RunningBum
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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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?
House == bank ???
- Thread starter deskpilot
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pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Reading is hard!
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.
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.
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.
Islandtraveler
Recycles dryer sheets
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.
nash031
Thinks s/he gets paid by the post
House is not a bank.
I don’t think that’s 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 you’ll 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... that’s within reason IMO.
I don’t think that’s 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 you’ll 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... that’s within reason IMO.
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nash031
Thinks s/he gets paid by the post
This seems a lot like market timing to me. You may be right, you may be wrong, but you won’t have a good idea which until way after the event.
flintnational
Thinks s/he gets paid by the post
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.
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.
traineeinvestor
Thinks s/he gets paid by the post
House and bank are two distinct concepts.
That said, spending the extra on the house is not the same as spending money on something you can never get back – money spent on a house has value even if that value will, in the future, be uncertain.
For what it's worth:
1. we would never spend money on a larger house if we needed returns on the invested capital to sustain our income needs;
2. trading our current home for a smaller home is an insurance plan if our other investments should fail to produce enough income for our needs.
That said, spending the extra on the house is not the same as spending money on something you can never get back – money spent on a house has value even if that value will, in the future, be uncertain.
For what it's worth:
1. we would never spend money on a larger house if we needed returns on the invested capital to sustain our income needs;
2. trading our current home for a smaller home is an insurance plan if our other investments should fail to produce enough income for our needs.
From the original post: "My question is: should I consider the extra $200K to be like money in the bank? If I need it back, can I just downsize later, and enjoy the better house for the next 10-15 years? "
I don't doubt that the OP can "afford" it in the sense that even if things go badly in the housing market, and the stock market, AND he loses his ACA (his point of concern, not mine), or for some other reason he needs to cash out and finds out there is no equity, he won't starve.
If he puts cash in a money market fund, and he needs it down the road, it will be there. Equity in the house may or may not exist. If he's prepared for that and can deal with that, that's fine. But that's a different question than the one posed.
nash031
Thinks s/he gets paid by the post
Of course I read (and answered) the question posed, but as I said I don’t think that was the real issue. The real issue was trying to justify the home purchase with some rational or logical argument, IMO. Perhaps I’m wrong and should only take that question at face value, and if that’s the case OP can certainly ignore the second two paragraphs of my post.
RunningBum
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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For the first problem, I don't really see that as an issue. If things go bad, you're going to have to give something up, whether you want to or not. It may not be easy, but if it's necessary, you do it.
For the second, I've thought about that one. My plan is to not wait until I am down to my last year of money, and then decide I'd better sell soon. Mine would be an early detection. If I had retired at the start of 2000 (which I nearly did), and saw 3 bad years, I wouldn't be in immediate need of money, but I would see that my 50 year plan (I was 38 then) was in danger, and I'd be looking for the next decent sell time to unload the house. I think the OP also has the funds to ride out a few down years to not have to unload an expensive house in a recession. If you don't, that's another story.
pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I think that the essence of the OP's question is that if he put an extra $200k into housing is that like money in the bank. In terms of guarantees, certainly not... there is a remote possibility that the value of the house would decline and when he sells that he will not get his $200k back. In terms of what will likely happen... then maybe... the most likely result is that when he sells many years later that he will get his $200k back plus some modest appreciation.. but it is not guaranteed like a bank. He has enough so it would be a prudent risk to take IMO... but if it were me I would leave the $200k invested and take out a mortgage to finance the difference.
kcowan
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I think you need to consider your purchase as a lifestyle expense. Clearly you love that idea.
Let's say in 5 years, the RE prices decline by 30%, a possible but unlikely outcome. Then your loss is $60k plus RE fees. Are you willing to pay $12k p.a. to enjoy that fabulous home? If so, then you are done. That is the worst case.
If you cannot accept the worst case, then pull in your horns and be conservative. You will not enjoy your choice as much but you will feel that you are adhering to your conservative ideals.
(I would blow that dough and live like there is no tomorrow. You might get rewarded with a windfall!)
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I didn't think of it until now, but with hurricane frequency increasing and sea level rising, a big decline in value may not be so unlikely. The West Palm airport is a whopping nineteen feet above historic sea level.
aja8888
Moderator Emeritus
Responding to the questions, it's not like money in the bank..it's equity in a house. If you need it back, pull a home equity loan.
But it sounds like you really want the more expensive place and I would just go for it. It will make you and DW happy.
And with $3+ M in investments, it's a "no brainer".
If I had that kind of dough, I would even treat myself to new Corvette!
You only live once (my current thinking).
As others have said, there is risk to house equity. I find these decisions come down to lifestyle choices. If you are more of a 'homebody' and get enjoyment from gardening, tinkering in the house, cooking, entertaining etc then the nicer house will bring give you enjoyment and its worth it. On the other hand, if you want to spend more on experiences, travel, dining out, etc and dont plan on spending a lot of time at home then it may not be worth it. Also consider how circumstances will change as you age, health issues and whether your mother might need to live with you at some point.
the community is off of SR-7 and decently above sea level. I'll probably be gone before that's an issue. Maybe the house will be ocean-front property some day.
It would be so easy to just go for it. The early death threads on this forum have a big impact on me. Males in my family are not long-lived.
I am a total introvert and homebody.
I can handle that kind of loss.
Didn't read entire thread, but the view that a house purchase is money spent seems beyond overly conservative to bordering on... well... really out there.
Assuming one is not pushing the "numbers" to get into a better house then by all means get what will make you happy. And it is more than reasonable to recognize that the house represents wealth that can be accessed in the future if need be (e.g. liquidate to fund assisted living, etc).
Assuming one is not pushing the "numbers" to get into a better house then by all means get what will make you happy. And it is more than reasonable to recognize that the house represents wealth that can be accessed in the future if need be (e.g. liquidate to fund assisted living, etc).
FI_RElater
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Sounds like a go!
since you should have cash flow, and (my to be corrected) analysis should only have you take ~100k out: you should be good to go
since it’s Palm Beach and (now reading near FL 7) that implies inland a bit, but hopefully not too close to the airport, the biggest concern would be flood zone and insurance ( since looking at the map, you have a swamp above Breakers West and west of FL 7 at the nature preserve)
{afa pb, earlier post indicated that they expected it and were using that to attempt to justify....I was showing that you cannot count on that}
I can appreciate not wanting to go to work at min wage, I wouldn’t mostly because we have enough (pension plus just a bit under you, along with paid off house and insurance guaranteed) and because there are plenty of others that would NEED that job to get by.
since you should have cash flow, and (my to be corrected) analysis should only have you take ~100k out: you should be good to go
since it’s Palm Beach and (now reading near FL 7) that implies inland a bit, but hopefully not too close to the airport, the biggest concern would be flood zone and insurance ( since looking at the map, you have a swamp above Breakers West and west of FL 7 at the nature preserve)
{afa pb, earlier post indicated that they expected it and were using that to attempt to justify....I was showing that you cannot count on that}
I can appreciate not wanting to go to work at min wage, I wouldn’t mostly because we have enough (pension plus just a bit under you, along with paid off house and insurance guaranteed) and because there are plenty of others that would NEED that job to get by.
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RunningBum
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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The inheritance? I saw twice where it was brought up, and both times said he was NOT counting on it, including the post you quoted. Where do you see it was expected and being used to justify?
brucethebroker
Thinks s/he gets paid by the post
Just ask the thousands of folks who moved OUT OF FLORIDA during the housing crash of 2008 and created one of the highest forclosure rates in the USA.
The higher the home price, the harder it is to sell, most of the time. Think of your house as shelter. Any appreciation is a bonus. (And this comes from a real estate investor, and broker.)
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