Some Decisions to Be Made - Looking for Input

[googily]

Hi all--

I have some financial decisions to make soon, and would be interested to hear various points of view. It's also not the sort of stuff easily discussed with "real-life" friends, as will become apparent.

A parent just died, with a trust that bequeaths about a half-million dollars each to myself and siblings. There is the choice of taking some or all of the money either in cash or in property she held.

One piece of property is a house, valued at about $180k, in a smallish town two time zones away. The location is one where DH and I would love to spend summers once we are no longer working. It probably requires about $3-4k a year in expenses.

I am 47, DH is nearly 52. No kids. Combined maxxed-out 401ks, IRAs, and savings at about $1.2M. We both work for a Megacorp where we have also have a good old-fashioned defined benefit pension plan. Our mortgage in a big expensive city is about $330k (3.625%) on a house that could easily sell for $850k.
We aren't penny pinchers, but we don't opt for a lot of Keeping Up with the Joneses-type stuff. (Combined income is about $230k.)

My job has changed over the past few years, and while Megacorp is still happy with me, I am totally ready to be done with full-time working. I could probably get a contract for a while for about half my salary, which would give me some additional day-to-day flexibility without completely gutting my income stream (and would be work that could be done remotely). DH is in a similar position, but he could also probably hang out a shingle and do well.

I haven't obsessed to the point yet where I have been running things through FireCalc (soon!), but I have used Quicken's planner and it does seem like I could retire in the next few years if I took the trust money all in cash, and maybe even with a cash/property split.

I know that from a harsh financial perspective, taking ownership of the house because we might spend a few months there each year isn't the most solid decision. On the other hand, if things go way way south someday, we could sell our current house and move there with a huge profit. (With no heirs, we're not really thinking a lot about permanently preserving huge amounts of our assets.) Also, if we sold the house, and then later on decided that we really really want to own something in that town, would we hate ourselves for having pulled the trigger on the old house too soon?

What questions should I be asking myself? About the house, about how realistic ER may be, etc. etc.?

Thanks....

 

[steelyman]

Take the house.

Leave the cannoli.

I bet you know what to do.

 

[Meadbh]

Condolences on the loss of your parent.

If you take the house you will still get ~$300K in cash, based on the information you provided. There should be more than enough left over to personalize the house (in a place you love somewhere in Mountain Time) and still add to your Portfolio. It seems to me that the house can add to your quality of life, assuming it is in reasonable shape and location. Perhaps you can use it as a vacation home and rent it at other times. Perhaps Megacorp will allow you to telecommute. You will be in a good position to decide if you like the location enough to retire there, and if you do, the transition will be relatively easy.

If you take the cash your finances will be in excellent shape but your lives will not immediately change.

Personally I would take the house.

In an analogous situation, I sold the house, and that turned out to be the best decision for me. But your situation is different.

I can't begin to guess whether you are financially ready for ER but you might want to document current and future expenses and play with FireCalc.

 

[aim-high]

My condolences on the loss of your parent.

 

[googily]

My condolences on the loss of your parent.

Thanks. It was a terrible illness and death, much too soon. Which also makes me a little queasy thinking about all of this--feels unseemly. And it also lends a lot of emotional weight to the decision on the house. (My grandmother passed it to my mother, and I know Mom wanted me to have it.)

On the flip side, it also reinforced the You Never Know part of life. I would hate to not grab the opportunity to live life the way I want to as soon as it becomes possible, because it can all go away so fast.

 

[LOL!]

I would not take the house. It will become an albatross around your neck.

Don't mix emotions with money.

If in a few years you really want to have a house in another location, then just buy it then.

And here is another way to think about it: If there was no property involved and you had to take the money, would you then use that money to immediately go shopping for a house in that location and buy one for $180K? If yes, would it be THAT house or could you find a better one for your needs?

 

[aim-high]

Sorry. :-(

From an emotional perspective it sounds like the house would mean a lot to you, but that you're concerned about how it vs the money would impact your financial situation if you want to or need to retire early.

If that is the case, my suggestion is to follow your heart. You've got plenty of money and if it came to it and the extra $3-4k expenses became too much, the house lost its appeal, or you needed more liquidity, then you could sell the house at a later date.

I definitely would not suggest selling it now though, because once it's sold it's gone. Give it at least a year until you've had some time to mourn. moo

 

[steelyman]

I was insensitive and apologize.

I would, though, think about the property if you like it and want to keep it up.

 

[SVHoper]

Sorry for your loss.

The house has sentimental value, but if it is valued correctly, it sounds like you can take it and always have the option of cash later

 

[aim-high]

LOL - literally. I just read your reply vs mine. It reminds me that sometimes answers aren't right or wrong, but different.

A question regarding your comment. How do you not mix emotion into the decision when you haven't had time to heal?

 

[daylatedollarshort]

Sorry to hear about your mother.

Personally I would sell the house and spend a lot of time picking out your ideal retirement home and location. If that turns out to be this house, then keep it. But statistically the odds are there would be other places that meet your specific needs perfectly, and at $180K the selling costs are not too much compared to your NW. If if you want to live in that same town eventually, odds are this house isn't the ideal size and location for you.

Plus, personally I would not keep the house to only live in part of the year unless you were going to rent it out. Here is a blog post from one of the Millionaire Next Door authors on second homes with some food for thought -

Second Homes... Part I

My childhood home has long been sold. I have never felt a loss in my fifties to not be able to go back and live there. I have looked at it on the Internet and I am glad someone else has fixed it up and made a nice home there.

 

[samclem]

googily,
My condolences.
Vacant homes don't tend to do well--vandalism, roof/pipe leaks that would be caught early in an inhabited home can cause big problems.
If the house has big sentimental value, then maybe keep it. Otherwise take lots of pictures of the place for a scrapbook/electronic scrapbook, maybe have a small remembrance/celebration/reunion with your siblings and family there, and sell it.
For you and your spouse: If the house were out of the picture, would you today buy a home in that town just to use occasionally and to have for the future? Very likely you wouldn't--you'd save that money and if it turned out you eventually wanted to live there you'd buy a house at that time that met your needs (layout (esp number of levels), features, neighborhood type, distance to shops and restaurants) . Emotions aside--is it likely that this would be the house?

An option: If emotions DO run high toward this house and if some/all of your siblings feel the same, several of you could own it through a trust, sharing the upkeep costs, etc. It would probably be complicated and fraught with potential problems, but it might work.

Best of luck as you sort through things.

 

[GrayHare]

Having been through similar I can say I'm glad we snapped pictures and then sold the house. Renting it out is an option, though, if someone has interest in that sort of thing. Otherwise a distant house is a tough thing to keep watch over. Note the cost of insuring an unoccupied home can be on the order of 10x the normal (occupied) cost.

 

[googily]

Thanks, all, for both the input and the good thoughts. It's been a rough couple of years.

A few addendums: the house isn't really a family treasure, since my grandparents didn't move into it until after they retired, about 30 years ago. But my mother kept it as a second home for 10 years after her parents were gone, and pays the very trustworthy and well performing (and somewhat busy-body) neighbors next door to keep it up and keep an eye on it. It also has some furniture that I'd probably end up putting into storage, because they are long-held items I'd hate to part with, especially if we ended up buying another house a few years from now and then had to furnish it anew because we sold everything from this house.

The fact that I can of course sell it in a few years is a big part of the decision. My father is handling the estate and is under a lot of strain from that as well as from losing his life partner and recovering himself from what he went through taking care of her. I feel like if I just take the house, which can happen pretty promptly, at least I get him out from under having to deal with it, because I doubt it would sell immediately. And it would give some time to get the emotions of it all a bit more under control. And maybe time for a final "closure" visit next year, separated from the whirlwind we were under when we were there for Mom's funeral.

(Plus, I wouldn't be surprised if the official appraisal we just got is a bit below what it could sell for, so maybe I could make a small quick profit. )

Would we go out right now and spend $180k on that house? Doubtful. Would we spend something along those lines for a different house in this particular town? Possibly.

Though I'm not sure DH and I will be very good at handling the inevitable headaches from far away. $180k also buys a lot of vacations.

But, Mom.... This house is so filled with her essence, and was so important to her. Sigh. And then I feel greedy for looking at all of this as my chance to ditch my job (especially if I don't take the house).

I appreciate very much the different points of view. As for RE, I did start playing with FireCALC, but need to get my spouse in the room so we can run our numbers together.

Thanks for letting me wander through the acres of thoughts on this.

 

[daylatedollarshort]

If you have Netflix you might find the Clean Sweep show helpful to watch. There are many episodes of families having trouble letting go of possessions left by deceased parents, which leads to them having too much stuff.

The general advice is to take pictures, keep the memories and give the physical items to someone else who really needs and wants them.

Good luck in whatever you decide.

 

[Delawaredave5]

Dave Ramsey would say, "pretend parents house didn't exist". If someone gave you $300k, would you go buy one in that area ? If no, take the cash.

I keep thinking "I'm supposed to want a second home". I don't. I want to wander around like Anthony Bourdain living months in different parts of country and world when I retire.

 

[WorkTillYouDont]

Dave Ramsey would say, "pretend parents house didn't exist". If someone gave you $300k, would you go buy one in that area ? If no, take the cash.

I keep thinking "I'm supposed to want a second home". I don't. I want to wander around like Anthony Bourdain living months in different parts of country and world when I retire.

Nailed it. But can OP have both? Enough $$$$ to do the Tony thing, but also the permanent outpost where you can store stuff.

 

[Dawg52]

My condolences as well.

From a financial stand point, $3-4k in annual expenses probably won't be a big deal to you. Can you keep the next door neighbor looking after it for you? I do this for my next door neighbor. He spends half the year in Taiwan and I make sure the grass is cut and keep an eye on the place. Oh yes, he has 3 cameras scattered through the house so he can go online and see if anything looks unusual. Gives him some peace of mind I guess.

As others have said, you can always sell it later if you decide it's not for you. Only you can decide if it's something you want to keep. Good luck.

 

[daylatedollarshort]

It isn't just the $3 - 4K a year but also the opportunity cost if the $180K could earn a better return if invested elsewhere.

 

[shasta]

What state is the house in? I worry about owning houses or any property in other states, visiting there too often and then having that state claim me as a resident and cut me with their taxes.

Maybe I am too paranoid, but I am all to familiar with the potential pitfalls of say owning a vacation home in California.

Am I too paranoid or careful?

My tax attorney has recommended that for extended visits or retirement action or sabbaticals in other state I should only rent in the state at most.

 

[shasta]

I guess if you own a house in X state, you would pay X state property tax and income tax on any rent you charge.

 

[googily]

It's in Wyoming. so in fact I'd be THRILLED if they wanted to claim me as a resident (no income taxes!).

 

[shasta]

Sounds pretty safe.

Retirement is funny. Before I had other woes - now I feel like Walter White from Breaking Bad - paranoid everyone wants to locate my hidden cash barrels and take them hehe.

 

[shasta]

Not suggesting I have cash barrels per say - its just when you made your own way and retired, joining a small % of the population, I just feel paranoid people want to ruin it for me.

Its likely a complex as im just 90 days into it at this point. I still feel emotional about spending and am more like 2% of portfolio my first year in.

Since I am in the recent retiree anxiety zone, perhaps im just paranoid.

I follow my tax attorneys advice as if they are gospel or commandments.

 

[enjoyinglife102]

Sorry for your loss.

Emotions and sound financial choices don't mix well under any circumstances. I'd sell the house. I wouldn't look at as being greedy at a chance to leave your job, I'd look at it as your mom providing you the gift of being financially independent and having the choice to live the life you really want with all the happiness that comes with that.