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Old 03-31-2018, 11:29 AM   #41
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The best house to buy is usually the cheapest one in the neighborhood. The bigger houses will pull it's value up. For people who just want to get into a neighborhood, the smaller house will do well. But a lot of buyers may be put off by not having any kind of view.

If things go well in the area, all values will go up, and if they go up by the same rate, the bigger house will see a bigger $$$ gain. A great view will do a lot to attract buyers.

No way to know for sure which one will work out better. $200K is a lot extra to pay for a view. Half that seems more inline (without really knowing just how good/bad the two views are), so the house itself, and perhaps location/privacy, better be worth another $100K.

A $550K house on a $3M portfolio doesn't seem out of line to me.

About 15 years ago I had a need to live somewhere for a pretty certain 5 years, and decided to buy. I went only a bit above starter home, but it had a layout I really liked. It was about 20% the value of where I live now. It had no real view, but the only real drawback is that the neighbors were too close, with a yappy dog and two annoying kids. Give me a little more space and privacy, and I'd be perfectly fine there. I'd miss my killer view and bigger space of my current home, but I don't think it's a huge deal. That said, if I did move again, I'd try to have another good view.
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Old 03-31-2018, 12:24 PM   #42
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How did it morph? For the most part people are still on track.
There's more discussion on which house to buy, which from reading the op was not his question or concern. Or what do you read from posts above?
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Old 03-31-2018, 12:40 PM   #43
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In general, the core of the thread is: house != bank
Dollars invested in real estate will perform differently and have a different risk/reward profile than dollars put into a bank instrument such as a savings account or CD. Is that what you're asking? (You don't seem like someone who isn't already well acquainted with that information.)
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and what amount of happiness will the 200K get me vs any risks.
How can you expect us to know the answer to the very personal-to-you question: what marginal utility will your DW and you gain from owning a larger house with a nice view vs. a smaller house with a crappy view? That's a question to answer for yourself. Some of your statements have indicated you and your DW would love to have the larger home with the view, but that's really all we know about the importance of housing quality and amenities in your life. Did you really think someone here could tell you how you'd personally value the nicer view home?

All other things being equal, the purchase of the larger + view home would add a small amount of risk to your current, conservative AA. If your personal preferences are that the larger + view home would bring you a substantial amount of marginal utility in your enjoyment of life, I can't understand why you wouldn't purchase it. In the awful scenario that you lose 50% of the incremental cost due to needing to sell during a crashing real estate market, it wouldn't be a life changing event for you. OTOH, the house might appreciate nicely and you'd actually make money by owning the nicer home. You pays yer money, you take yer chances.
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Old 03-31-2018, 04:04 PM   #44
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No!

A good friend and his wife bought a home with the same thought many years back. Sure, it was a lot more than they planned, but it was a great home in a great location that their daughters would love, and their two incomes would (barely) cover it. And surely eventually, they would be able to pay back the loan from her parents for the down payment.

So they bought the beautiful house.

Then they struggled to furnish it and ran up a lot of credit card debt.
Then she got pregnant and couldn't work any longer.
Then they fell behind on the mortgage.
Then they declared bankruptcy.
Then they got divorced.
Her parents have never been paid back.
They are both living paycheck to paycheck - she with her parents and he in a small apartment.

None of this had anything to do with the Great Recession. It all started by becoming severely house poor.

It's only money in the bank if your bank is in the habit of throwing away large percentages of your money at the worst possible time (like when you "need it back").

This has zero to do with OP as he has the money.... your example seemed a disaster from the start as they borrowed money to even pay for the house.... and more for etc. etc.... kinda stupid, but lots of people do it...
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Old 03-31-2018, 04:17 PM   #45
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Late to the party. I would reframe the question a bit.

Why not buy the $550k house with the great view that you want and finance the excess over the proceeds from the sale of your current home? If your current home sells for the low end of the range of $450k then you'll have, say, a $150k mortgage with closing costs, etc. Your payments will be less than $1k a month and you don't have to "use" any of your retirement stash.

The mortgage payments will be a premium that you pay to enjoy that bigger, nicer home with a great view and you'll get your money back if/when you later downsize... perhaps even with some appreciation gain. The reality is that things will probably turn out better than you think and you'll never ever need or want to downsize.
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Old 03-31-2018, 06:08 PM   #46
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200K difference on a 3.1M portfolio is nothing more than a market fluctuation in magnitude.

After years of hard work and saving, go ahead and buy the nicer house if that's what you want.
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Old 03-31-2018, 07:23 PM   #47
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Yup. Ditch the frugality and get the house with a view. Geeze.

You got 3 mill, what's a couple hundred grand to not have to stare at a wall?
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Old 04-01-2018, 12:16 AM   #48
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My situation is described in my other thread. NW without my current house is 3.1M. No debt, pensions or health benefits. Calculators say 100% if I earn only 1-2% return overall. I'd say that I'm fine assuming ACA and SS, otherwise, not.
There is a potential inheritance that is not being considered in any calculation that would solve any problems.

The main takeaway is clearly to chill out and think rationally - and that house != bank.
You’ve already said that there may be issues with long term care...and I suspect that the house she lives in is the backup plan for care... so you REALLY CANNOT PLAN ON THAT vis-a-vis inheriting it.
My FIL lived over a decade after stroke as did the MIL... long term can be LONG term


AFA housing, you’ve now mentioned being RIF’d at 50- something with a 3.1 mil sans current house:

so estimated 350 less ten percent (for negotiations and realtor fee) then left with just shy of 320. for a 550 house you need to bring 230 to the table (any higher fees for the 550 vs 350? ) This leaves you with ~2.8 mil, which then it’s important to know what is in taxable versus tax-deferred. If most is in tax-deferred then you might find it tighter, very likely do-able but tighter. if a mix of about 50/50 between the two, it may be easier as the tax has already been paid so you can go ahead but beware of upgrading lifestyles. BUT, speaking of taxes- the more expensive house WILL have much higher ONGOING property taxes: have you accounted for those? (the good news is that the millage for FL houses is almost guaranteed to be lower than “Jersey”)

When we looked at retirement houses, we also had similar decisions- found a house that was ~200 k over what we eventually bought. We were glad that we kept looking: we found a place that met virtually all our criteria and it has appreciated MORE, as it wasn’t priced at the top. BTW, the other house languished for over a year and a half...

BTW, did you at least apply for unemployment bennies? Also, doing things in haste often results in suboptimal results... take your time to evaluate
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Old 04-01-2018, 05:11 AM   #49
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200K difference on a 3.1M portfolio is nothing more than a market fluctuation in magnitude.

After years of hard work and saving, go ahead and buy the nicer house if that's what you want.
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Originally Posted by deskpilot View Post
In response to people's questions, I may have hijacked my own thread by adding details about asset allocation, retirement calculators, house fever, heartless megacorps , . Sorry about that.

In general, the core of the thread is: house != bank and what amount of happiness will the 200K get me vs any risks.

I have found this discussion immensely helpful, as I knew I would.
Agreed.

The 200k is not money in the bank but I'd say half of it is. So if the housing market went south Im sure you'd get half of it back. And if that's the case the stock market probably isn't doing too well either. So worse case you're down 100k. That's only 3% of your portfolio

Go enjoy yourself. That 200k will most likely never be needed and will probably end up as your estate. Won't you be pissed off if you don't buy this house and you end up leaving someone a few million? 😁😁
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Old 04-01-2018, 05:51 AM   #50
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.....so estimated 350 less ten percent (for negotiations and realtor fee) then left with just shy of 320. for a 550 house you need to bring 230 to the table (any higher fees for the 550 vs 350? ) ....
Where is the $350k coming from? In the OP the OP said he expects to get $450-500k from the sale of his current house.

Less ~10% for negotiations and selling costs that would be $400-450k of net proceeds so a mortgage of $100-150k and payments of less than $1k/month if the OP buys the nicer house and finances the difference.
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Old 04-01-2018, 06:03 AM   #51
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Youíve already said that there may be issues with long term care...and I suspect that the house she lives in is the backup plan for care... so you REALLY CANNOT PLAN ON THAT vis-a-vis inheriting it.
My FIL lived over a decade after stroke as did the MIL... long term can be LONG term

And the OP said they were NOT counting on that money, so why this tone? How about YOU do a little more CAREFUL READING before responding?
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Old 04-01-2018, 06:05 AM   #52
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Reading is hard!
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Old 04-01-2018, 06:20 AM   #53
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Youíve already said that there may be issues with long term care...and I suspect that the house she lives in is the backup plan for care... so you REALLY CANNOT PLAN ON THAT vis-a-vis inheriting it.
My FIL lived over a decade after stroke as did the MIL... long term can be LONG term


AFA housing, youíve now mentioned being RIFíd at 50- something with a 3.1 mil sans current house:

If most is in tax-deferred then you might find it tighter, very likely do-able but tighter. if a mix of about 50/50 between the two, it may be easier as the tax has already been paid so you can go ahead but beware of upgrading lifestyles.

BTW, did you at least apply for unemployment bennies? Also, doing things in haste often results in suboptimal results... take your time to evaluate
1.2M is after tax, and yes, I will apply for unemployment on 1/1/19 and I will need to keep my current house until mid 2019 for this reason and until my kids move out.

The main elder care issue is my promise to allow my mom to live in her house, so it would start with me driving her, buying groceries, doing housework, etc... If it comes to long term nursing care, her current assets should fund 10 years before the house is at risk.
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Old 04-01-2018, 06:27 AM   #54
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Another concern of mine is that as long as I am in NJ, I can probably find a six figure job in my field if needed - which would only be triggered by ACA repeal. Even at my age, my particular skills are desirable.

Once I make the move, I would be concerned about being forced back to work. I don't want to work at publix. West Palm is not exactly a high-tech hub.

I'm wondering if it would be good to see the results of the mid term elections before making a move.
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Old 04-01-2018, 06:31 AM   #55
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Another concern of mine is that as long as I am in NJ, I can probably find a six figure job in my field if needed - which would only be triggered by ACA repeal. Even at my age, my particular skills are desirable.

Once I make the move, I would be concerned about being forced back to work. I don't want to work at publix. West Palm is not exactly a high-tech hub.

I'm wondering if it would be good to see the results of the mid term elections before making a move.

Back to my "worst-case" scenario. IMO, if you can see a situation whereby you may be compelled to sell, and move back to NJ to go back to work, don't buy any houses in Florida.
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Old 04-01-2018, 06:34 AM   #56
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Its not always about the money. A house is a place to live, period. If it brings you and your family joy, it is worth it. You are dead a long time.
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Old 04-01-2018, 06:42 AM   #57
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Its not always about the money. A house is a place to live, period. If it brings you and your family joy, it is worth it. You are dead a long time.
that's a philosophical perspective, and a good one. But it does not address the question of whether the financial investment in a house should be considered the same as available cash.
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House == bank ???
Old 04-01-2018, 07:05 AM   #58
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House == bank ???

House is not a bank.

I donít think thatís the real question here. Can you afford the better house? I think so, yes.

I think, emotionally, you want that house. You can rationalize away anything, but I think ultimately youíll be happier long term when you lend an ear to your emotional side rather than flatly ignoring it - within reason! You said this better house is $200K more than your current house on a $3.1M portfolio... thatís within reason IMO.
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Old 04-01-2018, 07:11 AM   #59
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I'm wondering if it would be good to see the results of the mid term elections before making a move.
This seems a lot like market timing to me. You may be right, you may be wrong, but you wonít have a good idea which until way after the event.
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Old 04-01-2018, 07:12 AM   #60
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As others have said, it appears you can afford the house so get the nicer home if you choose.

As far as money in the bank, it depends. I see two potential problems with this line of thinking. What if you decide you love the nicer home and do not want to downsize? Then it is not really money in the bank because you can't really access the value easily. Second, if you are planning to downsize only if financial circumstances require it, that might not work either. Often real estate values and other investments (stocks, bonds) are closely correlated. In a recession they could all go down. So, at the time you need the extra equity it may not be there.
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