Author Topic: Anyone tempted to sell house in HCOL area to hit FIRE status  (Read 7233 times)

rob in cal

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Anyone tempted to sell house in HCOL area to hit FIRE status
« on: September 01, 2016, 11:02:05 AM »
   There must be several people out there who have a paid off house in a HCOL area that's worth from 400k and on up who could sell that house and move to a much cheaper area to live, and this extra cushion of capital would bring them to FIRE status right now.  I say this because I'm one of them.  In my case reasons for not doing so are because most of our family and friends are in California, our youngest is a junior in high school and we wouldn't want to disrupt his last two years by moving, I have a job that I like doing (as far as a job goes anyway), and I'd have to convince my wife to get on board with this.   
   In a few years, our youngest will be done with high school, we will have amassed more savings and passive income, hopefully our house will be worth even more, and at that point its a discussion we  might want to have.  At this point I've been bringing up to my wife the overall issue of the possibilities of a better life through FIRE, and where we are in terms of being there right now, but haven't addressed the exciting idea of really freeing up a bunch of capital by selling and moving elsewhere or at least downsizing in same area.

hollyluja

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #1 on: September 01, 2016, 11:11:53 AM »
I've definitely had the thought.  However HCOL areas are expensive because they are popular, and they are popular for a reason.  I'd have a hard time living the life I want in a small town.  I grew up in <10K population town and went to college in a <50K town so I know whereof I speak.

I might rent out our house to travel for a while, but I don't think I could settle in a very small town again.  I'm willing to work one (just one!) extra year to make that happen.

CBnCO

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #2 on: September 01, 2016, 11:23:01 AM »
While we do not have a mortgage free home, we do have considerable equity in it which, if realized, would easily allow us to pay cash for something in a lower cost area. And, yes, I think about this all the time; but, we are still trying to rationalize exactly where we would go that could give us an equivalent lifestype. I think the reality is that HCOL locations are typically HCOL for a reason in that they provide things like more amenities & culture, better weather, access to airports, etc.. I probably need to search the forums for a thread on best economical places to FIRE. Good Luck!

PhrugalPhan

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #3 on: September 01, 2016, 11:35:07 AM »
I consider it from time to time as I have a free and clear house in a HCOL area (probably close to $400k).  My problem is I have golden handcuffs right now that open in 6 years, plus my GF wants to work until her pension starts in 2 years.  Those 4 years in between are going to be tough as I won't have a great excuse to make my escape (other than the pension).

tonysemail

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #4 on: September 01, 2016, 11:51:57 AM »
I probably need to search the forums for a thread on best economical places to FIRE. Good Luck!

others had this idea too!  here is a stickied post-
http://forum.mrmoneymustache.com/ask-a-mustachian/mustachian-relocation-guide/


We have many ties to the area and we resigned ourselves to working extra years to pay for HCOL.
But geographical arbitration is one of the options available if ER is heading towards disaster.

bacchi

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #5 on: September 01, 2016, 12:07:38 PM »
We're building a garage apartment on our not-quite-HCOL (MCOL+) property. This will cover our expenses in MCOL+, freeing up money for rent elsewhere. In effect, we'll slow travel while keeping a base of operations near family.

sisto

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #6 on: September 01, 2016, 12:20:55 PM »
I've considered off and on over the years. I've traveled to several places to look for retirement property or at areas I might like to retire. The biggest issue for me is as someone pointed out HCOL areas are HCOL areas for a reason. I live in Northern California in more of a MCOL area (not exactly sure where you draw the line) and I just haven't found anywhere to retire that would save me enough to make it worth it to me. Where I live I really don't have to deal with earthquakes, it's a bit hotter but I can deal with that, it doesn't snow and I can literally go snow skiing and water skiing in the same day if I really wanted to. I'm basically an hour away from many really great destinations. My family is here, my friends are here, and I like the area I live in. I may still consider it in the future just so I could travel more, but probably not.

2buttons

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #7 on: September 01, 2016, 12:45:11 PM »
This has actually been key to my thinking and financial plan since I left college. Move to big city. Get big city job. Buy big city house. Payoff house.  Move somewhere way cheaper. Live like King. Bank cash, or rent out big city house.

undercover

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #8 on: September 01, 2016, 01:02:12 PM »
The argument that HCOL areas are HCOL for a reason is actually not a very good one. The most impactful reason is simply that jobs in that area pay very much more than a LCOL area, thus being there is more desirable for MOST people who never plan on retiring. These days, not only are things very different in terms of being able to find high paying jobs almost anywhere (or at least not exclusively in HCOL areas) with the advent of the internet, but most people here are not going to need the job aspect of the HCOL area.

You may say that you're staying for culture/weather/options/etc. But...again...those reasons are often not that great either. Hawaii is literally the only HCOL area I can think of that has consistently amazing weather and is also next to big city amenities. And most MCOL areas have just as good museums and other things which you say you'll visit but rarely actually will. I'd rather get my "culture" through traveling than see the same things over and over personally.

For those that stick it out because their friends and family are nearby...that makes the most sense.

Vilgan

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #9 on: September 01, 2016, 07:00:53 PM »
Initially was planning on this when first getting into MMM, but then realized that we really love where we live and would be willing to work a bit longer to live in Seattle as opposed to a LCOL area. We might still move to the burbs at some point, altho that still seems pretty HCOL compared to where I've lived before.

Caoineag

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #10 on: September 01, 2016, 08:32:27 PM »
We will be selling our house in ~2 years and travelling. The house will tip the scale to put us clearly in FI status. Technically not a HCOL area but the house has appreciated to nearly 400k and will before we sell thanks to mass transit expansion and mass migration to the area. Unlike most people on this thread, we love the area but have no deep ties and no fears about loving somewhere else. We both, however, have lived in small towns and big cities and don't seem as convinced as most that we can't find amenities we like anywhere.

Cherry Lane

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #11 on: September 01, 2016, 09:09:18 PM »
My mortgage isn't paid off (yet), but I do have a lot of equity in the house.  It's enough to buy a nice house outright in a location that isn't this one and still have $ leftover for the stash. 

I'd be fully FI if I moved to a cheaper location. While others look at their stash and say "I'm x% to FI," I look at mine and say "I'm FI if I want to move to y place."  I've been in this city for 17 years, and have made it my home.  I've no real intentions of leaving, but whenever I get fed up with my job, I can say to myself, "Self, you can move to y, or you can keep working to stay here." So far I've chosen to stay.

RobFIRE

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #12 on: September 02, 2016, 07:27:16 AM »
Well, I don't own a property so can't do this. However, I think it is a viable option in many circumstances.

Clearly there are a range of options between HCOL and "middle of nowhere". Moving away from HCOL doesn't mean moving to the countryside and being miles from a town (some may want that, most people probably not). I think that if you choose a medium cost area appropriately e.g. city suburb 30 minutes from centre or town within an hour of city, you avoid the HCOL due to the highest population density / highest paying jobs (which you don't need now) but still live in a town/suburb for daily needs and amenities, and can get to the city centre regularly for other amenities etc. when you want, and can avoid rush hour.

In the UK at least that could be more than GBP 500,000 reduction in property price.

If you have a young family I can appreciate this isn't so simple of course.

FireHiker

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #13 on: September 02, 2016, 02:11:08 PM »
This is a big part of our eventual plan once the kids are out of school and we retire (14 years from now). We have nearly 50% equity on a million dollar house (blows my mind sometimes because it appreciated SO much the first two years; we put 20% down when we bought in 2012). Of course it doesn't matter what the equity is until we sell, but between the house and other assets it is hugely comforting to know if something terrible happened we COULD cash out and live somewhere much less expensive pretty comfortably. My husband is probably sick of the near daily discussion of "if we sold our house and downsized to xx here...". Our house is oversized and I want to cut the size at least in half, but he is not on board right now. It WILL happen someday...

CanuckExpat

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #14 on: September 02, 2016, 04:41:30 PM »
We mostly did this, but as much for personal reasons as financial. We didn't own our house outright, but had a bunch of equity in a Bay Area house before the last round of craziness and had an aggressive buyer making us an offer we couldn't refuse. We had no strong ties to the area, and a desire to try living other places.

Selling the house knocked about two years off (or four man years since it required us both working), not so much for the amount of equity we tapped, but for the reduction in housing expenses. The question is, where will we live next. If we decide to go back to somewhere HCOL, maybe we will have to un-RE :)

Northwestie

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #15 on: September 02, 2016, 04:48:44 PM »
Initially was planning on this when first getting into MMM, but then realized that we really love where we live and would be willing to work a bit longer to live in Seattle as opposed to a LCOL area. We might still move to the burbs at some point, altho that still seems pretty HCOL compared to where I've lived before.

Same here - but will likely stay put in Seattle.  House is paid for  - went from $210 to about $825 now and still rising.  Yikes.  The think is that if you sell you are never going to buy back into the market.  So we might consider renting it for a stretches while travelling or possibly moving to slightly lower cost area - say around Bend, OR.   

Frankly - in LCOL places - I don't want to live in most of them.  Kinda boring.

CanuckExpat

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #16 on: September 03, 2016, 05:48:48 PM »
House is paid for  - went from $210 to about $825 now and still rising.  Yikes.  The think is that if you sell you are never going to buy back into the market.

I agree that if you love the place you live, and there is nowhere else you would want to live, then you shouldn't sell for financial reasons.

The counterpoint, if all else being equal, you had $825k in cash, but no house, and you wouldn't buy your current place at that price, it's a sign that you should consider selling. The scenarios are mathematically the same (ignoring transaction costs) but one has different mental accounting and emotional tugs.

That was what got us to pull the trigger and sell: We really like our house, and the area we live in, but if we happened to be homeless with $650,000, we wouldn't drop it all on that house at that point in time.

Another (maybe less important) point for those who have seen those levels of appreciation, remember that once you are over the principal residence exemption you will be paying capital gains tax any further gains. Which might have to all be paid in one year and could be quite high when you sell?
« Last Edit: September 03, 2016, 05:52:20 PM by CanuckExpat »

MMMarbleheader

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #17 on: September 03, 2016, 06:41:12 PM »
I play this game all the time too! Especially when I watch the HGTV show (On Netflix, calm down) with cheap ass nice homes. I have never had a master bathroom or a garage haha. My house was built in 1960 and is easily the top 10% of youngest homes in town.


But.. both of our families are in MA. I have worked my ass off to build a pretty great network in Boston that I could tap if FIRE didnt work out or I wanted to work part time. I think once the lead paint risk is diminished when our youngest is 6, we will sell our SF home and move to a 2-3 family owner occupied setup with a rental and maybe an air bnb. At least take the equity from a SF home and put it into something that makes money. 

Chaplin

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #18 on: September 03, 2016, 07:48:54 PM »
Definitely considered it as a mental exercise, but we're exactly where we would like to be right now. With about $700K in equity, it's tempting though. We'll FIRE anyway in 4.5 years and likely stay in this place until our son finishes high school four years after that.

Having that much equity tied up in an over-valued real-estate market isn't ideal, but since we're not mortgage free we're extending the remaining mortgage amortization to free up cash for investing. It's hard to beat borrowing at 2.5%. Right now the real-estate/financial investment split is right about 50/50 thanks to recent  big gains in the real-estate market but we're targeting having more of our net worth in financial investments. Since the real-estate is slowing down and our refi frees up cash, the financial investment side should pull ahead again soon.

Cherry Lane

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #19 on: September 03, 2016, 08:30:22 PM »
Just saw this report, and here's a way to use it to estimate where you could live.  Take the estimated proceeds from selling your HCOL house, add it to your current stash, and apply the 4% rule to get an equivalent annual income.  Then use this report of salaries needed to afford a median-priced home in 25 cities around the US.

How many would be fully FI in Pittsburgh?  Atlanta?  Dallas?  Somewhere even pricier?

Fresh Bread

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #20 on: September 04, 2016, 02:13:19 AM »
House is paid for  - went from $210 to about $825 now and still rising.  Yikes.  The think is that if you sell you are never going to buy back into the market.

I agree that if you love the place you live, and there is nowhere else you would want to live, then you shouldn't sell for financial reasons.

The counterpoint, if all else being equal, you had $825k in cash, but no house, and you wouldn't buy your current place at that price, it's a sign that you should consider selling. The scenarios are mathematically the same (ignoring transaction costs) but one has different mental accounting and emotional tugs.

That was what got us to pull the trigger and sell: We really like our house, and the area we live in, but if we happened to be homeless with $650,000, we wouldn't drop it all on that house at that point in time.

Another (maybe less important) point for those who have seen those levels of appreciation, remember that once you are over the principal residence exemption you will be paying capital gains tax any further gains. Which might have to all be paid in one year and could be quite high when you sell?

Thanks for this comment, it was really helpful to DH and I today. We know we could sell up and FIRE and the option comes up for discussion again and again, but now you've helped us to frame it in a different way. Also, we applied the same question to our rental and realised we'd rather have the cash and invest the money elsewhere. That's the first time we've been on the same page on that one so it feels really good.

FireLane

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #21 on: September 04, 2016, 07:39:07 AM »
I think about this a lot. I paid ~$250k for a small-ish apartment in New York City. I know that most places in the country, that would buy a nice big house with lower taxes than I pay now. Whereas if I want to stay here and upgrade to a place with more space, I could easily be looking at costs up to $1M, which would blow my FIRE plans out of the water.

The logical move when I retire would be to sell and move to a LCOL area, but I really like where I live. Plus most of my friends and family are here. It makes more sense to stay where I am for now, while I'm earning and building up my stash, but this is something I'll have to decide on a few years down the line.

Mmm_Donuts

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #22 on: September 04, 2016, 09:04:47 AM »
I think about this a lot too. The problem is, I totally agree with the sentiment that HCOL areas are HC for a reason. Aside from jobs, we live in an area that's extremely safe, with great restaurants, grocery options, farmers markets, multiple parks, great schools, etc etc within a 5-10 minute walking radius. People pay more to live here because of all the amenities it has to offer. When we do decide to make a move, I could equally see us renting in this same neighbourhood, or if we can find something similar in a lower COLA (suitable to car free living, with everything we need within walking distance) then I might move there, but it sounds like a tall order.

SeaEhm

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #23 on: September 04, 2016, 11:27:16 AM »
A previous coworker's dad did this.

He sold his house in California, took the money, and bought a nice 4,000 sq. ft house on a lake in a sought after private community in Missouri.

She told me that while he started to meet his neighbors, they were all doctors and lawyers.  When they asked what he did, he would just reply with, "I worked at [insert blue collar job]."

This story always makes me chuckle.

A few years ago, I used to think about moving to a lower cost of living area.  However, I love the amenities that are provided to me by living here.  The biggest one is the weather and the fact that I could go to a variety of ethnic areas to eat at great restaurants.  I like people watching and I have ample areas to people watch. 

It's kind of summed up by this statement, "I'd rather be poor living here than rich living elsewhere."

bop

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #24 on: September 04, 2016, 11:39:53 AM »
Two years, my wife and I sold our apartment in Manhattan (for $1,875,000) and moved to the Boston area (Somerville).  That geographic arbitrage is how we were able to retire.  The Boston area is not cheap, but compared to Manhattan, it is.  The choice doesn't need to be between HCOL and LCOL; medium COL is possible too. 
« Last Edit: September 04, 2016, 11:42:59 AM by bop »

pdxmonkey

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #25 on: September 04, 2016, 10:33:06 PM »
I've thought about this, but I have family in the area and my net worth is still just a bit over 500k so it wouldn't leave me many options to change my mind if I found the place I moved to kind of sucks. Given that even if I moved at the moment I'd like more spending money than my current nw would generate I'm going to stay put a couple more years at which time my house will hopefully be paid off and i would have reduced cash flow needs. At that time I might try a 4 day week as there are still plenty of things in this area I want to do that I haven't done, mostly due to time constraints. If I finish that list maybe I'll reevaluate. If the housing market keeps going up like crazy between now and then it will make the decision harder.

waltworks

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #26 on: September 05, 2016, 07:27:33 PM »
Yes. I have a stupid expensive house at a ski resort, and because of that, I have to keep working a few more years (which wasn't really the original plan, but my wife decided to stay home with the kids and stop working).

In our case, we went ahead and bought a house in a LCOL area we really like that has fantastic schools and great outdoors stuff to do - but is a step back from our ridiculous current location. We rent it out (which covers the costs) and if I decide I just can't bear to work anymore, boom: sell expensive house, move 500 miles south, FIRE.

We have kids that are only 4 and 2, which makes it relatively easy to relocate for a few years without disrupting things too much. I imagine that for certain family configurations/rootedness, it would be just too much. In other cases, it would be easy.

-W

m0nk3y

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #27 on: September 06, 2016, 07:00:19 AM »
We didn't hit FIRE, but we came out way ahead- sold our postage-stamp lot home of 2.5 years in a MCOL+ area, moved 1000+ miles north to a larger home on nearly 2 acres and pocketed over 100k. Enjoying rehabbing the home (contractors only for the major work, everything else is being done ourselves) and living in a small town with seasons and all the local small town fun that our pack of kids can enjoy. Compared to our old location; our average COL dropped 40%, discretionary costs slashed 70% and quality of life increased incredibly. Only downside- building materials are significantly more expensive... but the cost reductions elsewhere more than made up for it.

Livingthedream55

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Re: Anyone tempted to sell house in HCOL area to hit FIRE status
« Reply #28 on: September 06, 2016, 01:45:50 PM »
I did that last year (but will not FIRE for 3 more years as I'm paying for daughter's college at a state university and waiting for my pension numbers to work) but I sold a house (with a mortgage) for $429K in a nice suburb of Boston with a desirable public school system and bought (for cash) a house for $275K in a more blue collar suburb of Boston which will be my retirement home. It's a great house in a safe, friendly, family neighborhood less than a mile to town center and commuter train into Boston where I work. I'm happy!