Is it the freedom to travel? Is it the daily activities you never had time for? Is it visiting the grand kids? Is it having a very nice home to live in? Once you get your sea legs (retirement legs?) you might find that being tied down to a big house isn't what you want (or maybe it is!)

I wouldn't worry too much about such things as "opportunity cost". Your house will likely appreciate (for what that's worth). If you have the money and decide the expensive home is what you want, go for it.

We are actually in a somewhat similar situation. Our place (just a small condo) is very expensive (for us). It might sell now for $500K. We leave it for 2 to 4 months a year and travel. We have a very modest rental we keep full time as well, so you might guess that housing is our biggest expense in aggregate (especially when you count the condo fees and travel costs of a 10,000 mile round trip each year.) Still, it is what we want and find fulfilling. We "practiced" the lifestyle for several years (using vacations to see if we really wanted to move that far away, etc.) There are certainly issues with the life style, but no regrets.

As always, YMMV.

 

[daylatedollarshort]

rb35 - Maybe you could rent a home that interests you for a few months or more and test out the size and location before you buy. We're going to do the same with condos and see how we like living in a smaller space / different location before we consider selling the current house.

 

[Danmar]

+1
There's a lot to be said for choosing experiences over 'things'. I think that the emotional returns that we often expect in buying luxury items often aren't there or just don't last.

Agree but many great experiences can be expensive as well. Also, sometimes great experiences are the result of expensive items. Eg I love driving sporty cars. You can guess the rest.

 

[RobLJ]

We originally had planned to "downsize" in the move from Houston to Reno to retire, but housing was more expensive, so we "upgraded" although not nearly to the extent of the OP. We decided to also sell the small cabin in CO, since we have close access to skiing, hiking, and flyfishing and was near DS and his wife in CA.
So the Reno housing turned out to be the equivalent of both the Houston house and the cabin combined; we have a mortgage that is about 80% of the cabin at 15 years with a payment that is 60% of the original cabin payment. The payment is minimal.
After looking at smaller homes, DW settled on a Reno home that was very close to the Houston house in size, but much newer and in a great location.
Our youngest in Seattle is leasing downtown but has considered buying a vacation property in Southern Washington or Oregon, so down the road, we may consider going in with him for a family retreat similar to the Colorado cabin. We'll see.
My last day is this Friday; after that, I'm early semi-retired (just turned 57); will work on some special projects and teach online. Interesting post.

 

[Bamaman]

Rob: Congratulations on your pending "unemployment." I'm just too busy to work.


Houston and Atlanta are two places that spoil you to inexpensive real estate, temperate climate and a high quality of life. Too bad the traffic's so bad in both places. When you have to move from those cities, you get real sticker shock in housing.


I don't know about living in Reno, but I do know I could live within sight of Lake Tahoe. We love the place.

 

[NW-Bound]

If and when you no longer have to work, which limits your residence to cities with employment opportunities, there are so many places you can live.

In our travel, we have seen so many nice places that we could not make up our mind. So, in the end we just stay where we are.

 

[RobLJ]

I can walk down to the Truckee in 5 minutes and fish and Tahoe is about half an hour to forty minutes away--but it's a lot less expensive than Tahoe.

 

[rb35]

Again, thanks for all who have shared their thoughts and experiences. Here's a somewhat related question.

Would you rather buy a cheaper home with relatively high property taxes or a more expensive home with low property taxes. To use a concrete example, let's suppose there's an 800k home with 17k per year property taxes and a 1mm home with 7k in property taxes. You're really happy with both.

How would you look at it? Thanks


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[daylatedollarshort]

Again, thanks for all who have shared their thoughts and experiences. Here's a somewhat related question.

Would you rather buy a cheaper home with relatively high property taxes or a more expensive home with low property taxes. To use a concrete example, let's suppose there's an 800k home with 17k per year property taxes and a 1mm home with 7k in property taxes. You're really happy with both.

How would you look at it? Thanks

Location, location, location. All other things being equal, personally I would look either for the highest appreciation or the least likely to depreciate home. We noticed after 2008 that in our metro area some cities went down 50% in average home prices and other cities barely registered any price dip.

 

[rb35]

Good suggestion. So two possible places we're looking at are a suburb near Las Vegas or a suburb in Texas.

Based on the housing data I see (Case-Shiller and Zillow), Texas home prices were very stable throughout the last decade. Declines were small when they happened and longer term, there's been a slow but steady upward trajectory. Las Vegas real estate exploded in the 2000s, peaked in 2006 and then fell by 60%. Texas properties are making new highs now, Vegas properties are still 40% off their 2006 peak.

I'm guessing you're saying TX is a better bet cause of the lower price volatility?

Anyone have insights into the TX vs NV choices specifically?


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[Texas Proud]

Again, thanks for all who have shared their thoughts and experiences. Here's a somewhat related question.

Would you rather buy a cheaper home with relatively high property taxes or a more expensive home with low property taxes. To use a concrete example, let's suppose there's an 800k home with 17k per year property taxes and a 1mm home with 7k in property taxes. You're really happy with both.

How would you look at it? Thanks


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LOL... I would not be happy with either choice....

As for your question.... I would go with the $1 mill as you probably would get back the extra you paid for the property.... there is no way to get back the extra taxes that were paid...

EX... say there is zero inflation.... in 20 years you have paid an extra $200K in taxes on the 'cheaper' place.... but when you sell the place you only get the $800K... where you would get the full $1 mill on the 'expensive' place... so it would cost you $200K more to live at the cheaper location....

 

[Big_Hitter]

Having lived in TX most of my life, I know property tax rates are very high in urban areas. Not sure about Vegas. We couldn't wait to move - it gets really hot there. I assume the weather in LV is just as bad.

 

[Big_Hitter]

LOL... I would not be happy with either choice....

....

Agreed. You have an opportunity to live pretty much wherever you want in very nice house, why don't you pick somewhere nice?

 

[daylatedollarshort]

Good suggestion. So two possible places we're looking at are a suburb near Las Vegas or a suburb in Texas.

Based on the housing data I see (Case-Shiller and Zillow), Texas home prices were very stable throughout the last decade. Declines were small when they happened and longer term, there's been a slow but steady upward trajectory. Las Vegas real estate exploded in the 2000s, peaked in 2006 and then fell by 60%. Texas properties are making new highs now, Vegas properties are still 40% off their 2006 peak.

I'm guessing you're saying TX is a better bet cause of the lower price volatility?

Anyone have insights into the TX vs NV choices specifically?


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Texas and NV have really different vibes. If I were you I would pick where I would be happiest and not let money be the main driver. My advice is more for local choices once you've narrowed down the state and general area where you want to live. You have enough to live anywhere. Enjoy the freedom to choose.

 

[rb35]

Texas and NV have really different vibes. If I were you I would pick where I would be happiest and not let money be the main driver. My advice is more for local choices once you've narrowed down the state and general area where you want to live. You have enough to live anywhere. Enjoy the freedom to choose.

That's good advice. I've been trained to look at everything financially for so long that it's hard for me not to analyze everything like a trade / investment.

We'll have to start visiting more places to figure out where we might want to settle.


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[hesperus]

volatility?

Anyone have insights into the TX vs NV choices specifically?

I lived in Las Vegas for about a year, when my company was building the Venetian hotel back in the mid nineties. I couldn't wait to leave. I found Las Vegas not to my liking. Yes, it's hot, but moreover the economy is dominated by the strip, the sprawl is never ending, and there just isn't a lot of character to the city outside of the strip. When you venture outside the gated communities, there is really only pavement, traffic, noise and hustle & bustle. I know I'm pretty particular, but I enjoy character in the cities and towns where I live. To me, there just wasn't much of that. The crime there is also something to pay attention to.