Checking in with a quick question RE: personal home AA

[RetiredHappy]

You didn't say if you are still working. Presumably you are not yet retired, at 51, if you want to spend 50% on your NW on a house is fine as long as you plan to accumulate/save that 50% over the next 10 years or so before you retire. If you currently have $2M, and you are spending $1M on a house, then you better be saving another $1M and more over the next 10 years before you retire.

If you have $10M and want to spend $5M on a house, that may still be a stretch because more expensive house means much higher expenses.

 

[TheWizard]

I bought my house for $44k back in 1976; it's worth more than that now.
Becoming a first time homeowner at start of retirement is a bit unusual, I think...

 

[shasta]

Plot twist : Any thoughts on buying a house outright and then using a HELOC or Home Equity Line of Credit to buy stocks in a down market.

Does this give the house more Bond like liquidity?

(too experimental?)

id pay for any ongoing house repairs and all insurance / taxes with cash flow from equities.

 

[shasta]

You didn't say if you are still working. Presumably you are not yet retired, at 51, if you want to spend 50% on your NW on a house is fine as long as you plan to accumulate/save that 50% over the next 10 years or so before you retire. If you currently have $2M, and you are spending $1M on a house, then you better be saving another $1M and more over the next 10 years before you retire.

If you have $10M and want to spend $5M on a house, that may still be a stretch because more expensive house means much higher expenses.

I have been fire with a strong glide path and outpacing inflation for about a decade now.

 

[pacergal]

Have you investigated the cost of living where you want to buy? Taxes, insurance, etc. I understand many home insurance companies are leaving Florida and the ones that stay are charging quite a bit.
Can you handle working two more years until 60? Does that get you to full pension to make a bigger difference?
Are you retiring to Florida and have you considered the costs of what you plan to retire too? Travel, gardening, sports activities, etc.
Run firecalc both with a paid off home and less investments and with a mortgage and see how it looks. Unless you are saying it has to be a Cash offer in order to get the type of home you are looking for.

If you are sure of your numbers and firecalc gives you 100%, you seem to be in a good spot.
Best of luck and let us know how things work out!

 

[shasta]

Have you investigated the cost of living where you want to buy? Taxes, insurance, etc. I understand many home insurance companies are leaving Florida and the ones that stay are charging quite a bit.
Can you handle working two more years until 60? Does that get you to full pension to make a bigger difference?
Are you retiring to Florida and have you considered the costs of what you plan to retire too? Travel, gardening, sports activities, etc.
Run firecalc both with a paid off home and less investments and with a mortgage and see how it looks. Unless you are saying it has to be a Cash offer in order to get the type of home you are looking for.

If you are sure of your numbers and firecalc gives you 100%, you seem to be in a good spot.
Best of luck and let us know how things work out!

I would only pay cash for a home and only buy what I can afford. Moving from the Seattle Washington area to the Orlando Florida area represents a tremendous discount in cost-of-living from what I've been able to observe and my own experience previously living in Orlando, Florida, and then moving to the west coast..

Thank you again for another strong set of tips.

 

[shasta]

I wouldn't even be able to sell enough equities to raise money to buy a house here in the state of Washington because the governor Jay Insley has added a long-term capital gains tax and whether it's actually legal or not it just makes me too uncomfortable to screw around here. I need to rent and domicile in the other state I believe for a good amount of time before I could sell the equities to raise money to buy the house. (6 months or whatever)

 

[RetiredHappy]

Plot twist : Any thoughts on buying a house outright and then using a HELOC or Home Equity Line of Credit to buy stocks in a down market.

Does this give the house more Bond like liquidity?

(too experimental?)

id pay for any ongoing house repairs and all insurance / taxes with cash flow from equities.

One cannot assume market is going to "always" go up. How do you know when is a "down" market?

From my experience, it is extremely difficult to get a Heloc approval when retired. In our case we got a line of credit against our brokerage instead as a bridge loan while we bought our chrrent home and sold our previous home

 

[shasta]

One cannot assume market is going to "always" go up. How do you know when is a "down" market?

From my experience, it is extremely difficult to get a Heloc approval when retired. In our case we got a line of credit against our brokerage instead as a bridge loan while we bought our chrrent home and sold our previous home

I feel like this discussion takes many different faces, depending on the scale, but what I would seek to do is in an event where in my portfolio bonds are valued higher than stocks to a severe degree. I would like to take 10% cash or something against the value of the house something that it’s demonstrated, I could easily replace it any time from the liquid assets on the other side of the house, and give a big cash infusion with the 20% equity line of credit cash

These are just ideas and of course I would talk to an advisor about it. Just curious if else has done anything similar. Thanks again for reading.

 

[Lorenzo]

There is nothing in the historical data to suggest that you won't get your money back and then some in real estate investment. Will it perform as well as the market? Probably not, but pick your period and place and it might outpace it considerably.
The sale of our house will be used to fund either condo rental or buy in to a CCRC.

Yeah, but with this idea that one's home is just another component of one's investments, timing may be everything. I bought a home in 1999. Not good timing. I bought it because I wanted to live there, not because it seemed like a good investment. Not only did I get hammered in the economic downturn for the next few years, but it turned out not to have been the best location, as a lot of new development was happening in a different part of town, while my area sort of stagnated. By 2007 my place was at last again believed to be sellable for about what I had paid for it in 1999, but then came the crash of 2007-2008. It took maybe 10 more years to really recover and see some appreciation. By the time I sold in 2022 it had appreciated a good bit, but nothing like the craziness I have seen elsewhere. I believe the conventional philosophy is to buy a home because you want to live there and because it's generally a safe investment over a long time horizon like 30 years, not looking at it as a component of one's investment portfolio. The OP is definitely thinking outside the box on this.

 

[Sunset]

There is nothing in the historical data to suggest that you won't get your money back and then some in real estate investment. Will it perform as well as the market? Probably not, but pick your period and place and it might outpace it considerably.
The sale of our house will be used to fund either condo rental or buy in to a CCRC.

We bought our house a few years before the crash of 2007-2008 and it then took about 12 years to get back to the price we paid !
Even now it is up in over 21 years just 17%
Less than 1% per year of appreciation on average.

Yeah, but with this idea that one's home is just another component of one's investments, timing may be everything. ......., but then came the crash of 2007-2008. It took maybe 10 more years to really recover and see some appreciation. .

I believe the conventional philosophy is to buy a home because you want to live there and because it's generally a safe investment over a long time horizon like 30 years, not looking at it as a component of one's investment portfolio. The OP is definitely thinking outside the box on this.

Now I no longer have the view that housing is a sure bet, now I believe buy what is needed/wanted without risking too much on it, as the value can go down.

 

[Sunset]

No the 80-100k per annum is all rent no bills.

Metro Seattle area. Trying to maintain my same lifestyle as when I was an exec.

I’m intrigued by strategies around using a mortgage to fund some of it.

Since we’re all mature adults here, I will, of course, consult with an hourly rate finance advisor to see what he thinks of my ideas and what the pitfalls could be.

Why ?? Keeping up with the Jones simply won't last, as they are all still working bringing in fresh money every year. Are you bringing in fresh money or just spending some of the retirement stash earnings ?
It's a big difference.

 

[skyking1]

What's wrong with spending some of the retirement stash?

 

[Sunset]

What’s happening right now is with no interest rate cash available to a lot of shoppers. There’s some properties that normally would be out of my reach, but I think I could get by shooting in cash bids that are about half of my portfolio of investable assets.

Getting rid of the rent line item and also moving from the West Coast to the East Coast could make it work. The houses I’m looking at are the kinds of things where I would probably not buy another house in my lifetime.

.....

I’m obsessed with a few of the houses I’m shopping. Nothing like them in the rental market.

I posted earlier and maybe you are just using shortcut typing, but as you get rid of the rent line item, you will replace it with (estimated for example) Property tax line: $20K , House Insurance line: $4K, House repairs avg/yr: $10K
Numbers that could easily be $35K for a nice mansion in FL.

It's not like getting rid of the rental line, frees you of the total expense value.

It's dangerous to be obsessed with things, and if there is nothing like them in the rental market, then it really sounds like you are wanting to upgrade/upsize your housing.

 

[Sunset]

What's wrong with spending some of the retirement stash?

Nothing if it's big enough to support the spending.

Just wondering since OP is retired 11 years ago , and wants to spend 1/2 the stash on a new house. Will the remaining part of the stash survive to continue the existence of an exec ?

With the expense of kids ?

 

[skyking1]

The Washington State Capital Gains tax has a $262,000 standard deduction. Perhaps that could be a down payment and you could finance the rest?
That potentially gets you into a property.

 

[Chuckanut]

The problem with expensive homes isn’t the purchase price, it’s the (much) higher insurance, taxes, utility and maintenance expenses that NEVER stop, and only increase. DW doesn’t want to clean a bigger house either…

+1

It's not just the higher purchase price but everything else. A new roof, getting the place repainted, heating and cooling expenses, property taxes, insurance rates, gardening supplies, etc. all cost more. It adds up. And keeps adding up year after year after year.

 

[Chuckanut]

No the 80-100k per annum is all rent no bills.

Metro Seattle area. Trying to maintain my same lifestyle as when I was an exec.

+1 I can believe it.

The Metro Seattle area is rapidly becoming one of the most expensive major cities to call home in the entire USA. Food prices are also among the highest. Gasoline is UP, thanks to the carbon tax. Housing (rent or own) is extremely high. Seattle is now more expensive than Honolulu in regards to housing. That just happened this year. Higher housing prices drive up the cost of everything. The new minimum wage in King County is now nearly $20. Only a few years ago they were asking to raise it to $15 an hour.

Virtually every friend I have who has grown kids, at least one of the children have left the area because of the high cost of living.

 

[dmpi]

Our property is 14% our net worth. For me that's high enough. I consider a home a liability, not just an asset.

 

[Koolau]

A possibly indelicate question for OP: Have you visited Florida (really visited - like have you seen how "different" Florida is from the PNW?) What I saw of Florida wasn't too appealing but that's just me. Be aware that politics are different there.

I did like St. Agustine. I think I could live there. YMMV

 

[shasta]

Why ?? Keeping up with the Jones simply won't last, as they are all still working bringing in fresh money every year. Are you bringing in fresh money or just spending some of the retirement stash earnings ?
It's a big difference.

Oh I’m not keeping up with any jonses. I just mean in the functional sense.

 

[shasta]

A possibly indelicate question for OP: Have you visited Florida (really visited - like have you seen how "different" Florida is from the PNW?) What I saw of Florida wasn't too appealing but that's just me. Be aware that politics are different there.

I did like St. Agustine. I think I could live there. YMMV

I lived there about 20 years ago. I like the areas I am focusing on. I know what you mean about the differences. Things like the LTCG are bigger issues. I’m getting a really low return for what is paid in taxes here.

 

[Lorenzo]

Our property is 14% our net worth. For me that's high enough. I consider a home a liability, not just an asset.

A primary residence straddles categories, with characteristics of both an asset and a liability, not to mention that it is the roof over one's head, providing not just shelter but peace of mind. A home is a unique thing. Home ownership makes financial sense for most Americans, but it's far from a no-brainer.

A possibly indelicate question for OP: Have you visited Florida (really visited - like have you seen how "different" Florida is from the PNW?) What I saw of Florida wasn't too appealing but that's just me. Be aware that politics are different there.

I did like St. Agustine. I think I could live there. YMMV

Some friends of mine recently relocated inland from the Florida east coast, sold their home that they could have easily made into a profitable rental peroperty, and are now renting as they head into retirement years. They were concerned that it may become impossible to insure that property against floods and hurricanes.

 

[shasta]

For those that know FL im looking at places in old winter park. Seems like the safest bet for insurance and valuation rise.

 

[pjigar]

Our personal homestead is 25% of our NW but the "dwellings" are only 8% of NW. The rest of the homestead is land which is appreciating at a pace faster than the stock market and will continue to, due to proximity to DFW metro.