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Housing Advice
Old 10-29-2020, 09:04 PM   #1
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Housing Advice

Looking for an opinion on my housing situation and choice we will have to make < 3 months.

Married (33 & 32 yrs old) w/ 2 young kids. Gross $140k w/ no personal debt.

1.Currently rent a condo from employer that is 10 yrs old. More than a Adequate size but is a condo and lacking in a yard. Relatively new with no updates needed. Located in the community we both work in. Most likely not our “forever home” or what we envisioned. Have the option to purchase for $130k which is generous as neighboring unit sold for $235k < 18 months ago.

2. Family member wants to sell their property to us in 1.5 yrs but wants commitment soon or will move forward with renovations to sell on open market. House on 5 acres in rural setting with outbuildings yet close to ammenities that is probably larger than we need but would consider more of our “forever home”. 10 miles from work. Would require the purchase of machinery for snow/mowing($10-$15k). House is easily livable today but would prefer some renovations in coming yrs. Price sounds like it will be $360k-$380k with open market value of $390k-$415k. Significant other really prefers option 2 (family property) and maybe upset that employer would offer such a generous deal.

We’ve been fortunate and to date in a decent spot with NW around $680k. The conservative in me says option 1 is a no brainer. I wouldn’t sell this in less than 5 yrs or longer as I wouldn’t want to have that conversation w/ employer. Option 2 is probably the personal choice giving no financial consideration however have a fear of being house poor and committed to a much larger payment as we’ve largely lived our adult lives with no personal debt. Also other expenses that come with larger property. 20% down is a non issue for either but also don’t want to hurt our trajectory.

Any words of wisdom out there? Realize it’s a personal choice but what would you do? Live a little? Regret having larger pmt?
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Old 10-30-2020, 03:40 AM   #2
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Can you buy both? You already have 100k in equity in the condo. Live in it for another 3 years and build even more equity, then sell (capital gains tax free) and apply that money to the other property. Sound like you're in a pretty good situation. Just a thought.
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Old 10-30-2020, 07:23 AM   #3
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That's what I was thinking. Buy both and rent the house for a few years while living in the condo so the employer doesn't get irritated... then move into the house and rent or sell the condo.

Another thought that crossed my mind is that if the employer is selling the condo to you below market by so much the IRS might consider the difference to be imputed income to you and taxable.
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If your employer sells you property or services at a discount, you may be able to exclude the amount of the discount from your income. The exclusion applies to discounts on property or services offered to customers in the ordinary course of the line of business in which you work. However, it doesn’t apply to discounts on real property or property commonly held for investment (such as stocks or bonds).
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Old 10-30-2020, 08:25 AM   #4
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Purchasing a $360K to $380K home with $140K income doesn't sound like house poor to me. I don't know what the property taxes are in your area, but with the current interest rates your mortgage would only be about $1200 per month.
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Old 10-30-2020, 08:36 AM   #5
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Which option has the best schools?
Also, it's not just about larger payment. In my experience, a home requires much more time for yardwork, upkeep, etc. compared to a condo. Many weekends will be spent on house chores. Nothing wrong with that, just be aware of it.
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Old 10-30-2020, 08:47 AM   #6
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I don't understand your comment about your wife not being happy your employer offered such a generous discount. Does it come with golden handcuffs? If you are worth that much money to them, why don't you just ask for a raise?

It doesn't make sense that your company will go so far below market.

It seems as though if you had to pay retail for that condo, you would not buy it.

You haven't really provided enough details here.
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Old 10-30-2020, 08:54 AM   #7
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Old 10-30-2020, 09:45 AM   #8
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If only purchasing one property, get the condo. Live in it for a few years and then sell for a profit using that to help purchase your forever home.

If you can swing buying both and the house will rent out and pay it's bills, that's a great option as you can renovate and move there in a few years and make some extra cash on the sale of the condo to boot.
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Old 10-30-2020, 10:29 AM   #9
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Our first house was a duplex that launched me for 20+ years of landlording and profiting. Given your very sensible financial attitude, that might be a better opportunity than what you are now focused on through pure chance. Plan to keep it until the kids get bigger, then either sell it or keep in as the first property in your empire and buy something bigger.

Given kids you should also consider school districts for your two current interests.
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Old 10-30-2020, 10:49 AM   #10
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I also like the option of buying both properties and renting out the house. Just make sure the family member who sells it to you is aware of your plans. They may see the discount from fair market value as a gift to your growing family, and have an expectation that you'll live it it ... not that they should have such expectations, but people are not always rational and you probably want to maintain a harmonious relationship with this person.

Also, tell us more about your employer. Why are they willing to sell you a condo at so much less than market value? And why would there be any special conversation required if you did decide to sell it in 1.5 years when the house becomes available? If there is a conversation, why can't you just say "we have this great opportunity to buy a house from a family member, so we're going to be selling the condo"? You don't have to tell them that you knew you'd be purchasing the house when you bought the condo. How would they feel if you move to the house in 1.5 years and rent out the condo?
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Old 10-30-2020, 12:00 PM   #11
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As far as school they would go to district where we currently live as of now, although either are fine.

I’d feel obligated to that the conversation of selling due to the generous purchase price. Employer is aware of other property as we’ve been on and off discussing us buying employer property for past few yrs however made mention of what we are considering and that is when employer decided to come up with price.

Why the low purchase? Employer Families been made 100 times over, older, and probably just a drop in the bucket to them and most likely don’t want to deal with selling on market.

I probably wouldn’t purchase said condo for market value at this stage of life as we’re in a spot to make that next move up. Although employer has had a hand in this due to benefits of living here the past 9 yrs.
It is compelling to own both but morally feel like each sellers intentions are for primary residence and both parties play a significant role in our lives.
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Old 10-30-2020, 12:12 PM   #12
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Originally Posted by frgo0629 View Post
As far as school they would go to district where we currently live as of now, although either are fine.

I’d feel obligated to that the conversation of selling due to the generous purchase price. Employer is aware of other property as we’ve been on and off discussing us buying employer property for past few yrs however made mention of what we are considering and that is when employer decided to come up with price.

Why the low purchase? Employer Families been made 100 times over, older, and probably just a drop in the bucket to them and most likely don’t want to deal with selling on market.

I probably wouldn’t purchase said condo for market value at this stage of life as we’re in a spot to make that next move up. Although employer has had a hand in this due to benefits of living here the past 9 yrs.
It is compelling to own both but morally feel like each sellers intentions are for primary residence and both parties play a significant role in our lives.
The only people you owe anything to are the family you live with. You are too old to get bogged down with these phantom obligations.
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Old 10-30-2020, 12:16 PM   #13
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How about you tell employer that you would like to buy but that it is possible that you may move into the other place in a couple years and if you did you would plan to either rent or sell the condo. Do you think that would be acceptable to them? It will still give them a quick and easy exit and not have to deal with a market sale.

If so, then tell the family member that you would like to buy their place when they are ready to sell.

If that works you would be having your cake and eating it too.
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Old 10-30-2020, 12:20 PM   #14
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Current home: rented from employer, option to buy for a "great deal"

Future home: Family "wants" to sell it to you, on their terms and timeline

How about option 3 - one that you and your wife go out and pick, without any emotional baggage or obligations, or bad feelings if and when something comes up later on?

You're in a great financial position for your age. Go shopping.
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Old 10-30-2020, 12:28 PM   #15
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I'd go for the place the wife and kids want and not let money guide me. Their happiness is paramount and is also a financial consideration if you get on the wrong side of your DW, which seems to happen to others with regularity. Your kids will have a blast on 5 acres as opposed to living in a condo.

Also, you don't need to spend $15K to buy a mower / snow removal machine. Consider reducing the mowed area if a lot of the 5 acres is mowed now.
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Old 10-30-2020, 12:36 PM   #16
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I think maintaining a large homestead with two people working full time and raising two young kids would be waaaaaay too much work. Take the good condo deal, increase your net worth, then in 15 years retire early and buy a home on several acres if you want to.
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Old 10-30-2020, 12:47 PM   #17
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Quote:
Originally Posted by pb4uski View Post
How about you tell employer that you would like to buy but that it is possible that you may move into the other place in a couple years and if you did you would plan to either rent or sell the condo. Do you think that would be acceptable to them? It will still give them a quick and easy exit and not have to deal with a market sale.

If so, then tell the family member that you would like to buy their place when they are ready to sell.

If that works you would be having your cake and eating it too.
This would be my first choice - talk to the boss and find out if they'd be upset if you sold or rented it out in a few years.


Quote:
Originally Posted by Aerides View Post
Current home: rented from employer, option to buy for a "great deal"

Future home: Family "wants" to sell it to you, on their terms and timeline

How about option 3 - one that you and your wife go out and pick, without any emotional baggage or obligations, or bad feelings if and when something comes up later on?

You're in a great financial position for your age. Go shopping.


This is my second choice...

And I tend to agree with aaron also - the bigger house will be a lot more work for two working parents with small kids.
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Old 10-30-2020, 01:00 PM   #18
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Quote:
Originally Posted by pb4uski View Post
How about you tell employer that you would like to buy but that it is possible that you may move into the other place in a couple years and if you did you would plan to either rent or sell the condo. Do you think that would be acceptable to them? It will still give them a quick and easy exit and not have to deal with a market sale.

If so, then tell the family member that you would like to buy their place when they are ready to sell.

If that works you would be having your cake and eating it too.
I don't understand why OP is tying this together. I wouldn't buy a condo for any reason if I thought the person I bought it from would be annoyed if I sold it.

I don't buy the OP saying his company doesn't need money and can eat 100K of equity because they like him. The question is will it be a "regular" mortgage or will he be making the payments to his company.
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Old 10-30-2020, 01:08 PM   #19
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The reason I tie in the exit strategy is because from what the OP has said it is hard to know the employer's reasons for the sweetheart deal and expectations.

It could be as simple as the employer is rich and selling to the OP below market is a quick and easy exit and they are rich enough that they don't care about leaving ~$100k on the table... in which case they may not care what the OP does with the condo.

OTOH, the employer may be viewing it as giving as giving a valued employee a sweetheart deal to incentivize loyalty to the employer and they might be upset if the OP rents or sells it in a couple years.

I'm not sure if the OP knows for sure... and if he doesn't know then he should ask to avoid inadvertently spoiling his relationship with his employer.
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Old 10-30-2020, 01:29 PM   #20
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Thanks for all the input.

My intentions now are similar to what pb4uski mentioned. Be upfront that if purchased I very well may sell in coming years and if not okay we will not buy.

At this moment I don’t really know where employer stands if I were to sell in short time frame. I’ll be finding that out.
If bought it would be a mortgage and not a contract for deed via employer.
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