Author Topic: Downsizing to FIRE - how to select a house?  (Read 4245 times)

ChpBstrd

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Downsizing to FIRE - how to select a house?
« on: October 20, 2017, 10:29:55 PM »
I've done the math, and if DW and I can permanently downsize from our current 2700sf clown mansion to something half the size, we can FIRE up to 2 years sooner, i.e. in 5 years instead of 7. Savings go up. FIRE number goes down. Low-yielding home equity is converted to higher-yielding cash. No-brainer, right?

Well, we're afraid to buy a house that we'll dislike in the long term, because nothing available in the required price range has all the features we'd like. Most are architectural mistakes IMO. Most involve the loss of multiple features that we enjoy - things like a double garage/workshop, charm, a guest space, a big front porch, closets, a nice functional kitchen, a friendly walkable neighborhood, a level lot, and a nice accessible back yard. Any house that had all these features would be expensive (just as ours is). So it's hard deciding what to give up based on our current list of "wants". There is a very real risk we'll downsize from the clown mansion to somewhere that just makes us feel sad or limited, and then be ready to move again in a couple years. Multiple house transaction costs would put our early retirement at risk, so we really need one permanent move. We've already sold one house we hated in the past.

Add to it the fact that we don't know what our post-FIRE lives will actually be like. Yes, we have a vision, as always. We also have a horrible track record predicting our priorities, interests, and hobbies even a few years out. Post-FIRE, we will have a lot more time on our hands to enjoy or feel limited by our housing choice.

I'm trying listing my hobbies, and imaging post-FIRE life as a continuation of those. E.g. I like to tinker > want a garage, large shed, basement, or workshop. I like a more engaged city environment > no far-out suburbs. I like parties > 4-5 street parking spaces at least. That sort of process. It adds up to expensive.

I'm also considering a fixer upper or repo so we could custom-build on the cheap, but we have precious little time to keep up with the current house with our 3 year old kid. Those days may have passed.

We want to sacrifice the bullshit luxuries and earn some of our lives back, but if we pick the wrong luxuries/features to cut, it'll cost us in the long run. And it's hard to tell which cuts we will come to regret. Oh yea, and if we shop too long, we save less money in the long run.

Example: We found a very charming and well-kept 3/1 for a good price. However, the backyard is tiny, like 14' square, and the parking situation kinda sucks. Do we settle on this and always wish we had a back yard for the kid to play in? Will that frustration magnify in the post-FIRE years?

Anyone else face this sort of quandry? Do you typically like/do/appreciate the same things post-FIRE as you did pre-FIRE?

frugaldrummer

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Re: Downsizing to FIRE - how to select a house?
« Reply #1 on: October 20, 2017, 11:45:30 PM »
Sounds like you love your house. Do you hate your job enough to give that up for two years work?

Also - any chance of converting part of that large house into a rental? Would that generate enough income to cut down your fire timeline?

I have a four bedroom 2350 sf house, currently full with my mom and two adult sons living with me. But if they were all gone - I really wouldn't save that much by downsizing (example - a 1300 sf comparable age house in my neighborhood would only save me $100k (selling my $550 k house) . I figure it would be much smarter financially to convert two adjacent bedrooms with a bath into a room mate "rental" - with kitchen privileges.

If you could carve a studio apartment, "granny flat" or even just rental bedroom with private entrance out of your 2700 sf, would the rent get you to fire in 5 years? Then you get to keep your nice house AND fire too!

ixtap

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Re: Downsizing to FIRE - how to select a house?
« Reply #2 on: October 21, 2017, 12:40:25 AM »
I would think your ideal neighborhood would have parks nearby, making the back yard less important.

Make a list of what is important to you and why. Are there other ways to meet the why? Do you need a garage for tinkering or would a shed or basement do? What makes a kitchen functional?

human

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Re: Downsizing to FIRE - how to select a house?
« Reply #3 on: October 21, 2017, 12:57:00 AM »
Doesn't sound like you're ready to make the change. Double garage, workshop and backyard? You're not really serious about downsizing at all, fancy kitchen too and family are!! Reread your own post and you'll see how ridiculous it all sounds.

Cranky

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Re: Downsizing to FIRE - how to select a house?
« Reply #4 on: October 21, 2017, 04:18:23 AM »
A smaller house is, by definition, gonna be smaller.  If you arenít ready for that now, then Iím going to warn you - that little boy is going to take up a LOT more space in the coming years.

EarthSurfer

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Re: Downsizing to FIRE - how to select a house?
« Reply #5 on: October 21, 2017, 04:35:02 AM »
ChpBstrd, you are really contemplating a major lifestyle change.

Fifty percent less house means 50% less stuff. That's tough downsizing and downscaling project unless you and the DW value the freedom brought by a more compact life more valuable than the 2700 sqft mansion.

Making such a change is not only about the decision to have less, but also the decision to be happy with less material goods and find the joy in the freedom.

One final note: Don't do this unless the DW is 100% in agreement and open to the adventure.

 


chasesfish

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Re: Downsizing to FIRE - how to select a house?
« Reply #6 on: October 21, 2017, 05:27:57 AM »
Okay, this was me four years ago.  Funny enough I had just started on the board back then.  Here's some "experiences" I can share.

We went from a 2700 subdivision home to a 1600sqft renovation.   The subdivision home was big, but really chopped up with tons and tons of small rooms, four of which we just didn't use.  The new home wasn't too chopped up, except it was build around 1950 and the electrical/furnace/laundry was in the dead center of the house and caused the layout to also be choppy.  We felt pretty confined, but it was a good "purging" of stuff.   Learning renovation on a house that old about cost us our marriage.  If you buy a "fixer upper", get something built around 1980 or newer for your first one.  Each generation you go further back in a house the more iterations of potential issues that show up.

We then moved cities and initially rented.   We looked and looked for houses and finally figured out what we wanted.  The compromise for us was a 3br house, but nice size master bedroom/bath and one big ass room in the middle that encompasses the living room/kitchen/dining room.  We got really close, our current house isa little more than we wanted in size (dont need the extra full bath), but we are in love with the layout.  The 3 bedrooms are tucked on the sides of the house and the entire center/kitchen is opened up with floor to ceiling windows that overlook the back yard.   We found we are minimalists when it comes to owning "stuff", but don't want to be on top of each other in the primary room we are in.   


undercover

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Re: Downsizing to FIRE - how to select a house?
« Reply #7 on: October 21, 2017, 07:33:10 AM »
Here's the info OP left out:

https://forum.mrmoneymustache.com/ask-a-mustachian/reader-case-study-should-i-downsize-buyer's-remorse/msg1298088/#msg1298088

They've already asked this question a year ago, except gave much more detail then.

I don't understand the point of the question, as you already know exactly how to select a house because you know exactly what you want. It sounds like the house you're in is what you want but you feel guilty after discovering MMM.

OP, keep your house. Freeing up $100k sounds good on paper but if you're going to stress the hell out of downsizing then there's no point in doing it. Also if it's only going to shave a few years off hitting your goal then it's also probably not worth it.

If you ever do downsize, let it be after FIRE. Your needs and wants will likely change in ways you can't predict by then. In ten years you may not give a shit about half the shit you say you do. There's no point in doing anything drastic while you both have decent incomes and are mostly happy where you're at.

doneby35

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Re: Downsizing to FIRE - how to select a house?
« Reply #8 on: October 21, 2017, 08:38:23 AM »
If you are wanting to downsize, you need to be ready to let go a few things. But then again, are these things necessities in the first place? they belong in the "i want" category and not the "i need". From the things you mentioned in your post it does not sound like you really do want to downsize, so I would say keep your house.
I was in a very nice 2400 sqft house. I downsized to a 1300 sqft house. I'm actually way happier. Smaller mortgage, less maintenance, less cleaning, less stuff, closer to FIRE... A house is just a box, a roof over your head. I wouldn't worry too much about how fancy it is. But that's just me.

Timmm

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Re: Downsizing to FIRE - how to select a house?
« Reply #9 on: October 21, 2017, 09:12:11 AM »
Renting sounds like the way to test-drive at a reduced (but non-zero) cost. You can either sell your current house or rent it to someone else yourself.

We are facing a similar decision, living in a house we like very much, except it's way more space than we will soon need (and is already generously large even with a couple of adult sons here at least part time). It's also in a pretty HCOL town, so relocating and downsizing would likely free up a big pile of money. We are considering multiple locations for relocating.

Last summer, we took a rental for about two months in one, in a house that's probably a lot like one we'd downsize to there. It was just my wife & me, and we'd also been a bit limited in the stuff we could bring. It was a great practice run in several ways. Next summer, we are planning a house swap that is also going to be much smaller, and we'll be flying so even more limited on stuff. That'll probably be about 6 weeks.

It doesn't feel like we're much closer to a decision, but we're both working pretty steadily on sorting through the stuff we've filled our house with and making progress on getting rid of a lot of it.

ChpBstrd

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Re: Downsizing to FIRE - how to select a house?
« Reply #10 on: October 21, 2017, 10:03:24 PM »
Quote
Sounds like you love your house. Do you hate your job enough to give that up for two years work?
The current house has the features I want and enjoy, but about 1300 more square feet than I want. Do I love it? No. It's just a manufactured object. Yes, I hate my job enough to give up many things - especially the unneeded 1300sf - to gain back 2 years of my life. The question is how to avoid the risk of making yet another house trade in a few years. We've only owned the clown mansion 5 years, and moving is expensive. Problem is, the features I want are typically only found in high-cost big houses.

Quote
any chance of converting part of that large house into a rental?
Good thinking, but unfortunately no. The layout offers no practical way to separate bathrooms/bedrooms into a side apartment.

Quote
Doesn't sound like you're ready to make the change. Double garage, workshop and backyard? You're not really serious about downsizing at all, fancy kitchen too and family are!! Reread your own post and you'll see how ridiculous it all sounds.
All these things are routinely available in my market at an even lower cost than I'm paying. It's just rare to find them all in one place. Perhaps they are not available at all to non-executives in your market (?), but I'm talking flyover country. The complete house payment I'm complaining about is less than $1k/mo. That could easily be $600 post-downsize. It might take us 2 years to earn 25x that difference. Totally different economy.

Quote
Fifty percent less house means 50% less stuff. That's tough downsizing and downscaling project unless you and the DW value the freedom brought by a more compact life more valuable than the 2700 sqft mansion.
We've found that having a crap ton of space has not necessarily encouraged us to buy a bunch of stuff, but it has encouraged us to keep stuff we could have probably thrown away or donated. E.g. I have accumulated half a closet of stained or shabby clothes for use on household projects or cleaning. We were given an antique dining room set that we could just as easily give away again, but hey, that's the only thing in the formal dining room so why bother? One corner of a BR is occupied by a drawing table we picked up at a yard sale for $5, but never draw on. DW and I are on the same page. We'll have a disappointing yard sale. :)

Anyway, having interior space for stuff is not my primary interest. Functionality for daily life and post-FIRE hobbies and interests is. We could FIRE right now with an income of about $24k/year, but we'd not be happy with our outcome.

Quote
They've already asked this question a year ago
Yes, and responses derailed toward the budget rather than the specific question. I probably failed to state the question clearly and insist upon course corrections. I'll clarify now:

What is your recommended decision process to decide the right price point of house to sacrifice some years of life for? Not asking what is right for me; asking what process do you use to design a lifestyle you've never experienced before?

If you go too minimalist to do the things you want to retire for, you might be less happy than you were when working and end up going back to work. I could FIRE right now to an RV, a rural mobile home, a slum, or a "developing" nation, but don't want to. Need is a relative term. It's a problem of knowing thyself. How can one be sure they've bought enough to be satisfied but not worked too much?

Also, a year ago DW wasn't on board with the dream to FIRE, but another year of demoralizing work, 12k in reduced annual spending, and 110k in growth has changed a lot. We're kicking ass, but trying to keep up with dusting the clown mansion isn't worth two years of our 40s. We're both finally ready to make a move. Now it's not an if question, but a how question.


Linea_Norway

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Re: Downsizing to FIRE - how to select a house?
« Reply #11 on: October 22, 2017, 04:53:32 AM »
When you own a house, the location and the plot size cannot be changed. The house itself can.

I suggest you put your requirements in a prioritized list, or a list where you weigh each point with a number. For each house on sale, just see how the score gets. If you ever find a house that scores high on your list, then that might be the one.
See also if some of your requirements could be combined. Like having guest space. Could a guest bedroom be combined with a study or a storage room?

For each house on sale, look at the possibilities. Can you build an additional hobby room outside? Can you make your backyard bigger by taking down a shed or buying extra land from your neughbour?
If you don't want to fix up a house, could you hire someone to make the necessary changes. After FIRE you will probably have more time to do improvemenrs yourself.

Could you make money of your excess space in your current house? You say it is not suited for rental. Could it be hired to a painter who needs an atelier? Could a kindergarden use your house in daytime?

Cranky

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Re: Downsizing to FIRE - how to select a house?
« Reply #12 on: October 22, 2017, 05:34:25 AM »
I think that you buy a house that has some plusses and some minuses and you make it work with you, especially over the long haul.

I'm surprised that you aren't seeing plenty of houses with basements, and a basement makes for very adaptable space. Our house is quite small, but we have a full basement. It was the playroom with the kids were little, and now it's where dh makes wine, I've got my sewing area, and the treadmill reigns over all. It's not beautiful, but it works.

We do have a bigger yard, and eventually have put in a deck and do most of our entertaining out their 6 months out of the year.

I'd keep looking, but don't hold out for perfection.

albireo13

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Re: Downsizing to FIRE - how to select a house?
« Reply #13 on: October 22, 2017, 06:47:04 AM »
We downsized just last year in prep for retiring in a few years.  We sold our large (3800sqft) clown house with 5 acres and large yard to something much smaller (1800sqft), small yard, nicer town.

Unfortunately, we didn't clear much money ... BUT ....

1. much more efficient house - expenses are much lower - burn rate is lower
2. smaller, less crap to keep, easier to clean
3. newer house - spend much less time repairing
4. nice town - lots to do, desirable area, closer to ocean

Caveats:
1. steep driveway
2. 2 story house

My recommendations:
* find an area you like and that will maintain RE value
* find a 1-story house - as you get older in retirement, having 2 floors becomes not fun



bacchi

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Re: Downsizing to FIRE - how to select a house?
« Reply #14 on: October 22, 2017, 10:10:16 AM »
You can build a workshop.



Cassie

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Re: Downsizing to FIRE - how to select a house?
« Reply #15 on: October 22, 2017, 12:11:39 PM »
When downsizing 5 years ago we made a list and ranked the items most important to us. First we found the neighborhood and only looked at 1 story homes. Many were small at 1k sq ft and we  wanted 1300-1500. Since they were built in the 50's the kitchens were small with often no dining rooms. DR was very important as we entertain a lot. Many people have added them on through the years or built onto the kitchens off the back of the house. What we found was a complete dump but someone had added onto the back of the house a DR and master bedroom.  The DR and MB shared a common wall and the DR was enormous. So we moved the wall and added a master bath behind the bedroom. My DH was handy and had the time since we retired so did all the work himself before we moved in.  What did we give up?  It had a 1 car garage so he made a workshop out of it.  A 2 car would have been nice. The house is a ranch with aluminum siding so not that attractive on the outside.  5 years later and we are in love still with the house.   Some neighbors have put stucco on their homes and they look much nicer but we don't want to spend that much $ on the outside.  WE put a lot of $ on the inside because that was important to us. YOu won't get everything you want.

formerlydivorcedmom

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Re: Downsizing to FIRE - how to select a house?
« Reply #16 on: October 23, 2017, 08:48:18 AM »
My kids stopped playing in the backyard once they hit school age.  They'd much rather go to the park or ride their bikes.

I've been wrestling with the idea of downsizing, too, from 3000 sq ft to about 2000 sq ft.  For now, we're decluttering to see what it would be like to live with less stuff.

undercover

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Re: Downsizing to FIRE - how to select a house?
« Reply #17 on: October 23, 2017, 09:20:59 AM »
What is your recommended decision process to decide the right price point of house to sacrifice some years of life for? Not asking what is right for me; asking what process do you use to design a lifestyle you've never experienced before?

Determine wants/needs: check.  You've already lived in multiple houses to deduce the exact criteria that you want in a house.

Examine current home and figure out what you can live without: check. You don't use 1,300sqft of your house which is causing you to delay your ultimate goal of FIRE. You can either rent that space to dwellers or downsize.

At this point it's less about price point and more about buying exactly what you want and hopefully saving money/time working for said house. And then once you find that house you can run the numbers and make a subjective decision on whether or not it's worth the transaction costs (including your time and the mental hassles of moving).

It's a problem of knowing thyself.

Yes. No one really knows what they like/don't like until they try something. You've done that. You know what you want/don't want in a house. You know the larger house isn't worth paying for at this point.

Now it's not an if question, but a how question.

You already know how. Sell the house and get what you want once you find the house that meets your criteria that you already have.

albireo13

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Re: Downsizing to FIRE - how to select a house?
« Reply #18 on: October 23, 2017, 09:59:20 AM »
Living with less cr@p is very invigorating!

It's amazing how much energy is exacted from you just due to .....  maintaining, storing, organizing, looking for .... 
lots of "STUFF"!   It becomes "soul-sucking"  ..... liking having a bunch of Dementors living in your house with you.


  Businesses make money off of STUFF   (rental storage, storage sheds, shelving, etc).

I'm a reformed "pack-rat".  I use to save everything .. just in case we might use it.  Our old, large house ended up packed with STUFF.

It's when we moved, and had to deal with it all, that I got "religion".

elaine amj

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Re: Downsizing to FIRE - how to select a house?
« Reply #19 on: October 23, 2017, 10:30:01 AM »
Here's another suggestion....don't give up until you start looking. And be patient. In the meantime, attack your problem as creatively as possible - don't get stuck into thinking there is only one answer to your problem. And don't let yourself be stuck if your dealbreakers end up not being dealbreakers after all. It really is OK to change your mind.

We really really wanted a better entertaining space and went househunting a few years ago. Thankfully, we didn't find what we wanted. We put our hunt on hold. Several years later, we're happy we didn't find what we wanted (as we would have spent more). And when it came to entertaining, our friends are just happy to come over and hang out - even if my space is not ideal. Sometimes good enough is good enough.

Most of all - trust in yourself to adapt as necessary to your home. It's great to find a home that is perfect for you. But also likely there will be a few quirks that are not ideal. You're smart people - you'll find a way to make it work for you.

ChpBstrd

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Re: Downsizing to FIRE - how to select a house?
« Reply #20 on: October 23, 2017, 12:16:18 PM »
Thanks for the helpful and encouraging replies, everyone. I guess I have a sense of urgency to get this right. Back when I assumed I'd work till 65, I figured I could move whenever I wanted using my earnings. In a FIRE lifestyle with a 25x stache - reduced for lower housing expenses, trading houses every few years might be the sad road back to a cubicle. I know this about myself - I'm picky about houses and that's a weakness.

Renting might make sense for a year or two, but in my market what you can buy for $650/mo including T&I rents for roughly $1,100/mo. Rent on a nice apartment is the mortgage on a clown mansion - which is how I talked myself into this position in the first place.

Related question:

Has anyone here downsized to FIRE and then found themselves dissatisfied and reverting to a higher-cost lifestyle?

Laura33

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Re: Downsizing to FIRE - how to select a house?
« Reply #21 on: October 23, 2017, 12:26:21 PM »
You don't know what your life is going to be like, so your first priority is your current needs, especially the things you can't fix -- location, size, price, and schools (unless you plan to homeschool).*  Prioritize day-to-day living (functional kitchen, energy efficiency) over hobbies and nice things to have (front porch, big workshop).  If something is missing, is there a workaround?  E.g., if you have a small yard, is there a park nearby?  If there isn't good shop space, is there room to build later?  If it has only a one-car garage, can you downsize to one car if it's a walkable neighborhood?  Etc.  And when you are looking at workarounds and improvements, consider the cost of those things when you are figuring out how much house you can afford and what your real savings will be (e.g., sure, you can make a home more energy-efficient, but it will likely cost you a buttload of money that you may not be expecting).

The rest of it is niceties.  I've gone to a lot of parties at friends' homes where the parking sucks -- sure, it's not great, but would I expect my friends to pay $100K more for a house just to suit me?  That's the tail wagging the dog.

Finally, only go into this if you are ok with the idea that the new place might not work out and you might end up wanting to move in a few years anyway.  Things change, and humans suck at predicting what they will need or want down the road.  If the plan is so tight that having to move again will undo all of the benefits you hope to see from this move, then it's probably not worth it. 

The problem seems to be that you have a specific list of features that you want, and that particular mix of features just does not seem to exist on smaller homes.  Unfortunately, that's life.  Most homebuyers look for space first, amenities second, so you really will not see multi-car garages and large yards and lots of character on smaller, cheaper homes.  You are in an extreme minority in wanting bells and whistles without the extra space.

So all you can do is put your list of features in descending order of priority, and then figure out where you want to draw the line to separate the "must haves" from the "nice-to-haves."  And then, if you can't get all of your must-haves for the price you need to pay, you know that your plan is not realistic in the current housing market, and you either decide some of your "needs" are negotiable, or you realize that you don't actually want to downsize given the options available in your current market.

*For me, I'd put the "character" parts of the home there as well, because a house has to "feel" a certain way for me to be comfy in it, and there are some things that you either can't change or would cost more than it's worth to change.  But this is optional and personal.