Author Topic: Reader Case Study: Should I Downsize / Buyer's Remorse  (Read 7166 times)

ChpBstrd

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Reader Case Study: Should I Downsize / Buyer's Remorse
« on: November 09, 2016, 02:52:01 PM »
Life status:
Married, 38, one 2-year-old, both parents employed, kid in daycare, both parents have masters degrees

Gross Salary:
Me -  $58k/yr
Wife - $75k/yr
Total - ~$133k/yr

Tax-relevant Info:
Has not made sense to itemize in a few years.
Maxing out both 401k s.

Other Income:
None.

Current Expenses:
30y Mortgage @ 3.67%
     P&I $734
     T&I $302
      26 yrs remain
      Price of house: $200k
      Probable value: $220k
      Mortgage balance: $148k
Daycare: $6,864/yr
Utilities: ~$2,700/yr
All Other Cash Expenses: ~$38k
Total Lifestyle Expense: ~$60k, not including depreciation

Assets:
$425k in retirement, taxable, and checking accts.

Liabilities:
$148k mortgage
Two depreciating cars worth $9k each (commute is not practical to bike. Tried it.)

Specific Question:
I desperately want FI, but coupon-cutting isn't moving the needle! We just hit a savings rate of 50%, but I fear future investment returns may not meet my assumptions to retire in 8-9 years at most. I would gladly trade most comforts for a year of my future life back, but the wife is about to revolt if we cut much further. I'm looking at our huge 2,700 sf house as the obvious place to cut expenses by four figures. We could buy a house half the size in a similar neighborhood for about $120k, or a 1,000sf cottage in a poorer neighborhood near a freeway for less than $80k.

Option A: stay in 220k mansion
Option B: transact to 120k house
Option C: transact to 60-80k house, pay cash

About option A... After 3-4 years of shopping, we found a vintage house with a rare set of features we both wanted that was just 4.5 miles (15 min) from work, in a great neighborhood, etc. The only problem was it was too big - a whole other house too big. We threw a lowball offer at it and walked away from the seller's counter, only to have the seller accept our original offer a few weeks later. We hated our existing place, and most other places, so we reluctantly bought it. I calculated the sale, purchase, move, bid/ask spread, and minor customizations associated with the move cost us $20k in home equity. That's the price of moving.

Then, we installed an $18k ultra-high eficiency HVAC system and blew the attic full of cellulose to a foot deep for another $1k. Now the utility bill equals my old 1600sf house that was built 30 years later. We've made lots of other improvements thinking we would stay for life. We increasingly like the house, the neighborhood, and the short commute.

About options B and C...
We could convert up to $6,000 a year in mortgage payments, interest, insurance, and property taxes into savings, boosting our savings rate from about 50% to about 58%. This, and the lower post-ER expenses would shorten the distance to the goal line by up to a year.

However, then we'd be stuck in a house we don't like in a neighborhood where we might not want our daughter to grow up. Also, the cash savings do not account for faster equity growth and appreciation of the big house, so the actual effect on net worth might be more like $4-5k/yr. Add to that the thousands in material and our labor we'll likely re-spend remoding the next house.

Given the cost of trading houses ($15-20k), the payback period might be 5-7 years. By then we might be so frustrated we repeat history and make another expensive move.

Option D...
Buy the small house for cash. Attempt to rent the big house for $1,500/mo. This is what the previous owner attempted, and I suspect they lost money. (Arkansas is so cheap, you might as well buy if you can commit to 5 years.)
Sell one or the other in 3 years and pay no capital gains tax.

Your thoughts? I feel like I'm burning money on more property taxes, interest, and insurance than necessary, but trying to fix that problem might cost more than living with it. Then again, who can ER to a 2700sf house at a cost of $35 a day! Maybe it is better to account for the mistake now rather than later. Or, maybe it's a lot less stressful to focus on the other fatty areas of our lives, such as the $38k in groceries, merch, services, hobbies, and other bills.

Cannot Wait!

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #1 on: November 09, 2016, 03:09:23 PM »
Haha, yeah, don't think you can sneak $38k worth of bed pans and catheters by the MMM crowd!
Need more details there.

Random ideas:
Rent out a room - student or Airbnb?
hire an au pair instead of daycare as you have the space?
create an in-law suite?
duplex the house?
work from home so you can write off office space and save on commuting?

ChpBstrd

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #2 on: November 09, 2016, 03:21:58 PM »
Well, i wanted to keep my already long post on one topic :)

Rent a room: Considered it, but believe it or not it's a 2700sf 3br! Has 2 living rooms, 2 dining rooms, and an office!

Au Pair: Wife wishes she had this job... wouldn't go well to offer it to others. Plus research shows the value of early childhood education.

Duplex: Not architecturally possible in this case for less than the cost of... a duplex in AR.

WFH: not supported by either employer, unfortunately.




AMandM

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #3 on: November 09, 2016, 03:37:25 PM »
Your house sounds lovely!  If you like the house except for its size, and especially if you like the location, I would not move.  By the time you break even on the transaction costs of moving, your child will be out of daycare and you can put that $6000 to savings.

Without doing a full duplex, could you rent out a room to a boarder?  The tenant would share the bathroom and maybe the kitchen or maybe you could put in a few cabinets and small appliances.

Or perhaps you could put the extra space to use (make it pay) in some other way than duplexing.  Rent out a room or two as storage, office, workroom, meeting space or classroom for community groups?


AlmstRtrd

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #4 on: November 09, 2016, 05:44:08 PM »
Do you "desperately want FI" a year or two earlier because others on here are doing it, because you don't like your work, or some other reason? If you are at a 50% savings rate, you are doing great. Looks like you only have another three years or so paying for the daycare (as AMandM alluded to). The big house gives you the option of adding another kid (just sayin'). Just speaking from my own experience, if that big-ass house helps to keep your wife happy, I wouldn't push too hard to speed up your FI date.

Looking further down the road a bit, does the big house offer a better overall environment for a growing kid? Bigger yard to play in, better parks/schools, space where the kid can play and hang out with friends at home? Those are all worth considering. There is certainly a point where optimizing can cut into the life that you actually want for yourself.

MKinVA

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #5 on: November 09, 2016, 06:16:01 PM »
I think you are at the point a lot of people get to. You have pretty much optimized your situation. It is never going to be perfect. You live in a neighborhood you like maybe love, commute not bad, wife happy, kid happy, you be happy too. The hard part about seeking FIRE is staying the course. You are probably as close as you are going to get without risking a good situation. Leave it alone. Stay calm and carry on.

ChpBstrd

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #6 on: November 09, 2016, 08:19:41 PM »
True. It's not a horrible life or anything. I "have" all the things I wanted 10-15 years ago (minus the boat and motorcycle). But now I want the time the money could have bought. I want the time to both give my 2 year old what she deserves and pursue my hobbies and interests. I don't get a chance to pursue my interests any more since having a kid. Back when I thought life was about possessions, I was also much more inclined to waste time.

The sustainability thing strikes a chord. I bet lots of people try extreme frugality and burn out in a year or two. But still, I have an almost $60,000 family of 3 lifestyle in one of the cheapest places to live in the US. A quarter of that sustains a mostly unused mansion. Ridiculous.

If my numbers don't seem big, consider that I live in "minimum wage country" where my salary is also 30-50% less than I'd make outside the deep South. My ER target is $1.4M.


obstinate

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #7 on: November 09, 2016, 08:42:12 PM »
Remember that freeing up $100k of capital by downsizing is approximately the same as growing your income by $4-6k/y. It's significant, but maybe not as significant as you thought in your head. I'm curious where that $36k of other cash expenses is going. It seems maybe a little high. (This is more than the entire MMM family's outlays.)

human

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #8 on: November 09, 2016, 09:22:37 PM »
What do you mean by 60k lifestyle expense? Is that everything? Mortgage, daycare and other stuff not listed?

That mortgage is a joke. Where I live couples with that combined income take out 400k mortgages. Why is it a 30 year mortgage? Could it not be refinanced? Go ahead and put the extra 6k on it a year.

Would your spouse really want to move? I'm not so sure if she isn't willing to cut more.




dess1313

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #9 on: November 09, 2016, 11:11:11 PM »
Stay put.  At a certain point you need some quality in life.  You have a child not yet in school.  In 2-3 years where you live and what schools you have access to will be VERY important.

you found a house that you love.  yes it is too big, but you've taken steps to improve it as possible which is good.  and it costs a lot to buy/sell a place in fees, taxes etc that all goes to waste.

You're reasonably close to work.  you drive basic cars.  area is safe/nice and you seem to enjoy being there. Without more budget detail its hard to point at anything good or bad in it

You have a 50% savings rate.....that is impressive, you do know that?  not everyone on here is able to pull that off

Why not start a side business?  here(canada) on our taxes we can write off home costs when the home is the basis of a business.  take all extra income and throw it at your mortgage.  it'll free the handcuffs up a little sooner.  can you refinance to a better mortgage rate?  here in canada our plans are a bit different. so i don't know how good your rates are for that length.  are you still paying the insurance on it and if so would you be able to refinance and get rid of it soon?

dess1313

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #10 on: November 10, 2016, 12:45:19 AM »
Also a random but possibly useful idea.  Are any of your abundant dining rooms/living rooms a small walled area?  I know of a few people that have turned bedrooms into dining rooms and vice versa dining rooms into bedrooms.  Also would work for a home office.  Might be a way of adding a room for better income and function.

ChpBstrd

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #11 on: November 10, 2016, 05:11:30 AM »
Thanks for the ideas, everyone! I do wish we were duplex-able or had a garage apartment, but the house just wasn't built that way. It would cost tens of thousands to divide the house, and that would drop its value a lot. Might as well move for that money. Duplexes are 100k here.

Yes, 50% is a decent savings rate, but I'd be much happier with 70%.

There are 2 reasons even a 50% savings rate now could leave me financially DEPENDENT in 8-10 years:

1) The wife's job is miserable, and mine may be volatile. Even with our educations, our currently high income could easily drop by 50k if one of both of us changed jobs or took a few-month sabbatical. Then the savings rate would drop to sucka level.

2) I'm targeting 7% long term ROI, but it is getting increasingly sketchy to earn that kind of return. If my ROI turns out to be more like 4%, I might fail to reach FI in a decent timeframe even at my current savings rate.

The solution to these risks is to cut waste and increase savings. In my area, that should be easy to do. Livable but dumpy houses sell for $40-50k here - $30k if the neighborhood is really poor, which most are. We're living like kings, but a little math shows me I'm paying 2-3 years of labor for it.

Revenue generating ideas are appreciated, but I cannot find the time to run a side business. I even tried to start a blog, but didn't have time to write for it! This just adds to my frustration with financial dependence. Between the kid, keeping 3 toilets clean, cooking, mowing $%#! grass, etc. there's barely enough time to sleep. And that's with a 40-hour/week job and 15 minute commute!

The non-housing chunk of waste in our $60k lifestyle is being addressed, but alas, yet another piece of decor just arrived from the internet, and I didn't buy it.

AlmstRtrd

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #12 on: November 10, 2016, 05:15:01 AM »
Stupid suggestion, maybe, but have you made sure that you are not heating/cooling more of the house than you have to? Some places are just laid out so that that is not easily done. In our CT home a lot of the heat fills up a vaulted entryway. It makes for a spacious entry but it sure is a heat waster. Ditto for a vaulted living room but at least that area gets used a lot (and for activities where it helps to have a higher ceiling).

Agree with human that you should look at a 15-year mortgage as that would bring your payoff and retirement dates closer together. My general rule is that I don't want our home to comprise more that 15% of our NW. As a percentage of your total assets your number will drop even as you pay off the mortgage. And if I am wrong and the price goes up a lot (not likely in that area of the country, I realize), then you are stuck with a good problem.

ChpBstrd

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #13 on: November 10, 2016, 05:36:07 AM »
Thanks for the suggestion, AlmstRtrd.

The house is one-level with flat 8 foot ceilings throughout (which made it easy to insulate a foot deep). I do not have a zone HVAC system and the layout leaves only a couple of options for closing vents. We've worked to toughen the hell up and use the thermostat sparingly, which is hard in such a humid location :) . 68F in the winter, 78F in the summer. In any case, all utilities combined comprise just 3.2% of my spending and much of that is the base charge just to stay connected, so additional efforts from here might yield a dozen bucks a year.

 A bigger benefit of downsizing would be property taxes, which could drop by 1k per year if I halved by real estate value.

Enigma

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #14 on: November 10, 2016, 05:52:18 AM »
Your house is a luxury and I think you noticed that when you bought it.  I would vote to downsize something cheaper and better laid out.  Either there was extra payments or your the loan amount was around $160k when I was playing around with loan amortizations.  From my best estimates you have already put 75k in cash towards your house (40k possible down pmt & 48 pmts @ $700).  With your LCOL area you could have already bought a house in those 4 years and been focusing more on retirement savings and goals.

Appreciation (Gain) 20k

Payments to date P&I (734/m) = 35.2k over 4 years
Cumulative Interest due to luxury (Lost) 23-24k
Principal Paid (Gain) 11-13k

(Two depreciating cars worth $9k each, boat and motorcycle)
Car 1 Worth 9k (Original value unk)
Car 2 Worth 9k (Original value unk)
Boat - I have no idea...  3k?
Motorcycle - I have no idea...  3k?

Little bit of luxury spending...  If you plan retirement now and cut a lot of luxuries I think you will benefit better when you want to retire or when there is a crisis (lost job).  Either way good luck!

COlady

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #15 on: November 10, 2016, 08:05:01 AM »
$220k for a home you love. You've got a jealous person here. Our house is worth $375k and I hate it and am trying to resist the urge to buy a house I love for $550k.

Malum Prohibitum

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #16 on: November 10, 2016, 08:44:55 AM »
There is something to be said for living in an area you love.  When you mention downsizing, you do not describe it in a way that makes me think you and your family would be happy living in the area where the cheaper housing is.

That could become a great stressor in your life.

ChpBstrd

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #17 on: November 10, 2016, 09:39:57 AM »
I've looked at the numbers in a similar way, Enigma. Your point is well-taken. The further I can downgrade, the earlier I can retire. Bottom line. If I was single, I'd honestly consider spending a few years in an old mobile home, which could be bought, with land, for $25-30k and resold for the same or slightly less after FIRE.

I guess the question is psychological. Could we cope with the loss of social status from "rich" to impoverished? The constant inconvenience, when we remember the convenience? The subtle sense of disappointment from other people? Watching our kid not fit in at school with the other kids of successful parents? Would my confidence at work take a hit?

Maybe all financial independence decisions boil down to psychology.

Krolik

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #18 on: November 10, 2016, 09:45:18 AM »
We also have a house that is too big for us. It was the cheapest house we could buy here and the price was 350K for fixer-upper.  But we chose to buy it since it is a great neighborhood, very safe with access to excellent schools. Our daughter just started school this year and already has lots of friends living here. We really like this place.
Although we could downsize and buy/rent cheaper house we would  lose all the above. It is not worth for me. Even if it means that our FIRE is delayed by a few years. Once you have kids not everything can be calculated in terms of $$$. Just my opinion.

Slee_stack

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #19 on: November 10, 2016, 10:33:40 AM »
A couple suggestions above were to refi to a 15 year, but that only makes sense if the interest rate is lower enough to warrant it.  Otherwise, my opinion is don't pay one extra cent towards the mortgage since you are benefiting from the deduction and the current rate is reasonable.

The house is silly big, but other than size, does it matter?

I dunno.  I get that (most) everyone wants to shave their time to FIRE, but is 7 years vs 9 life and death?  Are you missing the forest for the trees?.

The options presented by the OP may not even have a majority impact on actual FI date.  Higher and lower than expected returns can adjust the timeline by a year or more either way.  As someone else mentioned, so would raises and/or unexpected windfalls (or expenses).

Its great to cut where you can on things that don't add value.

Its also important to recognize and accept sunk costs.  Sometimes the only thing you can do with poor decisions is learn from them so you don't repeat them.

Let FIRE guide you, but be wary of becoming obsessed with it.

farmerj

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #20 on: November 10, 2016, 11:34:07 AM »
15 year rate is ~2.75. Worth refinancing if you're going to be there a while -- that's quite a large sum over the life of the loan.

Moving doesn't seem worth it to me, but I'm not you.

ChpBstrd

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #21 on: November 10, 2016, 12:34:15 PM »
I looked into doing a refi to a 15y loan. For over $2,000, I could lower my rate by a few tenths of a percent. The PV calculation didn't work out, compared to the alternative of just prepaying the existing loan. Plus the lower minimum payment of the 30y loan provides extra resiliency in any future lean times. Another reason not to refi: for just a little extra, I could sell the house!

honeybbq

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #22 on: November 10, 2016, 03:30:43 PM »
My HCOLA slip is showing but... good grief, just pay that sucker off in a few years and have fun playing hide and seek with the kid. Turn one room into a play room. Turn another into a library. If space is cheap and you already own it, just enjoy it. Not worth the hassle to move.

ChpBstrd

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #23 on: November 10, 2016, 04:01:22 PM »
I fear that transaction costs have locked me into an anti-Mustachian luxury housing burden. Because it's too expensive to move, I'll end up being nickle and dimed with unnecessarily high expenses that delay my ER. By buying a small mansion, I've forced myself to spend money either way.

 The breakeven to move into a smaller space might be several years - a low yielding investment, and it would be painful on top of that. Yet, I'm troubled. I feel like the day I would be FI except for the damned house is the day the house goes. So why not bail on the house now rather than later?

Take care, young mustachians. Buy the cheapest housing you can stand, not the most expensive housing you can afford.

Villanelle

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #24 on: November 10, 2016, 11:20:56 PM »
You have 3 people, and three bedrooms, but you say you can't rent a room?  Why not?  That's one more bedroom than you need (unless you and the wife have separate bedrooms).  Not only that, but you have all those extra rooms.  Make the office or one of the living rooms or some other space into a guest space, if you feel you need that.  What am I missing?

If you don't want to commit to it long term, just do it for one year, or even ~9 months if you live near a university.  Bring in a few thousand dollars extra for that fairly short time, and if you hate it, don't sign another lease. 

ZiziPB

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #25 on: November 11, 2016, 04:28:39 AM »
+1 on the posts questioning your $38K per year spend outside of the mortgage, utilities and daycare.  Care to elaborate where that money is going and why you can't save any of it?

Mother Fussbudget

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #26 on: November 11, 2016, 11:55:19 AM »
Others have given really good feedback IMHO.  You love your house except for the size.  You love your neighborhood.  I'd say don't worry about it.  Convert one of the living rooms into either a bedroom, or a 'rec-room' for your kid.  And there's always looking for a smaller house in your current neighborhood.  Give yourself 2 years to scour your neighborhood for a better house match for your family.  Continue to perform low-cost improvements (think 'paint' and 'wallpaper' here) that will bring both increased resale value AND increased enjoyment of your home .  Think of your current 'house' as a temporary home that you will live in, then "flip" within 2 years (i.e. 'slow-flipping').  You've done all the right improvements that increase the resale value, perhaps it *IS* time to sell.  If you make a profit on the house, could you successfully slow-flip another house?  (Move in, make improvements, live in it for 2 years, lather rinse repeat)

You wanted outside the box ideas as well, no doubt.  Have you considered passive income streams, like being a landlord?  I met ARebelSpy and his wife at Camp Mustache (2015).  They were school teachers for 10 years, making school teacher salaries and starting from $0 saved + some debts achieved FIRE within 5 years by buying & renting properties (~15 income generating properties).  Today they're traveling the world, learning every day, and banking the excess income.  ARebelSpy owns properties he's mostly never even seen  having found contacts on-line (BiggerPockets.com, and other places) of other like-minded real estate investors, and building 3-person 'housing teams' in his target cities - realtor, property manager, inspector/contractor/maintenance person.  You can learn more about them by listening to their recent podcast on madfientist's blog.

This is the kind of endeavor you can start via research:  reading - lots of reading.  Blogs are good for an overview of a concept, but nothing beats the deep-dive you can get from books.  There's a recommended book list over on the Real-Estate and Landlording forum.  Go to your library, pick up the first-book in that list, and read it: Building Wealth One House at a Time by John Schaub.  Learn what makes a good rental property (monthly rentals generated vs. purchase price).  You can start from reading blogs, but once you get down to putting a plan together, there's no substitute for good deep reads possible from books from your local library.   To quote Joe... uh... ARebelSpy:

"And, of course, experience is the best teacher, so you'll learn by actually getting out there and doing it.  But since a book is much quicker to do than a real estate deal, get as much knowledge into your head as you can - without succumbing to analysis paralysis - before you do so."

And if hands-on landlording isn't right for you, there's always the possibility of investing in REIT's in your retirement accounts (IRA & Roth so the taxable dividends don't impact your taxes during your high-earning years).  Become a Lazy Landlord with REITs

In any case, good luck.  You might consider using the case-study spreadsheet to organize tracking your spending.  At 50+% savings, it sounds like you merely need to fine-tune at this point. 
All the best!

ChpBstrd

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #27 on: November 12, 2016, 09:16:34 AM »
Thanks for the ideas!

I've looked into real estate, but...
a) owning faraway rental properties seems suicidal, &
b) unless I budget insanely low for remod and repair expenses (roof, water heater, HVAC, etc. at usual depreciation rates)

I've done the math and never found a deal in my market that outperforms a hands-off, liquid REIT yielding 5-6%, not even after my leverage. I've also watched commercial properties sit unrented for 5 years. Ouch!

hollyluja

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #28 on: November 16, 2016, 04:04:05 PM »
Between the kid, keeping 3 toilets clean, cooking, mowing $%#! grass, etc. there's barely enough time to sleep. And that's with a 40-hour/week job and 15 minute commute!

It sounds to me like this is your real issue.   A 2700 sq ft home is so much time and work to maintain!  I complain about my 1100 sq ft home sometimes, but I love how easy it is to keep clean.  My father and I painted the whole outside in 2 afternoons this summer, since it's all on one level.  Before this I had a 1900 sq ft home with a 1/4 acre yard and it felt like it took all my time to keep it up.

At least around here, you can find very nicely finished homes in the 1300-1800 sq ft range.  If you could save money AND save daily/weekly time AND time to FI by downsizing, while still living in a comfortable house, do it!

Goldielocks

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #29 on: November 16, 2016, 04:14:35 PM »
I would stay put for another 3 years and re-evaluate.   There is nothing here that will collapse your FIRE goals if you do nothing for 3 years, yet life with a 2 year old is a bit hectic and will likely change up sooner or later.

Thoughts

One of those bed  rooms should be a office / second income job room.   When you have the time (kid gets a bit older), start looking to make a few thousand a year from a second income  / home office business.  For now, just start looking for ideas.

Close off the extra space you don't need... e.g., close off a dining room, living room, and one of the bedrooms and one bathroom.  Only clean it (dust) just before hosting others.  Put baby gates across the doors, if needed, to prevent you from going in there, close off the heat of anything with a door, etc.


Accrorn

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #30 on: November 16, 2016, 05:01:13 PM »
I would keep the house, it seems as if you are happy with it. 

I would also list out what the 38k or 3167 per month discretionary spending is.  That is more than my current monthly budget - which includes almost a 1k mortgage payment and 750 dollar insurance payment.  I feel that you aren't listing it out because you know that's where people are going to tell you to cut.

AZDude

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #31 on: November 17, 2016, 02:55:55 PM »
You have a nice stache built up. You could look at downsizing your job instead of your home. Especially if you plan in advance so that when the kiddo gets into school, you move to part time. By the time the move paid off, your childcare expenses will be gone and you would have been saving ~$6k a year anyway.

In this scenario, you get 20 hours a week of time back. You keep the wife/child happy. Win-win-win, right?

Ynari

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #32 on: November 17, 2016, 03:21:40 PM »
I would keep the house, it seems as if you are happy with it. 

I would also list out what the 38k or 3167 per month discretionary spending is.  That is more than my current monthly budget - which includes almost a 1k mortgage payment and 750 dollar insurance payment.  I feel that you aren't listing it out because you know that's where people are going to tell you to cut.

+1

If it's mostly your wife's purchases, then...  are you and your wife on the same page regarding FIRE?

farmerj

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #33 on: November 17, 2016, 04:14:37 PM »
I looked into doing a refi to a 15y loan. For over $2,000, I could lower my rate by a few tenths of a percent. The PV calculation didn't work out, compared to the alternative of just prepaying the existing loan. Plus the lower minimum payment of the 30y loan provides extra resiliency in any future lean times.

Wait; when did you look at doing the refi? And what's your credit score like? And did you check more than one source?

~2.75% should be doable.

Dicey

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #34 on: November 18, 2016, 07:46:51 AM »
I'm surprised you're not itemizing, since you own a house. Are you positive that you're not leaving money on the table just because it's easier not to itemize?

Your pessimism about market returns seems unfounded. Sure, returns many go down for a while. Then they will go up. Historic return rates are a long-term average, not a maximum return rate cap.

As AR is, as you called it, a minimum wage area, the pool of qualified renters is possibly too shallow for landlording to make much sense. ARS's success is in part due to taking advantage of market fluctuations/opportunities. That exact ship may have sailed, but there will be other opportunities. He also made money with CC authorized users, which may be waning, so learn from his example by being open to current opportunities rather than lamenting the past.

Your wife's job is stressful, yours may be volatile, why add the expense and stress of moving to a lesser area to save Very Little? A house in a desirable area is generally going to have better resale value when the time comes. Also, leave the mortgage alone. Put your extra $$ into investments and let inflation shrink your mortgage costs while your investments increase your NW.

You will yield a much higher return by better expense management. You currently have way too many holes in your budget. Here's a great example: eighteen thousand dollars for an HVAC system?? WTF? That's insane!

Bottom line: plugging the budget holes + patience + a lot less pessimism is the winning formula to improve your current quality of life and your future. You're doing better than you think.

LAL

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #35 on: November 30, 2016, 11:06:53 AM »
If your wife wants to stay at home why not let her? Why not trade money later for now?  Give her what she wants to stay at home and increase delay your fire?   Are you hooked on that idea you have to fire together in 7 years?

Dicey

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Re: Reader Case Study: Should I Downsize / Buyer's Remorse
« Reply #36 on: November 30, 2016, 11:22:36 AM »
Uh, LAL, cheap bastand seems to have lost interest in this thread...Maybe he's just busy.