Can we afford a condo?

[ivinsfan]

Quote:

Originally Posted by hesperus You have received a number of thougthful responses. It appears you you are crunching numbers to justify the purchase. You obviously want it. In that case just do it.

HAHA, the OP is seeming to play devil's advocate with a lot of the comments that say wait awhile, or that his numbers are a little bit tight. But if you are that committed to buying it, why are you asking a bunch of strangers on an internet forum?

The one thing I have picked up from reading here and from my own life is that once you actually FIRE, it's surprising how many things in your life change including how you decide to spend your time and where you want to live or how much you want to travel. And a lot of these things catch you by surprise. Waiting until you actually have a year or 2 of FIRE under your belt,might be a good idea.

[haha]

I have friends who live in Aspen and Boca Raton. The lifestyle seems exhausting to me, but they have plenty money so much of it is farmed out. They also have a large family that can share in use but not in expenses.

You would have to pay me to have a second home. A first home is trouble enough. But that is minority position. It always looks like work and worry to me, but owners usually claim to love it.

Can you afford it financially? Leave that question in your will, when you finally punch out your heirs can try to answer it

Ha

[seraphim]

Condo fees have a tendency to increase on an annual basis, plus the board can hit you up with special fees for emergencies or items not covered by monthly fees. Just a thought to consider.


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[seraphim]

Quote:

Originally Posted by haha I have friends who live in Aspen and Boca Raton. The lifestyle seems exhausting to me, but they have plenty money so much of it is farmed out. They also have a large family that can share in use but not in expenses. You would have to pay me to have a second home. A first home is trouble enough. But that is minority position. It always looks like work and worry to me, but owners usually claim to love it. Can you afford it financially? Leave that question in your will, when you finally punch out your heirs can try to answer it Ha

I doubt it's a minority position. People talk about their second homes. People don't talk about not having second homes. It would be an interesting poll...

But I agree with your position about extra work. Our second home is in the driveway, so we're not constrained to any geographical location.



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[ivinsfan]

I think one home owners would be the majority on this board, excluding rental homes.

But I also think people that own 2 homes will say they are great,what else would they say? A few here might even have more then 2 homes!

[sheehs1]

Quote:

Originally Posted by newenglandpat as a side note if we didn't purchase at all and I QUIT work today, according to firecalc we could get $175,000/yr for 40 yrs with 93% certainty!!

And isn't that a comforting thought!

As a side note and to throw something else out to think about :

3% inflation on $100,000 over 40 years = $326,203
Over 20 years = $180,611. Granted that is the calculated affect on the 40th and 20th year. All meaning your purchasing power of that $100,000 will be severely eroded over those time frames and your need may be greater proportionately.

None of us really knows what inflation will do and presumably we will all stay invested, so some percentage may be relative. Don't know. But when I look at what has happened since 1978 which is 37 years, I am amazed at the affects of inflation. No reason to think the next 40 won't be similar. There could also be the opposite - deflation along the way. It is all an unknown and the best we can do is to "try" to prepare and have "some fun" along the way.

It looks like you may have the first 20 years (or more) buffered for inflation covered already….IF…

[newenglandpat]

Quote:

Originally Posted by ivinsfan HAHA, the OP is seeming to play devil's advocate with a lot of the comments that say wait awhile, or that his numbers are a little bit tight. But if you are that committed to buying it, why are you asking a bunch of strangers on an internet forum? The one thing I have picked up from reading here and from my own life is that once you actually FIRE, it's surprising how many things in your life change including how you decide to spend your time and where you want to live or how much you want to travel. And a lot of these things catch you by surprise. Waiting until you actually have a year or 2 of FIRE under your belt,might be a good idea.

I posted this because i really wasn't sure if we could afford this. After going through this exercise, running firecalc, looking at this from many different angles I do think we could do this now BUT i am still quite nervous leading me to want to wait 2 years or so when barring a bad bear market this should be a no brainer. During that time we will continue to refine our thinking into what we want,where,etc. as I said a few posts up if a distressed unit came up that met our needs we might just do it otherwise waiting seems to be the way to proceed!

[timemoveson]

Here is one more perspective from someone with 3 homes, that just sold one of them.

I have the OPs assets and more.

The 2nd home we have is fantastic and used very extensively (about 2 hours from our primary residence, is real land and majestic house, and has 4 season usage). It is a definite keeper until it cannot be cared for and will likely yield at-market gains over time as well as provide constant enjoyment, I believe.

The 3rd home was purchased a few years ago after studying the target market (hot and very nice), going many times to visit and understand what we were getting into, and carefully purchasing and thoughtfully and frugally renovating it. And it was partially rented to help defray costs. Despite all this, we absolutely did not get value from it. It wasn't used. Our lifestyle needs and preferences changed. It was an albatross. And we could afford it and could have kept it. We chose not to to simplify our lives and repatriate the capital to put to much better use to further our overall goals. It took a long time to sell and the whole adventure was nothing but annoying and trouble we should have never entered into.

Think about it really hard. Please.

[pb4uski]

Quote:

Originally Posted by newenglandpat I am not sure you are correct about the opportunity cost of the unit itself (600-750K) because that money is invested (in the condo) instead of in the equity markets. now will the appreciation be the same? who knows? the HOAs/taxes/utilities are in essence 'consumed' and not recoverable so I agree with you on that part. So, if we were to rent for 4 months say a real fancy unit and use up the 24-28K each year the opportunity costs of the 'consumed' portion would be the same as renting. Only the 600-750K would be in my portfolio!!!

True that there might be some appreciation that offsets your opportunity cost, but like you say, who knows? Also, it could go the other way. Unless you will adjust your AA or include the condo in your portfolio then I think your portfolio rate is the more valid comparison rather than equity returns. But I concede that the opportunity cost should be the expected return on the assets you are liquidating to buy the condo less the expected appreciation rate on the condo.

As I said in a prior post, when we looked at it we concluded we would need to use it 5-6 months a year for it to make sense and we are more in 3-4 month mode at this point though we have had small amounts of snow 3 out of the last 4 nights and there is allegedly more coming so we may rethink that 3-4 month thing.

Owning another property many miles away is stressful for me. While we were in Florida I worried abut our place up north and we also had a no heat situation while we were in Florida. (Luckily I had installed temperature monitoring via the internet before we left for Florida and i could see something was wrong and had my heating guy stop by and check it out). I suspect that I would also worry about the Florida place while I was up north too.

[Moemg]

Quote:

Originally Posted by pb4uski I suspect that I would also worry about the Florida place while I was up north too.

Especially during hurricane season !

[Moemg]

While you are waiting I would investigate the costs . Maintenance on a $600,000 to $750,000 condo should be in the $1,000 monthly range or higher . Taxes will probably be at least $12,000 or higher . That already gets you to $24,000 without any utilities and what about the bane of Florida ( Insurance ) . Is that included in the maintenance fee ?

[athena53]

Quote:

Originally Posted by seraphim Condo fees have a tendency to increase on an annual basis, plus the board can hit you up with special fees for emergencies or items not covered by monthly fees. Just a thought to consider.

I was going to mention that, as well as insurance. (Depending on what you actually own when you buy the condo, the association may cover a lot of the insurance but the cost will be passed on to you.) I worked in the insurance business and they're always updating their catastrophe models after hurricane season and then increasing premiums on property insurance in FL. My parents are in Myrtle Beach (about a mile from the shore) and the windstorm coverage got so expensive they just dropped it. There's no mortgage and they said the property would be worth more than the house if the house blew away.

I also had family who had a beautiful oceanfront home in Mantoloking, NJ (now being rebuilt after Sandy courtesy of the insurance company) and salt water is really hard on buildings. You need to replace parts of the exterior more frequently that you would in other areas. The HOA may have sufficient reserves or they may charge a special assessment for needed repairs.

Every time DH and I throw around the idea of a vacation home (more likely some sort of timeshare) the conclusion always boils down to keeping our cash and our flexibility and just taking vacations when and where we want and letting someone else worry about maintenance.

[robertf57]

Just one more thought. Using Firecalc with 40 years duration may be overly optimistic because of the limited number of 40 year periods. You may find running the calculator with 30 year retirement duration looks worse.

[newenglandpat]

As I said in a prior post, when we looked at it we concluded we would need to use it 5-6 months a year for it to make sense and we are more in 3-4 month mode at this point though we have had small amounts of snow 3 out of the last 4 nights and there is allegedly more coming so we may rethink that 3-4 month thing.

Owning another property many miles away is stressful for me. While we were in Florida I worried abut our place up north and we also had a no heat situation while we were in Florida. (Luckily I had installed temperature monitoring via the internet before we left for Florida and i could see something was wrong and had my heating guy stop by and check it out). I suspect that I would also worry about the Florida place while I was up north too.[/QUOTE]

We completely agree that it is more expensive to buy than to rent for 4 months/yr. The allure is that it would be OUR home instead of a rental giving us a higher comfort level. Eventually once medicare kicks in and I am fully retired this would become our homestead (6 months + 1 day) to avoid our current state tax situation.

There is always the concern about our current home while we are not there. Not sure how that would play out. I currently handle the snow removal, will need to hire someone. not sure how to handle possible ice dams causing leaks while in Florida!

[newenglandpat]

Quote:

Originally Posted by Moemg While you are waiting I would investigate the costs . Maintenance on a $600,000 to $750,000 condo should be in the $1,000 monthly range or higher . Taxes will probably be at least $12,000 or higher . That already gets you to $24,000 without any utilities and what about the bane of Florida ( Insurance ) . Is that included in the maintenance fee ?

I really need to get a quote for insurance. These buildings do have hurricane shutters which should help with the cost. There is some room in the 24-28K for insurance but may not be quite enuf!!

[newenglandpat]

Quote:

Originally Posted by robertf57 Just one more thought. Using Firecalc with 40 years duration may be overly optimistic because of the limited number of 40 year periods. You may find running the calculator with 30 year retirement duration looks worse.

I just ran my numbers using 30 yrs vs 40 yrs and the 30 yr did show a higher success rate than the 40. the whole firecalc might be overly optomistic given the current state of PE,etc, then again this time may not be different after all....

[ivinsfan]

It's interesting how different we all are and one of the great things about this site. I'd say at least 50% of us posting on this thread say the "allure" and comfort level" comes along with it NOT being your own home. As a matter of fact, I think more of us have commented about the hassle cost then the actual money spent.

It will cost you money to winter in a premier climate, no doubt about it. How you do it is up to the individual or couple involved.Homes need to be taken care of all time either by the owner or someone else.

[newenglandpat]

Quote:

Originally Posted by newenglandpat I really need to get a quote for insurance. These buildings do have hurricane shutters which should help with the cost. There is some room in the 24-28K for insurance but may not be quite enuf!!

looks like insurance will be in the range of $1200- $1500/year which would fit into the projected carry cost of the unit

[MichaelB]

Quote:

Originally Posted by newenglandpat looks like insurance will be in the range of $1200- $1500/year which would fit into the projected carry cost of the unit

That sounds low for the "northern Miami area". Are you certain you can get coverage from a financially sound insurer?

[newenglandpat]

Quote:

Originally Posted by MichaelB That sounds low for the "northern Miami area". Are you certain you can get coverage from a financially sound insurer?

yes, I just reviewed an actual policy for this subdivision. there is some coverage from the HOA, this covers contents, interior buildout,fire,etc