48 with 12+ years to go

[JoeInVirginia]

Hi all,

Basic info to inform any discussion or comments

Married DW (48) has been a full-time student over the past 18 months completing her Nurse Practitioner program. She will be finished all the course work this month and once back at work should bring in 100-120K. DW was a stay at home mom for the first 5 years after birth of DS. Became a registered nurse while during this time. Worked for a couple years as a RN and then started graduate school as part of the Nurse Practitioner program.

I'm a software engineer (48) slowly becoming the grey beard in the office. No interest in being a manger, but not as interested in keeping up with all of the new technology which seems so important to all of the younger guys and gals I work with. Currently pull in 160-170K depending upon overtime hours. No significant bonus structure in place within the MegaCorp division in which I work.

One DS age 9. He is a great kid. DW and I do tend to spoil the kid, but he is a well grounded young man, so we can't be making too many mistakes.

DW has a complicated educational history which has come with some significant educational expense. Long story short, DW went to medical school in early 2000's (~250k in education loans), but never became a practicing physician. A mix of private and federally backed loans have been in various states of deferment and default for 15 years. A few years ago the private loans were written off and it was a bit of shock to then be on the hook for ~120K of income when tax time rolled around. For the past two years my wife has been attempting to rehabilitate her federal loans after they were placed with a collection agency. This past May we paid off the remaining ~130K federal loans using a HELOC. This was advantageous due to a waiver of penalties and fees (~50k) associated with the federal loan default. Interest on the HELOC is variable but currently 3.9% I'm happy that DW no longer has the loan default to deal with and will make it much easier for her to have more financial tools at her disposal if life events require.


Current Info:

Income: 160K-180K, DW (~100-120K starting in a month or two)

Assets:
House: ~400K
Current 401K: 270K
Employee Stock Ownership Plan: 140K (can start to divest at age 55)
Old 401K: 350K DW: 40K
Roth IRA: 100K DW: 25K
College savings outside 529: 40K
529: 40K
HSA: 4K (first year using HSA, not sure if we are going to keep the high deductible plan or go back to more traditional insurance next year)
Checking/Savings: 20K


Liabilities:
HELOC: 124K (currently paying $1200 per month)
Medical: Had a recent ER visit which turned into a 1 night hospital stay. Not sure how much this will end up costing.
Cars: Paid off
Credit Cards: Paid off each month

Expenses (monthly):
Electric: $100-$400 depending upon month
Gas (heat): Average ~$100 (very variable)
Cars: $200 Fuel and maintenance only
Child care: ~$400 per month ($0 during covid-19)
Food: $500-$800
Communications: $180 (cable, internet, cell-phones)
Allowance: $100 for DS (he hasn't touched this in 9 years and has about 12K saved)
Entertainment: $200

General Spending: This is variable and has been where the most of the budget busting spending has occurred since the house was paid off in 2018. I'm the guilty party on this front. Having spent 15 years putting extra into the mortgage payment to pay off the house early, once the mortgage was gone I have been indulging in a few expensive hobbies. The acquisition phase of hobby items was expensive, but since taking out the HELOC my aversion to debt has refocused my attention on paying it off. I blame my recent spending on growing up relatively poor in rural Virginia. DW just thinks I'm an idiot. "How many old pocket watches does one man need?" she asks.


Expenses (other than monthly):
Auto Insurance: $2000 per year
Home and Fire Insurance: $700 per year
Water: $400 per year
Personal Property Tax: $800 per year
Real-estate Tax : $4000 per year
Vacations: $4000 per year
Other crap: $2000 per year (subscriptions, memberships, etc)
DW Tuition: 45K per year over the last two years, but that should now be a thing of the past. She paid this out of her savings.


Investing: (~25% of gross income saved per year on average)
Max out 401k with company match at 2%
Employee Stock Ownership Plan: 8% of salary per year
Employee Stock Incentive Plan: 5% of salary with max of 5% discount and no lookback -- This is a new thing for the company and I'm not sure I'm going to keep this. The discount and lookback are not worth it.
Max out Roth IRA for me and DW while under income limit. This may be the last year where we qualify.
Max out tax advantaged contributions to 529 plan for DS
~$400 per month into separate college savings (tax advantaged bonds)

Asset allocations:
I started working right at the peak of the DOT COM bubble and I have seen the DOT COM collapse, a few recessions, the housing bubble, covid-19, etc. My general view of the stock market is that the game is fixed and the market is not rational. Having said that, I generally agree with the advice of Jack Bogle to buy and hold low expense ratio mutal funds. While the advice is sound due to a combination of both good and bad luck I was completely cashed out of the market right before the housing bubble collapsed. I've held on to much of that cash over the past 10 years while investing new money in S&P mutual funds. Overall, the asset allocation has generally been about 50% cash and 50% stocks. In January I sold all stocks and now hold about 90% cash. I did dip my toe back into the market during the bottom of the covid selloff and did see positive returns, but have since sold. My crystal ball is very cloudy, but unless the market is rigged beyond all measure I can't see how current values can be maintained.

Savings:
Had a big savings drop over the past two years as wife stopped working and paid tuition for graduate school.
Otherwise, all income not going toward expenses or investing goes into savings. The 20K currently in savings is not where we need to be. Working on building that back up.

When wife is back at work she will we contributing the max to her 401k, and whatever remains will be mostly going to the pay off the HELOC. HELOC should be repaid in a couple years.

DW and I do plan to tear down and rebuild on our current home site soon after the HELOC is retired. The current home was built in 1950 and has never really been updated very much. The value of the home is based mostly on location rather than physical condition and while DW has been very tolerant of my desire to avoid the mega mortgage payments that would come with a new house in our area, her tolerance is not without limit. Cost to tear down and build is guesstimated at 400K (at least that is my spending limit). Value after rebuild should be 600-700K. Depending upon timing (how much we have saved) the total amount financed will be somewhere between 200-300K.

Given the 12+ years of time to build savings I do hope that DW and I can accelerate the savings while working toward achieving some short terms goals that improve our quality of life.

One major question for the forum is related to the tear down and rebuild. If any forum members have gone through that experience would you do it again? Was the pain of moving a couple times worth the end results? Would a major remodel have been reasonable alternative?

Feel free to comment on other topics I may have raised.

 

[MBAustin]

Welcome, Joe!

You've put a lot of info out there for us!

Congratulations on all you've accomplished. A few random thoughts:
- Most of us would not try to time the market as you have and instead would pick a comfortable AA and stick with it. Since you seem a bit risk averse, something like 60/40 would probably be my choice. You still have 10+ years to retirement so you have a good bit of time ahead to grow your assets, and cash will not keep up with inflation (which is perhaps more likely to be an issue due to the deficits building up from COVID).
- If your son hasn't spent any of his allowance, you are definitely spoiling him. He can really benefit by spending some of his money on things he wants (vs. needs). For example, I gave our kids a maximum amount for a new pair of sneakers each semester and if they wanted more expensive shoes, they had to cough up the difference. Also he should be buying gifts (small) for family members at this point. Also highly recommend starting on life skills such as cooking and laundry at that age so it's a habit before they are busy and grumpy teenagers.
- Highly recommend tracking your spending carefully for a year or two.
- You are in a very high COL area. Do you really want to retire there? Even if you like the general area, there are lots of nice places an hour or so away with significantly lower COL. You should decide on this firmly before you even thing about rebuilding. And you should talk with an architect before you decide on rebuild or remodel.

I'm sure you'll get lots more commentary. Glad to have you on board!

 

[HI Bill]

Welcome! Ignoring college the college savings plans and the house equity which you can't spend, and subtracting the HELOC loan, I get a net invested assets total of about $800K. Let's say that you paid off the HELOC, and built a new house with $500K of your savings (not including taxes in this analysis)....that would leave you with a total invested asset value of just $300K. If your savings rate is 50% for 12 years, and you both keep your current jobs, the most I could see you ending up with is about $2M, not including potential appreciation.

The great news is, you have great-paying jobs. But your debt cycles are financially ruinous. You need to establish a budget now, and another budget for retirement. Include everything. Including health care, new cars (yours won't last forever), and any new hobbies or additional travel. Figure out how much house you 'need' (want), and get some quotes for the tear-down, the rebuild, permits, grading, design, pool (?) and landscaping, and don't forget to include rent while you're rebuilding. Then you'll have an idea whether you can live on 3-4% of your potential nest egg (~$60-80K annually, not including SS). I'm guessing this will be tough for you guys.

If I were you, I'd pay off the debt first, while still maxing out the retirement contributions. Check the difference in cost between selling your existing place and buying an existing home, versus building. My gut feeling is that even with your great salaries, you'll need to w$rk past 60 to afford the lifestyle you'll want then, especially if you do build the new house.

All of us here, including those with great salaries, get to FIRE by living below our means, with the exception of a few folks who inherit wealth or sell businesses right before FIRE. Many develop income streams through rental properties or through investments. It can be done, but means deferring spending for most. In my personal example, I lived in 800 sf condos for most of my adult life, except for 2 years where I rented an apartment. Now, at 54, I'm buying a $1M home and moving to a HCOL area for retirement. To me, it was worth the wait, but it certainly isn't for most. Good luck!

 

[Bob_Walter]

I would think a tear down and rebuild is greater than $400k, then add 20% for change orders, permits and over-costs.

 

[JoeInVirginia]

Thanks for the comments. Keep them coming.

In terms of investment strategy I've tried to not be a market timer. Buy and hold index tracking mutual funds with low expense ratios is my preferred approach and the cash out prior to housing bubble collapse was due to company change in 401k providers which had an extended blackout period that happened to occur right when the crap was hitting the fan. Not putting that money back into the market was initially about risk, but overtime as the market continued to rise I did fall into a trap of trying to wait for a market correction before jumping back in with both feet. That was a mistake. In retrospect I would have dollar cost averaged back into the market, but that is water under the bridge.

As for 2020, selling all stocks in January prior to the covid selloff. That could be considered market timing. I was not planning on making any major asset changes, but the cognitive dissonance between what is going on with Wall Street and Main street must at some point be reconciled. What has occurred so far in 2020 has done nothing to improve my view on that topic.

I am currently dollar cost averaging all new dollars invested into S&P Index funds as a hedge against what I would consider a return to some form of sanity.

I don't short or do much of any individual stock picks since that is pretty much just straight up gambling.

In a perfect world I would gladly accept an average market return of 3 to 4% above inflation, but so much of what has occurred in my working life has been several cycles of boom and bust with bigger and bigger swings.

This weighs on my thinking when you look at Firecalc and see how the Monte Carlo simulation of investment performance can be dramatically impacted by very small temporal shifts (market timing). I'm not saying the dollar cost averaging over the long term is not the right way to build long term wealth in the market, but there is evidence that dollar cost averaging may not achieve the same results going forward.

Given my negative view of the stock market I am open to investing in other asset classes, but since the majority of savings to date is within taxed advantaged (mostly 401k and IRA roll-over from 401k) accounts there is no easy way to exit financial markets using those accounts without taking on some tax liability.

I agree about spoiling the kid. He has told DW and I that we have been spoiling him. His self awareness is pretty amazing. The teen years are approaching quickly and there are some life lessons (financial and otherwise) that we can certainly do a better job of preparing for. The suggestions to require the use of allowance to augment necessities and gift giving are something that would start to introduce want vs. need and value of money into his thinking. I'll give it try. If he decides to give all his money away I'll let you know.

The housing situation is a bit more complex. I purchased the house years before meeting the lady that would become my DW. At the time I purchased the house it was a bit of a fixer-upper. Purchase price 160K. I spent several years doing renovation projects, but at a certain point the decision needed to be made that the house was either going to become a rental, a sell, or a tear down. Selling would be the easy option, but in order to move up while keeping a similar location the price of new is way out of my comfort zone. Pretty much all new construction is skewed to 1M+ for infill. Buying an existing home would be in the 600K and up for a single family detached 20+ years old. Existing townhomes have a pretty wide range depending upon size and condition, but new townhomes are also in the 600K and up range.

The sunk cost of the house that we currently live in is maybe 260K including mortgage interests, money spent on previous renovations and repairs, taxes, etc. Selling would recover that plus an additional 80K. That money could be used to move up to a existing home in the 600K+ category for sure.

Tear down and rebuild with a budget of $400K would maybe result in a house that would sell for 700K+ in today's market. If the sunk cost from the existing house are rolled into the rebuild, the total sunk cost can be no less than 660K but will grow over time with mortgage interests, taxes, etc. I can't say for sure, but there is a good chance housing prices will be pretty stable trending upward in our area. Being able to recover what would otherwise be sunk costs is a win in itself. It's like living rent free. Other than the opportunity cost of what would have been done with the money walking away from a house at break even or better is a win. I suppose the main thing that might come from doing a tear down and rebuild is the ability to have some control over the end product while still keeping costs reasonable in a location that would otherwise be cost prohibitive.

We will be in this area for at least 10 more years to maximize earning potential, but we have no special affinity for the area and will likely relocate to a lower cost of living location once the DS is off to college. Taking the proceeds from a sale and adding to the nest egg will occur at that time.

Developing a more complete budget is something that I have done in the past when the budget was more constrained. As my income has increased spending has become more variable, but has definitely trended upward also. As a single income household for most of the last 10+ years we have consistently saved for what we know are predictable expenses later in life, but since it has been one income saving for two we have slowly fallen behind the curve needed to reach early retirement with income security.

The current HELOC is a thorn in my side but a short term pain in my side will help secure my DW's financial life going forward. Once DW is bringing home a paycheck again after maxing out her 401k anything else will go towards paying back the HELOC. Once the HELOC is retired DW will be saving the majority of her income.

 

[Bob_Walter]

If you're serious on a tear down and rebuild I would look very closely at the costs. Get a couple of estimates from reputable contractors, you'll probably have to pay a fee. I just don't see a tear down and rebuild for $400k in a high cost area, plus where will you live, that will be an expense. Whatever the costs estimates are, I would ad 20% to be realistic. I've been around the construction industry long enough to know there are a lot of variables and unexpected expenses.

Also I wouldn't try and predict what any market is going to do, just a few years ago everyone was saying the ten year was going to 3% and above.

 

[JoeInVirginia]

If you're serious on a tear down and rebuild I would look very closely at the costs.

This is something that will certainly require more leg work. We have no expectation of building a custom home for $400K all in, but if a decent single family 2200sf two story house can't be built for 350K with 50K used for moving, apt rental, overages, etc. then there is something wrong. $160/sf for construction on an existing lot seems high to me, but I'm sure that there are a lot of costs built into the demolition, permitting, site work, utility changes, foundation, construction, etc that will quickly consume 350K. If things start to go north of 350K the plan will be adjusted. We are not planning on building the largest/nicest home in the neighborhood, but the current house at 1200sf with one bathroom and lots of maintenance issues has impacted aspects of quality of life. Location strongly impacts quality of life due to commute, and the current location is very good commute wise.

My personal preference is to go with a modular builder to avoid as much on-site work at local labor rates as possible. Even with modular construction there are lots of trade-offs which affect final costs, but unless we end up working with a straight up criminal enterprise the costs should be predictable. I expect that site work and foundation will be expensive relative to other parts of the country, but the cost of the modules and placement are predicable. As a cautionary tale a co-worker with specific home needs built a semi-custom home using traditional construction methods in a slightly less expensive area nearby. He/she ended up having 12 months of delays and many many unexpected cost overruns. That would be my worst case scenario.

The local government has some incentives in place for current homeowners that may reduce certain costs related to utility changes and future tax assessments. Also, there is no HOA in my current location which is a major plus in my book.

So, until we talk to a builder and see what we can get for our money it is all guess work, but having a spending limit sets our expectations for what is possible.

How all of this impacts saving for retirement is important and it's clear that spending money on a new house will result in the need to work longer. I can't say that building/buying a new house is exactly what I would chose if it where just my decision, but marriage is a partnership.

Today is the last day of my two weeks of vacation with the family. Having a taste of freedom only serves to reinforce my desire to exit the working world sooner rather than later. I'll be back a work Monday day dreaming.

 

[JoeInVirginia]

If I were you, I'd pay off the debt first, while still maxing out the retirement contributions.

That is my preference also. Using current income to pay of the HELOC is the current plan. Using existing funds didn't seem like it would work out well. The main thing that made that difficult is that other than personal savings and college savings all of the other pools of money are held within tax advantaged accounts. Using the Roth IRA is a possibility but given that our income will exceed Roth IRA contribution limits once my DW is back at work I have a hard time tapping the Roth account since it would not be easy to replenish. Though my employer did just add a Roth 401k option which does open up the possibility funding a Roth account without income limits.

I do think we are living in a low tax environment and future taxes will be higher, so even though we are in a high tax bracket contributing to a Roth 401k today is a good hedge against future taxes and also provides some flexibility with income later once SS kicks in. I was planning on switching my contributions to the Roth 401k once it was clear that our income was going to exceed Roth IRA contribution limits. I will likely start that in January of 2021 once my wife has a couple months of earnings.

So using income to repay the HELOC quickly is where we are. Does that align with your suggestion? It seemed like you were suggesting that using current funds to repay the loan was also a possibility.

 

[JoeInVirginia]

Then you'll have an idea whether you can live on 3-4% of your potential nest egg (~$60-80K annually, not including SS). I'm guessing this will be tough for you guys.

Based upon current salary and mix of pretax and post tax savings, fixed costs, and general spending I think living on 80K prior to SS would not result in a major lifestyle change.

At present pretax savings includes 401k and HSA which totals about 2K per month.

Post tax savings includes 529 at $325 per month, $475 into college saving account, ~1K into Roth accounts per month, ~$600 into employee stock purchase plan per month.

All of the above comes out to 33% of gross compensation. Given that we currently living on less than 70% of gross compensation (higher really since half of the savings is after tax) I'm pretty certain that we can live on 50% of current gross compensation without any changes in lifestyle.

Outside of direct compensation there is the 2% (@3.2K) match to the 401k and 8% ($12.8K) contribution into the employee stock ownership plan (ESOP). These last two could be considered additional compensation on top of salary.

Fixed expenses for the area have been kept really low due to choice of home, limited child care costs, driving cars until they are worn out, etc.

The discretionary spending is a problem and there is a lot of wasteful spending in that area that could be diverted into additional savings / debt payback.

 

[HI Bill]

$160/sf for construction on an existing lot seems high to me

Then just be glad you don't live in Hawaii, where the cost is closer to $600-800/sf for a custom home, and the cost for a pre-built home with land is around $400-600+, depending on the neighborhood, island, and view!

 

[JoeInVirginia]

When using a couple of online (take estimates with a grain of salt) I get estimates that can vary by more than 200K based upon construction details (location, type of foundation, square footage, fireplace(s), garage, type and quality of siding, type and quality of roof, type and quality of flooring, kitchen details, bathroom details, etc). These estimates are based upon traditional construction techniques using data which is apparently also used by builders and appraisers.

Building-Cost.net -- free residential building cost calculator (Building-Cost.net)

https://www.costtobuild.net/estimator.html

Using my Zip as the location and selecting a general quality level above builder but lower than custom the total cost of a 2200 sq ft, two story, with garage, unfinished basement, 2 full and 1 half bath comes to between 319K and 420K depending upon the specific options selected.

Changing the location of the build (use Lynchburg Virginia as an example), the cost of construction drops by about 20%. The majority of the cost delta is due to the difference in labor rates, but there are other costs which are higher in a higher cost of living area which contribute to the cost increase seen in a high COLA which are not directly tied to labor.

The builder markup on materials is somewhere in the range of 15% based upon the calculators and doesn't vary much based upon location. I assume markup is direct builder profit outside of labor charges.

Modular construction can be up to 20% less expensive than traditional building methods if you don't go crazy with design changes and options based upon my current research.

 

[JoeInVirginia]

DW went back to work a couple months ago. She is making ~100k, but is not really happy with the current employer, so she is still looking.

One thing that was kind of surprising about one of the job offers she received is that one of the medical practices has a two year 30 mile geographic exclusion zone if she ever left that practice. WTF? I'm glad that this trend hasn't hit software development yet.

I wonder how telework would be handled if there was such an agreement in place. Would you have to leave your house and drive 30 miles away?

 

[sailor]

DW went back to work a couple months ago.
One thing that was kind of surprising about one of the job offers she received is that one of the medical practices has a two year 30 mile geographic exclusion zone if she ever left that practice. WTF? I'm glad that this trend hasn't hit software development yet.

I wonder how telework would be handled if there was such an agreement in place. Would you have to leave your house and drive 30 miles away?

There are becoming a thing of the past, because they require court order to enforce, but they are still present even in software development.
The mini-megacorp I work for pursues some of the violators, including some of your level.

The relevant wording of my actual contract (and I'm a software engineer):

========
I agree that while in the employ of Company and for one year thereafter should I voluntarily leave the company or if I'm terminated,
I shall not within a territory encompassing a fifty miles radius from the front door of the office in XYZ where I perform my report,
perform any duties substantially similar or the same of those which I performed for the Company
========


The bad rub was/is that company can terminate you and you need to search outside of 50 miles zone if they can prove you do a similar job (onus on them).
They are winning only small percent of court cases, but it's more of a deterrent about not going straight to the competition.

sailor

 

[HawkeyeNFO]

What happened with your house plans?

I'm in Fairfax County, one block outside Arlington. I think your estimates for new-build are way too low. $400k certainly doesn't include site work. You can expect at least $75k, and realistically much more just for that. We tore down and rebuilt in 2019, and the home construction costs from what we signed on, compared to what it would cost if we signed today, have gone up around 20%.

Given your estimated value of your house, you'll probably do better from a financial standpoint if you just buy a different house and move in. Albeit with limited information on your location and other potential costs involved, it seems to me that you will end up with negative equity if you go the tear-down and rebuild route.

 

[JoeInVirginia]

We are currently in a holding pattern with the house.

We visited a house in Falls Church that was a teardown by NDI. That particular house was about 5000 sqft and had quite a few upgrades. I would need to look at the flyer, but what I recall is that the house cost 650k not including site work. The real-estate agent at the open house said it would be up for sale for about 1.2 million. Take all that with a grain of salt.

https://www.newdimensionsinc.com/news-and-events/ It was this house at 2127 Greenwich St, Falls Church, VA 22043



We live in Fairfax City and based upon what NDI lists on their web site they have a couple models that we could squeeze onto our lot. If you can believe their cost estimates the model that we were thinking of is the Buckingham, but NDI says they can build any model from their back catalog. They have some cheaper options.

https://www.newdimensionsinc.com/product/the-buckingham/

They quote 399K as a turnkey price for this house. That does not include site work. The site work required for the current house could be pretty pricey due to elevation changes and the need to do asbestos abatement of the current house before demolition. The original siding under the current siding are asbestos shingles. Some fees related to site development would not need to be paid. These include thing related to water (fresh and storm), other utilities, impact fees, etc. I'm pretty sure the water line and sewer line for the current house will need to be replaced within the next 10 years.

If we could keep the site work to something like 100K and the 400K price for the house is accurate it would seem possible to build something in the ball park of 500K. Higher than the $400k I would like to spend, but still a lot less expensive than buying something similar anywhere in Fairfax.

 

[P.S.]

Welcome Joe. This is a great forum. Sometimes the best advice here is not money-related. But stories of how, in the crazy, frenetic, high speed world we inhabit, to navigate a path to slow down, find contentment, peace, and maybe even a little self-actualization, before it’s too late, and to achieve a little of what we really want out of life.

Sometimes it’s easy to get caught up in the fastness and high cost-ness of an area. It’s easy to buy into, but yet... you find yourself on an ER forum.

And sometimes it’s hard to love what we really love, when we’re so dang tired, working so hard, towards a completely separate goal.

GL Joe. I wish you and your family the best in your endeavor.
(but wonder if it’s not really about the house)

 

[JoeInVirginia]

I attempted to hit the pause button at work at then end of 2019 and slow down. I stepped down from a project management role with the intent of going back to a technical lead role. That bit me on the back side.

Long story short, instead of being a technical lead on the project the new product manager pretty much sidelined me. What had been a pretty good working relationship for years became toxic.

Maybe this is all just a reflection of the organization since the leadership that I had known and respected for past 9 years have all departed over the past 9 months. The new group of leadership all have military backgrounds and while they are all pretty sharp they don't have the same technical understanding as the old group and certainly want the organization to look and run more like the military organizations which trained them for leadership.

I would really like to scale back my working life and spend more time doing the things that bring me more satisfaction and personal enjoyment. The money is the main thing that keeps me working for megacorp, but money is just a means to an end, which ties into the house issue.

I don't know if I fully captured the nature of the current house. Built in 1950. Over the 20 years I've lived in this house I've done a lot of home improvement projects but not a major remodel. So, the 1950s house is still pretty much the same house it was 70 years ago.

So what we have is: central heat, but no central air. One bathroom. No basement. Original square footage 892sf, but 1100 sf today with an addition that was put on the house sometime in the 90s. When purchased by me the house had 15 mature 50-70ft tall yellow popular trees anywhere between 10 to 20 ft from the house. I removed these 15 trees years ago, but the lot still has about 15 tress of similar size, just a little further away from the house.

One thing about having big trees close to the house is that the roots grow next to / under the foundation. There were a couple problem areas with the foundation prior to the tree removal, but afterwards the foundation has settled and there are three or four cracks that continue to grow. The foundation is still pretty solid, but I couldn't sell the house with the current foundation issues. That makes it hard to get money out of this house without spending 150-200k on a major renovation. I would get that money back upon sale, but it wouldn't be 250-300k of profit. The main thing about doing the renovation is that I already know we have foundation, sewer, landscaping, drainage (the list continues to grow) issues with the current house. Should we continue to put money into a what could be considered a money pit.

Also, the trees that remain continue to drop branches. I've replaced my roof twice due to tree damage, and at present there are couple patches covering the most recent holes from falling tree branches.



My personal preference would be to do a minimal renovation of the current house with foundation repairs and turn it into a rental in a couple years. This would probably be the smart move from a financial point of view, but would require buying or renting something nearby while we coast to the finish line and move to lower cost of living area once DS has finished high school. While there are some lower cost housing options in this area, it would end up being a lateral move. This kind of lateral move has all the pain and none of the gain, so DW has said no to this idea. Turning the current house into a rental and moving up to a bigger, newer, more expensive house quickly becomes a problem since as I've mentioned before current home prices for 20 year old 2500 sf houses start at around 600k and go up from there. Any new construction of townhomes also start at around 600k. New single family are mostly infil and are 1 million+.

The only option to move up to a newer house and not have a giant mortgage would be to turn a 10min commute into an hour commute. I'm not a fan of that idea. DW has a more positive view, but she hasn't had to deal with traffic very much over the past several years.

Long story short with the house thing is that I'm going to have to invest money (and therefore time) into dealing with housing as a general issue. As a single man and as a young family this house has keep our housing costs about as low as you can achieve in this area without sleeping in your car. With DW back at work there is 1) more money to go around and 2) a bit of expectation shift on her part which I'm 100% aware of. For the most part she has been patient and forgiving of my miserly ways, but if I want to be a good partner I need to listen to her ideas, desires, concerns and compromise.

The conversation that we have today is about how to get her finances on track (turbo charge retirement savings, pay off the HELOC) while still moving towards improving the housing situation.

Given the constraints I'm playing with, the option of teardown and rebuild presents the most complications, but feels like it might have the biggest upside. 1) commute stays reasonable 2) cost could be constrained based upon choices we get to make rather than choices other have already made 3) Depending upon market conditions more profit might be made upon sale rather than leap frogging through multiple real-estate transactions.

So, it is good to point out that what kind of house you live in is a choice. Keeping up with the Jones, impressing the friends, status, etc are all part of why people spend crazy amounts of money on houses, but being aware of problem is the first step in solving it.

 

[HawkeyeNFO]

NDI does good work. We talked to several companies around NoVa and they were our choice. I'd recommend them without hesitation. Here's what they built for our family: https://www.newdimensionsinc.com/product/the-overlee/

PM me if you want any details about working with NDI, but I'd happily recommend them. With the COVID lockdown, I sure am glad we had a brand new house to stay in!

If you go the rebuild route, and you only expect to get a house valued at $700k, then it's a non-starter from a financial perspective. Now, if there are houses in your neighborhood that are selling at $1.3M, then that probably changes things. No sense in having negative equity after construction.

As to some of your other questions, we moved every 3 years or so courtesy of Uncle Sam, so my family is used to it. And it sucks every time. Like you, we plan to be here for at least 10 years, so hopefully we're done with moves for a while.

As far as a remodel instead, you may or may not have to move out anyways, depending on your specific project.

Our house was from 1925 and we wanted to add a few things on, like a bedroom, a bathroom, and a garage, as well as a major kitchen remodel. We even had an architect draw up plans for the improvements. Then we had contractors give us some estimates, and they came back with prices that weren't cheap. We would have been forced to move out for several months. If we would have gone that route, we would still have the old house, including a basement that was only usable for storage, higher heating and cooling bills (old house was drafty), and still not address things like a foundation that leaked into the basement during moderate storms. It would have been bigger, but not necessarily better.

For about $200k more, we saw that we could have a brand new bigger house, where things are modern and just work. In our neighborhood, the land values are so high that it made sense to tear down instead of any addition to the old house. The only downside is that our property tax has nearly doubled, but that is a result of the value of the 2019 house being twice that of the 1925 house. Our home's value is probably over $500k higher now than it would be if we had done the addition and remodel.

 

[JoeInVirginia]

Glad to here you had a positive experience with NDI. We haven't progressed further than talking to them about some possibilities, but they have tried to educate us about the process and they get high marks for starting with that side of the story rather than jumping right into the sales side of things.

Did you add a garage to the Overlee?

I like the craftsman style. Someone around the corner built something very similar on the last open lot in this neighborhood. I think that house is valued at around 820K today.

We have some site limitations that complicate house placement on the lot. We have a wedge shaped lot with a 20 ft elevation change from back yard to sidewalk. In order to meet setbacks either the house needs to be wedge shaped or compact. With the Buckingham model we would have to shrink the house in a couple places by a foot or two and rotate the house slightly.

If we build something like the Buckingham I would expect the resell to be closer to 800k in todays dollars (maybe higher, but that house would be on the larger side for our neighborhood). So there is some headroom if the construction costs grow much beyond 500k. We shouldn't be underwater on resell, but the math around what would be the best use of $$$ for housing is an open question.

The current house was paid off up until this past May when I paid off DW's school loans which had fallen into default. Doing a full payoff of the loans avoided about $50K in fees and penalties. The deal I made with DW is that she will payoff the HELOC used to payoff her loans, and I'll save just as much as for the new house. It might take three years to payoff the HELOC so if I save $120K in a house fund and construction prices don't rise faster than I can save, then the total amount financed will be a bit less than the what it costs to build. If doing a teardown and rebuild resulted in negative equity that option would be off the table.

 

[HawkeyeNFO]

Did you add a garage to the Overlee?

Yep. Old house didn't have a garage, I was about to pay upwards of half a million bucks for a new house, and I like cars. No way I wasn't getting a garage. It's only a one car, but I had them make it really long, so you could store extra stuff in there, like bikes, lawnmower, etc. If the cars were compacts, you could probably fit 2 in there. The garage is essentially part of the basement, which made it cheaper than a detached, stand-alone structure. About 1/3 the cost IIRC.

We have some site limitations that complicate house placement on the lot. We have a wedge shaped lot with a 20 ft elevation change from back yard to sidewalk. In order to meet setbacks either the house needs to be wedge shaped or compact. With the Buckingham model we would have to shrink the house in a couple places by a foot or two and rotate the house slightly.

My lot is only 50 ft wide. With side yard setbacks of 15 ft, that leaves only 20 ft wide of buildable area. There are a few homes in my area built to conform to those rules, but I don't think they look very appealing. So I went to FFX County and got a variance, asking to have 10 ft setbacks on both sides. The variance took some time, but now I'm in the 30 ft wide house. Our driveway slopes down under the front porch and into the garage as I didn't want a long driveway around the side, nor a structure that took up a good piece of my nice backyard.

In dealing with Evergreene, Stanly Martin, Classic Homes, Focal Point, NDI, etc., I recommend finding a plan that fits your lot, with zero changes if possible. They like to stick to their plan, because all of the costs for materials is known/predictable. They will all let you make "red-line" changes to make a plan fit your lot and your desires, but each change drives up costs.

In my case we didn't change anything on the Overlee plan that you see on the website. However, for our basement, we added the garage and had NDI partially finish the space with a bedroom, full bath, and rec room. We also had them put on a deck on the back of the living room. Our area is very hilly, so we have a walk-out basement (sliding door out of the rec room) instead of a "well" with steps leading up and out.

 

[youbet]

The mini-megacorp

Interesting expression. At first glance, it appears to be an oxymoron. But I have a feeling you have some deeper meaning behind that coined phrase?