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Today I REALLY miss my Dad...
Old 05-30-2008, 07:35 PM   #1
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Today I REALLY miss my Dad... I'm going to bounce something off of you guys. In the past I would have had a sit-down with Dad and taken advantage of his 77+ years of hard won experience and old-fashioned common sense. but he went and died on me back in February.

Many of you are familiar with my situation. Nearly 50 years old and 25 days from a Federal pension (roughly $3000 a month), my wife and I have begun to seriously search for land where we can build our little farm/homestead and live happily ever after. Cindy will continue to work for 8 more years, at which time her pension should exceed mine.

Two pieces have definitely caught our eye. The first is 8.35 acres of raw land, 15 minutes from the wife's office, and with a view of the lake where I take my daysailer, which is selling for $84,000. The second, more desirable IMHO, is 16 acres of gently sloped land, with a small pond on it and a year round stream feeding it, a small shed, and a 14' x 60' mobile home, including a well and septic system already in place, for $114,500.

My thoughts are that I would be getting twice the land, a well and septic, plus temporary housing (for while I build our timber-framed house). Well DUH!!! That part seems pretty easy doesn't it?

Now, here's the question I would be laying out for Dad, if he were here. We seriously screwed our credit up with plastic before I got wise. We are just digging out from under that and really would not be able to get any approval for a conventional mortgage. We can't sell our house until we have somewhere to move to, and we can't buy somewhere to move to while we still carry the mortgage to this house. My TSP only has about $150k in it. I was wondering if anybody thought it would be ok to take that lump sum and buy our land, move onto it, and then put our house on the market for a quick sale. We are different than most in that we aren't trying to make a mint on the sale of the house. As long as we cleared the mortgage, and maybe had a little bit left over to start the new house we'd be happy.

I'm thinking that it might not be that big of a deal since the balance is pretty small (compared to most of you) and since we will both be pensioned for life. To my way of thinking the most important part will be that we won't owe anybody for the house/land we live in/off of.

Or am I just talking myself into this because I so badly want to start our homestead?
"Iron" Mike - Semper Fi
Jack of all trades; Master of none.
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Old 05-30-2008, 07:43 PM   #2
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Mike, how screwed up is screwed up, credit wise? Do you know your credit scores? Even today, for someone with assets, not a lot of debt, and rock-solid income (state pension), you might be able to get financed.

What I am getting at is that you might be able to find some financing out there somewhere to buy the land. It might not be the greatest terms (or it might, depending on your situation), but you will only be carrying it until you sell off the current house.

Another possibility is to ask if the seller would carry the paper. Offer them a chunky downpayment and and, oh, 9% interest only loan that has a balloon payment after 3 years for the rest. They might be willing to go for it given that we are not exactly in a rosy real estate market.

What do you own on the current house and what do you think it is worth?

I think this is worth thinking outside the box on for a bit.
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Old 05-30-2008, 07:50 PM   #3
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Mike - i suggest you not bother with "hard money" loans, though you could probably find a lender - interest might be double a normal loan. Know nothing about TSPs and don't have anything worthwhile for your problem, but on the property with a steam.... Check out my current fantasy - off the grid power and water:
Pump water with no electric or gas pump:
The Ram Company, Home Page.
Use a stream to provide round the clock electric power
Micro-Hydro Water Turbines for Home Power | Alternative & Renewable Energy - ABS Alaskan, Inc.
Raise a few chickens, plant some taters and 'maters - life looks good!

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Go to the country, build you a home
Plant a little garden, eat a lot of peaches
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Old 05-30-2008, 07:53 PM   #4
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-- Taking the tax hit on your TSP would be a bummer, and you'd lose a lot of financial flexibility (a chunk of money is a very handy thing as you move homesteads)
-- (Assuming you go with the property with the mobile home) is the owner of the land willing to write you a short-term note for the amount? He'd be in a very low-risk situation as you improved the property by building on it--he's going to be very sure that you aren't going to stop paying him. After a few years your credit will be clean and you can get a "real" mortgage and pay him off. Even if you paid him a few % above market rates, it would still be less of a hit than paying the penalties on the TSP.

(later edit: Cross-posted with Brewer regarding seller financing)
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Old 05-30-2008, 09:35 PM   #5
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On the property with the mobile home, maybe the owner would give you a 6 or 12 month lease with option to purchase. This would buy you time to get your house sold. At the end of the lease if you can't (or decide not to) purchase, you walk away minus your lease payments. A real estate attorney can write up a lease agreement that protects your interests if the owner of the property is willing to do the deal.
"There is no dignity quite so impressive, and no independence quite so important, as living within your means." Calvin Coolidge
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Old 05-30-2008, 11:16 PM   #6
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What Hankster said ... he beat me to the punch.
But you should check your credit rating and ability to get a pre-approval from a bank. You never know until you ask... and you could be pleasantly surprised.
Good luck to you LN.
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Old 05-31-2008, 06:39 AM   #7
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Mike, you don't want to take the tax hit from withdrawing your entire TSP. Plus, who's to say that your house will sell when you want it to, in this market?

Maybe you could sell your home and THEN look for properties. During the time that it takes for you to find one and close on it, you could put most of your stuff in storage and rent a small, cheap apartment for a few months. That would involve an additional local move, which is a hassle but might be your best option.

There's also the possibility that the properties you have you eye on, might still be for sale after you have sold your home. That would shorten the process. Once you have your present home under contract and in escrow, you could buy a property contingent upon closing on your present home.
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My thoughts on this...
Old 05-31-2008, 07:03 AM   #8
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My thoughts on this...

I'm going to approach this a bit differently. Rather than looking at the finances (regardless of the property, you will have that "challange") I'll give you my thoughts on the two current parcels you are considering.

First of all, W2R commented that there may be other properties that come up in the future. Very good point. The "quandry" you may have is that either of the current offerings may be OK, but neither of them is "speaking to you" (sort of like love - you know it when you see it ).

Second point. I've actually lived in a mobile home (e.g. "trailer"). Once rented one in Florida when I was stationed there (along with my wife/son). Purchased one when I got out of the A.F. (could not afford any other type of housing).

While it was good for the short term (we lived in "our first home" four years), it is nothing like having a "stick house" however I will say for that period of life, it fit the need.

You spoke of a well/septic system. Question for you. Did you have a perc test done on the existing drain field? If so, would it support your home, once built. A drain (e.g. septic system) needs to be large enough to handle the size of home you are planning in the future, and the exising one may not fit the need. You may have to install a new one, anyway. And of course - they are not inexpensive...

As far as getting "more" (in land), personally I look at it from a point of "usability". If you bought the larger tract, could you sub-divide in the future (hey, we're all getting older, and you may not necessarily want the work involved keeping it "looking good" - especially if it is meadowland).

Sometimes, larger is not better. I'd rather have a small diamond than a large piece of coal , even if they are both formed from carbon.

Not to tell you what you should be doing. It's your life, your decision. Just giving you a couple of things to think about based upon my "experiences".

- Ron
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Old 05-31-2008, 08:22 AM   #9
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You might consider getting a loan against your TSP. The rate is low - same as the current G fund rate. You can only borrow against your contributions and earnings on those funds - not against agency contributions and earnings. The details are here: TSP: Civilian Features chapter 11, TSP Loan Program; 2008 Feb 26
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Old 05-31-2008, 08:50 AM   #10
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First... if you are having 'financial difficulty'... then maybe you should not buy until that is gone.... no need to pile on...

But looking at the 2 parcels.... as someone said... the small one is still a big hunk of land... and the price is probably higher since it sounds like it is closer to town and it is next to a lake.... (well, you said you could see the lake.. if it is not next to it than can there be development in front of you that would block your view? I knew someone that this happened... thought he had a great property but got screwed when more development came).... SO, the price point is higher for a good reason....

But what do you and your wife like better? The lake or stream? To me this would be a big factor in deciding which to buy..

Good luck.... it sounds like a great price from what we have around here for property...
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Old 05-31-2008, 09:25 AM   #11
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Mike, you may want to take a look at Personal Loans at Great Rates! Get a Personal Loan at the P2P Lending Marketplace - Prosper. It's probably the future of banking for many folks. You'll pay more interest, but you will be very likely to get the loan you're searching for.

Best of luck!
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Old 05-31-2008, 09:44 AM   #12
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What do you think your dad would tell you to do if you presented him with all the facts of your situation, both the pieces of land and your finances? (I'm sorry that he's gone--it sounds like you were very close and miss him very much).

Anyway, I'll play ball and throw out my two cents:

You need to get your finances in order before you do anything. It sounds like your current mortgage is for almost the full equity in your home (you hope to sell "to clear the mortgage with a little left over"). And you are "just digging out from under" the credit card debt, which is at a level that will affect your ability to obtain more financing.

Do not even think of touching the TSP--that is your nest egg and you may need it down the road in retirement. Do not jeopardize it.

First, get ALL the credit card debt paid off (apply the pension toward that and nothing else). No matter how long it takes, do this first.

Then get your current house ready to sell. Sell it before you buy another place.

Finally, do not buy either parcel--find something that meets your needs for the great outdoors with a house already on it.
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Old 06-02-2008, 12:53 AM   #13
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Finally, do not buy either parcel--find something that meets your needs for the great outdoors with a house already on it.
I agree I have looked at retirement in the country and think an existing house is best. It will already have a building permit, a well and septic tank, garages or other buildings and a house. Around here building permits aren't always given, You can't build within 300 feet of a creek, wet lands, green spaces, growth management, all kinds of reasons. A good house can be improved without as much permit problems.
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Old 06-02-2008, 10:53 AM   #14
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Wait. Don't get land fever. When you are ready to sell your house, have your debts cleared up, and are in the right financial position, a perfect piece of land will appear.

This is what we did, and it saved much emotional hardship for us to rent a little house for a year while we built on the land we bought (right after we sold our house). All is now paid for, free and clear, 5 years later. If we'd done it the other way, we would not be in the position financially we are today.

Be patient and you will be oh-so-glad.
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