Author Topic: Case Study: Stay put, renovate, tear down and rebuild, or move?  (Read 11602 times)

SanDiegoFIRE

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We own a $3mm house in a VHCOL area, just refinanced $1.9mm 15yr 3.125%

The house is very old and has little curb appeal but is in the best location in our area (surrounded by homes 1.5-2.5x the value of ours) - if we sold it today a buyer (either developer or end user) would most likely tear down and build a mansion.

We love the location and yard (oversized lot) but don't like the house (structure), although at 3500 sqft it suits our needs just fine for a family of 5 (it is really ugly though).

Our options are (in order of cost) to (1) stay put and do nothing, (2) renovate to our liking, (3) tear down and rebuild or (4) move.

(1) do nothing - obviously generates the most savings
(2) renovate - we estimate would cost $500k-700k to change to our liking, but would still not be our dream house and, more importantly, if we sold the house likely buyers would simply bid land value of a little less than $3mm therefore we would not recoup any of the cost
(3) tear down and build new - figure $350/sqft for construction for 5k sqft above ground, plus cost of renting a home while building and redoing landscaping, etc for a total of $2mm; could probably eventually resell for $5mm+
(4) move - we might just keep the house and rent it out (could probably get annual rent net of insurance and taxes of $80k); dream house would probably be $4.5mm

Why change anything? We want to entertain more (space is currently a bit constrained for it) and have a home we feel proud of, as well as the fact that kids are now getting to age where they need more space. Also would be ideal to have a room for live in help.

Which option is ideal? Which can we afford?

We are in our early 40s, single earner, with gross annual income of between $900k to $1.4mm over the last 5 years. The income fluctuates a lot and job security would not be considered stable, but I think the worst case scenario would be job loss without being able to find work for a year and the ultimately a lower income of $500k gross. I think that scenario is extremely unlikely (less than 5% chance).

Our assets include $1mm in retirement accounts, $500k in taxable accounts, and $2mm in various real estate investments (with associated debt on investments of $700k). The income from real estate net of costs and interest expense is roughly $35k (not included in income mentioned above). Annual expenses are $400k but could probably be trimmed down to $250k very quickly if needed.

If we stayed put and did nothing (option 1), we could probably retire in 7 years. If we did option (2) maybe 10yrs, (3) would probably be closer to 15 years until retiring, and option (4) might be 20+. I see the trade off of retiring early as being roughly opposite in proportion to quality of life during the working years + increased stature within the community (i.e. the earlier we retire the worse our quality of life while we are working and the less respected we would be in the community).

zolotiyeruki

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #1 on: April 05, 2015, 08:25:52 AM »
Are being trolled? Or am I missing something here?

--3500 sq ft for a family of 5 (are you planning on having more kids?) is astonishingly generous.  In my not-so-humble opinion, you have zero need to build a 5k sq ft home.  I say that as the owner of a 3500 sq ft home, and we have a family of 8.
--you mention that you like to entertain.  That's great, but what kind of parties are you having that make you feel squeezed in 3500 sq ft?
--what kind of renovations are you considering that would cost half a million dollars?
--What's your annual spend?  You have $1.5 million in retirement savings, plus $2.4 million (net) in real estate assets ($3M home plus $2M RE investments minus $2.6M debt).  That's a net worth of nearly $4M, and for most of us, that's WAY beyond enough to retire on, if you're willing to move.

I get the feeling that living in a VHCOL area has skewed your perspective dramatically.  You can be FI if you want to.  How many years of work is it worth to you, in order to stay in your current location?

Roland of Gilead

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #2 on: April 05, 2015, 09:07:06 AM »
Wrong forum.   With a annual income of 1.4m I think you should visit bogleheads.org

justajane

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #3 on: April 05, 2015, 09:51:04 AM »
I doubt this is a troll. They just landed in the wrong place.

Why ask the plebes what they think? You do realize you make more in a year than most of make in a decade, some of us in two or three decades?

If your wants are to build a house so that you can have live-in help, probably less than one percent of the commenters on here can relate or provide you advice that fits your situation.

Your question is so far-fetched to most of us that it's almost like someone coming on here and asking what 10k handbag they should buy. Does. not. compute.
« Last Edit: April 05, 2015, 09:53:14 AM by justajane »

bacchi

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #4 on: April 05, 2015, 10:34:00 AM »
You have only 2x your annual income in net assets. Have you just recently been earning this much income? Retiring in 7-10 years looks like a pipe dream from what little we know.

The obvious choice is 1) do nothing. You can then FI in 7 years and build wherever you want.

Ricky

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #5 on: April 05, 2015, 10:50:26 AM »

--What's your annual spend?  You have $1.5 million in retirement savings, plus $2.4 million (net) in real estate assets ($3M home plus $2M RE investments minus $2.6M debt).  That's a net worth of nearly $4M, and for most of us, that's WAY beyond enough to retire on, if you're willing to move.


He already said $250-400k. [barf]

Quote from: SanDiegoFIRE
(i.e. the earlier we retire the worse our quality of life while we are working and the less respected we would be in the community)

Again, [barf]. You really need to do some soul searching, my man. You really should experience cultures different than your own to gain some serious perspective instead of jetsetting across the world and staying places for merely a few days to a week.

Wrong forum.   With a annual income of 1.4m I think you should visit bogleheads.org

Why? Outliers are outliers no matter which forum you're on. We have our own investing section. There are also plenty of people here worth $2-3m or more at the moment. This guy is just an extreme outlier who I doubt will benefit much from living frugally unless philanthropy or ideas bigger than his own needs/wants could somehow overcome his excessive spending.

That said, obviously the mindset here will never completely rub off on the mindset of OP. Too much income for it to really matter what he does, unless he can change his mind to think efficiently and frugally. He could have retired 2-3 years ago probably.

You're missing an option (5):

I'm pretty sure all of us here (in your situation) would get rid of a $3M 3500 sqft house, the "rentals" that are returning a paltry 1.75% (seriously?? you actually own these?), retire yesterday, and buy maybe a 1500-sq ft house in a much lower cost of living area. Then you could re-invest as you wish, but much more carefully and thoughtfully this time around.
« Last Edit: April 05, 2015, 11:09:12 AM by Ricky »

SanDiegoFIRE

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #6 on: April 05, 2015, 11:44:32 AM »
You have only 2x your annual income in net assets. Have you just recently been earning this much income? Retiring in 7-10 years looks like a pipe dream from what little we know.

The obvious choice is 1) do nothing. You can then FI in 7 years and build wherever you want.

By my calculation it's more like $3.9mm net worth on avg gross income of last few years of around $1.15mm.  After various income taxes it's more like $550k annual net income.  While perhaps not prodigious, net worth of 7x net annual income isn't bad.

I think 7 years is very doable in the base case (do nothing) scenario, if not even sooner.  Our expenses won't stay high forever given the ages of our children.

SanDiegoFIRE

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #7 on: April 05, 2015, 11:47:53 AM »


You're missing an option (5):

I'm pretty sure all of us here (in your situation) would get rid of a $3M 3500 sqft house, the "rentals" that are returning a paltry 1.75% (seriously?? you actually own these?), retire yesterday, and buy maybe a 1500-sq ft house in a much lower cost of living area. Then you could re-invest as you wish, but much more carefully and thoughtfully this time around.

We've done pretty well with our investments.  That's the only way we've amassed the net worth we have with our high spending.

The investment properties are leveraged, so it's not entirely accurate to simply divide the net income after all expenses (including interest) by the total value.  In any case, I don't think there are many investments out there that yield a 2.5-3% real return in this environment.

SanDiegoFIRE

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #8 on: April 05, 2015, 11:58:01 AM »
Thanks for the replies

I wasn't trolling, and sorry if some interpreted it that way

I'm pretty competent at what I do professionally, and it does bring me a lot of satisfaction (who doesn't feel good when they are successful in their chosen endeavor?).  I don't dread my work, and while I'm not saving the world I don't think anyone else really is making a meaningful impact that could not be replicated by someone else in short order other than the 0.01% in a given field.  So I don't feel a strong need to quit working, and therefore am trying to consider how to maximize my family's overall happiness, not just get to a number ASAP and change things.

Merrie

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #9 on: April 05, 2015, 12:02:27 PM »
Personally, if dropped into your life, I would sell the house and move to a place with a halfway reasonable COL where I could live quite comfortably on those assets and never, ever have to work again (but could choose to work if I wanted, or just work part-time, or volunteer a lot, or whatever). If I had a quarter of the assets you list I would be set for life and I feel my family of 4 lives quite comfortably in 2100 square feet with room for one more and room to entertain, and even if I wanted to upsize a little I could. A 5 bedroom house in our large metro area can be had easily for 300 or 400k.

If I were you in your situation, I ... man, I can't even contemplate it. What exactly are your goals regarding retirement? That's going to have some bearing on what route you go.

bacchi

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #10 on: April 05, 2015, 12:06:16 PM »
By my calculation it's more like $3.9mm net worth on avg gross income of last few years of around $1.15mm.  After various income taxes it's more like $550k annual net income.  While perhaps not prodigious, net worth of 7x net annual income isn't bad.

Ah, my mistake. I meant investable assets and was using 1.5 + 1.3 = 2.8 / 1.4.

Quote
I think 7 years is very doable in the base case (do nothing) scenario, if not even sooner.  Our expenses won't stay high forever given the ages of our children.

You'll need 25x expenses to hit FI using the SWR. That's $6.25M-10M based on $250k-400k. Subtract $2.8Mx2 and you're short $650k-4.4M. I don't see the $400k spending level happening unless you downsize your house in retirement.

There's another possible problem with the renovation/remodel/move scenarios. Won't that reset your California property taxes? Maybe that's already figured into your calculations.

frugaldrummer

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #11 on: April 05, 2015, 12:11:35 PM »
Ok, just some food for thought:

You want to maximize your family's happiness- in your mind that equates with status and things, but consider whether those are truly the most important?  For instance, would your children benefit from more of your time?

Would you consider a move to a different part of San Diego?  I'm guessing you're in La Jolla or RSF at those prices. You certainly could buy a nice home in, say, Encinitas for a couple of million or less, and put the money you save into retirement.  Is your job one that you could cut back to half time?  If so, you could partially retire today, spend more time with your kids, and still enjoy your work.

Also....a word of caution about raising your kids in a wealthy community. My kids grew up in one such, and despite high intelligence, are all struggling in their twenties due to the economy and mental health issues. It seems unlikely that any of them will be able to reproduce the financial success of their parents. I worry about their ability to be satisfied with a more average lifestyle. Not sure we did them any favors raising them in LJ
« Last Edit: April 05, 2015, 12:15:55 PM by frugaldrummer »

Ricky

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #12 on: April 05, 2015, 12:37:22 PM »
The investment properties are leveraged, so it's not entirely accurate to simply divide the net income after all expenses (including interest) by the total value.  In any case, I don't think there are many investments out there that yield a 2.5-3% real return in this environment.

Fair enough, I missed where you had 700k worth of debt.

If $35k is after all expenses and mortgage and before taxes then you're still only returning 2.7% based on a cash-out value of $1.3m.

Not many real estate investors here would accept 2.7% for that amount of risk. Even holding "T" yielding 5.7% is probably less risky.

zolotiyeruki

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #13 on: April 05, 2015, 01:19:40 PM »
I'm sorry if I came off as disrespectful in my first reply.  Your case study is just so far outside the norm for this community that it didn't seem believable.  I also somehow misunderstood the $400k in expenses to be related to your rental properties, rather than your normal lifestyle.  Sorry!

I think some soul-searching may be in order.  What *really* makes you happy, at the most basic level?  You're living a life that (it appears) you enjoy, while a significant percentage of the folks on this board would consider it ridiculously lavish.  Tied to this question is another:  "what is driving your spending?"  And then, of course, the follow-up:  "Are the things you're spending money on actually making you happy? is there a way to get the same level of happiness without the high price tag?"  I wonder, given your location, if a lot of your spend is because of peer pressure.  I don't mean that in any sort of demeaning way, but I've seen similar tendencies in myself, and I've seen it happen to a lot of people--they (or I) feel a desire to spend money on X because their neighbor/coworker/boss/brother-in-law/whoever has done it.  That's what brings me back to the question--"what really makes me happy?"

You may decide that you'd be happier if you sold it all, bought some farmland in Kansas, and built a cute little house on the prairie for $250k and lived off $50k/year, enjoying the fresh air and amber waves of grain.  In which case, FIRE already!!  Or you may decide that your current lifestyle is what you prefer, hosting parties, drinking expensive wine, and rubbing elbows with other millionaires while witnessing an orange-red sunset from your mansion on the coast.  In which case, you've got several years before you can retire.  The point, though, is that you need to figure out what your dream is, and figure out what brings you lasting joy, and then pursue that goal.

frugaldrummer

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #14 on: April 05, 2015, 01:56:01 PM »
Just some back of the napkin math.....
As I understand it, you have 1.1 million equity in home, 1.3 million equity in investment properties, and 1.5 million in savings?  That's a total of 3.9 million.

if you cashed in your real estate to buy a $2 million property outright in a sl less expensive part of town, you'd still have $1.9 million, which could generate income of $76k per year at 4 percent withdrawal rate. If you continued working for five years and banked $500 k per year, you'd have $4.4 million in savings and at 4 percent, income of $176k per year WITHOUT any house payments.

Seems to me a relatively modest adjustment in lifestyle could grant you economic freedom in short order without much sacrifice, while pursuing your grand housing dreams will keep moving FIRE farther and farther away.

SanDiegoFIRE

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #15 on: April 05, 2015, 02:41:51 PM »
I'm sorry if I came off as disrespectful in my first reply.  Your case study is just so far outside the norm for this community that it didn't seem believable.  I also somehow misunderstood the $400k in expenses to be related to your rental properties, rather than your normal lifestyle.  Sorry!

I think some soul-searching may be in order.  What *really* makes you happy, at the most basic level?  You're living a life that (it appears) you enjoy, while a significant percentage of the folks on this board would consider it ridiculously lavish.  Tied to this question is another:  "what is driving your spending?"  And then, of course, the follow-up:  "Are the things you're spending money on actually making you happy? is there a way to get the same level of happiness without the high price tag?"  I wonder, given your location, if a lot of your spend is because of peer pressure.  I don't mean that in any sort of demeaning way, but I've seen similar tendencies in myself, and I've seen it happen to a lot of people--they (or I) feel a desire to spend money on X because their neighbor/coworker/boss/brother-in-law/whoever has done it.  That's what brings me back to the question--"what really makes me happy?"

You may decide that you'd be happier if you sold it all, bought some farmland in Kansas, and built a cute little house on the prairie for $250k and lived off $50k/year, enjoying the fresh air and amber waves of grain.  In which case, FIRE already!!  Or you may decide that your current lifestyle is what you prefer, hosting parties, drinking expensive wine, and rubbing elbows with other millionaires while witnessing an orange-red sunset from your mansion on the coast.  In which case, you've got several years before you can retire.  The point, though, is that you need to figure out what your dream is, and figure out what brings you lasting joy, and then pursue that goal.

This is a thought-provoking reply and great to think about - thanks

We do want to give our children advantages that we didn't have in life, and that drives a lot of our discretionary spending (education, lessons, experiences).  Being a single income family, spouse is full time involved in children's growth and development (and it really is a full time job).  We also are trying to use our means to buy "access" to things that may differentiate them from their peers.  Perhaps we have a cynical view of the world because spouse and I both grew up in struggling families, but to us there is intrinsic value in being exposed to individuals who are already or who will eventually be influential.  Whether that costs an extra x years of work seems quantifiable and therefore makes it easy to decide whether it is "worth" it.  I guess 30 years from now I don't want to look back and say I didn't do my best for my family.

bulery326

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #16 on: April 06, 2015, 01:18:02 AM »
Thanks for joining in this forum SanDiegoFIRE and taking the comments provided with true consideration and respect.

Your comments on wanting to provide your children advantages was very telling to me.  I do not have kids of my own, but grew up not too long ago (recently turned 30) with a somewhat unique perspective on privilege.  My school district was in a high income disparity suburb which included a large portion of kids who qualified for free lunches and another large portion of kids who got BMWs and Benzs for the 16th birthdays.  It is interesting as I survey the people I grew up with to see where they are in their lives.  I find an interesting (if still anecdotal) trend.  For the most part, regardless of what socioeconomic status someone came from, if their parents made an effort to facilitate meaningful connections and instill an appreciation of hard work, the person is doing quite well for themselves.  If their parents provided no help in their maturation or simply purchased a life for them, the person is struggling in their endeavors.  I find my peers that come from quite high income backgrounds that were essentially given everything they ever wanted are struggling the most and/or continue to live off their parents, because they have no way to cope with the position they find themselves in.

From the way you talk of it, you almost come off as wanting to "buy" your children into the good life.  I would greatly caution you against this.  You and your wife having brought yourself from limited means to fantastic wealth are shining examples of what makes this country so fantastic.  Do not rob your children of being able to earn the self-satisfaction that you have rightfully achieved for yourself.

My parents came from quite meager means and provided a solid middle class life for me.  One thing they made sure to do was provide me with a network of role models and mentors (many of them self-made themselves) not to "buy" me opportunity, but to provide me with their wisdom and road map to become successful myself.  Having those people in my life was way more influential to my success (PhD at 25 and currently a Professor) than having been bought access to anything.  Comparatively, I have peers whose parents purchased their ways into excellent private universities who are living at home working a lower management job that their parents arranged for them and never planning to grow into anything better than that.

You talk about not wanting to look back in the future with regret for not doing best for your family.  I would caution that "buying" a life for your children could be doing just that.  Please do not deprive your children of the opportunity to earn their way in life as you and your wife have, instead facilitate their growth into wonderful people.

Merrie

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #17 on: April 06, 2015, 05:16:40 AM »
What bulery326 said.

Also there is one thing money can't buy, and that's time with their parents. You can buy them all sorts of lessons and experiences, but you can't replace the time that they miss with you while you are working. I wouldn't go overboard with one to the expense of the other.

You may have heard the saying... nobody says on their death bed that they wish they'd spent more time at the office.

zolotiyeruki

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #18 on: April 06, 2015, 05:37:32 AM »

This is a thought-provoking reply and great to think about - thanks

We do want to give our children advantages that we didn't have in life, and that drives a lot of our discretionary spending (education, lessons, experiences).  Being a single income family, spouse is full time involved in children's growth and development (and it really is a full time job).  We also are trying to use our means to buy "access" to things that may differentiate them from their peers.  Perhaps we have a cynical view of the world because spouse and I both grew up in struggling families, but to us there is intrinsic value in being exposed to individuals who are already or who will eventually be influential.  Whether that costs an extra x years of work seems quantifiable and therefore makes it easy to decide whether it is "worth" it.  I guess 30 years from now I don't want to look back and say I didn't do my best for my family.
I find this fascinating, because I've never run into anyone who's been concerned about this aspect of their kids' education.  What kinds of things are you paying to expose your kids to?

MrsPete

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #19 on: April 06, 2015, 06:06:14 AM »
I doubt this is a troll. They just landed in the wrong place.
Totally agree.  This individual seems to be serious in his questions, but he's directing them to a group that is likely to give him answers he doesn't want to hear.
I'm pretty sure all of us here (in your situation) would get rid of a $3M 3500 sqft house, the "rentals" that are returning a paltry 1.75% (seriously?? you actually own these?), retire yesterday, and buy maybe a 1500-sq ft house in a much lower cost of living area. Then you could re-invest as you wish, but much more carefully and thoughtfully this time around.
Yep, sell the big, mortgaged house RIGHT THIS MINUTE.  As a single-income family with such a large debt -- even with savings -- you're putting yourself at risk.  If you were to lose your job (or become sick, or whatever else), you'd be in trouble.  5 people do not need 3500 sf, even with frequent entertaining factored into the equation.
If I had a quarter of the assets you list I would be set for life and I feel my family of 4 lives quite comfortably in 2100 square feet with room for one more and room to entertain,
I do have a quarter of the OP's assets (and none of the debt), and I obtained them on a much smaller income.  I suspect quite a few people on this board could say the same.  I do live in a 2400 sf house (though we have only two children), and we are planning to build a 1900 sf house in the next couple years.
We do want to give our children advantages that we didn't have in life, and that drives a lot of our discretionary spending (education, lessons, experiences).  Being a single income family, spouse is full time involved in children's growth and development (and it really is a full time job).  We also are trying to use our means to buy "access" to things that may differentiate them from their peers.  Perhaps we have a cynical view of the world because spouse and I both grew up in struggling families, but to us there is intrinsic value in being exposed to individuals who are already or who will eventually be influential.  Whether that costs an extra x years of work seems quantifiable and therefore makes it easy to decide whether it is "worth" it.  I guess 30 years from now I don't want to look back and say I didn't do my best for my family.
I think we differ in our thoughts on "best for my family".  You're thinking that "best" means living in an upscale community, meeting the right people and having the right experiences so you can set the kids on a career trajectory to live in an upscale community, hang with the right people and have the right experiences as adults. You're trying to put them on the right hamster wheel. 

I hear what you're saying, and I know you believe it wholeheartedly, but I'd ask when was the last time you took your family and the dog out to a state park and spent the afternoon fishing, paddling around in rented canoes, and eating sandwiches from a cooler?  I mean an afternoon just hanging out with the family, talking and telling stories?  Maybe including a couple friends so you get a glimpse of who your teens choose to spend time with?  My youngest is about to head out to college, and those lazy family days are the things I will cherish most from their childhood. 

Yes, in addition we've introduced them to people who've helped put them on the right roads towards their professional lives and have provided "extras" in their chosen fields, but those aren't the things that've mattered most.  Those aren't the things that've helped make them good people. 

I also grew up in a family that could have been called "struggling".  We always called it dirt poor.  We've been successful -- middle-class successful -- professionally, and we decided early on that we were purposefully going to give our kids LESS than we could afford.  Yes, they had summer camp and music lessons and lots of travel, but they did it in second-hand clothes and with the idea of getting value for the dollar.  They've grown up to be intelligent, resourceful, grateful kids. 
« Last Edit: April 06, 2015, 06:13:09 AM by MrsPete »

justajane

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #20 on: April 06, 2015, 06:19:36 AM »
Isn't one of the biggest perks of San Diego living and why you pay a mint to live there the fantastic weather? If you're worried about having enough room to entertain, couldn't you drop tons of money on a kick ass backyard entertaining area in your current home or another home? Based on your situation and your climate, it seems silly to want a 5,000 sq ft or larger home just for entertaining. Maybe if you lived in Canada I could understand.

It sounds like you are embarrassed by the look of your current home. I would sell and find a home of the same or smaller size that looks more prestigious but doesn't necessarily cost more.

I agree with others that you have to be careful about setting up unrealistic expectations for your children. That's probably one of the worst things you can do for their future finances. If they think that a 5,000+ sq ft home is normal or the bare minimum for existence -- that X car or Y clothes must be had for happiness and some arbitrary sense of success, then they will have to pursue careers that pay enough for them to have those things, regardless of whether they actually enjoy them. 

SanDiegoFIRE

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #21 on: April 07, 2015, 08:03:51 AM »
Thanks again for all the replies

To provide some context of our child-rearing philosophy:

We aren't naive about what it takes to be successful.  Our kids get A's, have high test scores and participate/compete in a few concentrated extracurricular activities at a very high level.  They are well-grounded and we have always focused on developing character, process over results, means and not just ends.  They know the value of $1, and are exposed to peers who have both a lot more and a lot less than they do.

Of course getting into Harvard doesn't guarantee professional success (nor do the things above guarantee admission), but it definitely increases the chances of it.  No credential is magic and sets one up for life, but everything in aggregate dramatically tilts the scale in favor of it:
* the discipline developed over many years of practicing a sport or instrument
* the confidence acquired from competing at a high level and winning
* the knowledge from studying hard and going above and beyond what is required to just 'get by' in school (via careful tutelage and focused attention on their development)
* being exposed to people who are learned, cultured and successful and emulating them (EQ and soft skills)
* work experiences in the real world (via internships) that helps them understand and realize early on what career they may want to pursue
* cultural experiences (travel, arts, etc) that everyone on these forums seems to live for

These things aren't really available for free - but I think there is no question they help children get ahead in life

rocksinmyhead

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #22 on: April 07, 2015, 08:23:54 AM »
I agree with others that you have to be careful about setting up unrealistic expectations for your children. That's probably one of the worst things you can do for their future finances. If they think that a 5,000+ sq ft home is normal or the bare minimum for existence -- that X car or Y clothes must be had for happiness and some arbitrary sense of success, then they will have to pursue careers that pay enough for them to have those things, regardless of whether they actually enjoy them.

+1000000 (also to everything MrsPete said)

I know you obviously didn't come here asking for parenting advice, and you seem to have put a great deal of thought into your parenting philosophy, but it just seems to me that if your kids find they don't want to pursue a lucrative career (like maybe they would prefer social work, or MMM-style early retirement) it's gonna kinda suck for them if they are raised to feel, as justajane said, that "a 5,000+ sq ft home is normal or the bare minimum for existence." just want to point out (in response to your last post) I'm not questioning whether your children will have the ability to be wildly financially successful (as you have, which PS congrats! and I'm also super curious about what you do, LOL), but whether extreme financial success will align with their own pursuit of happiness.

pbkmaine

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #23 on: April 07, 2015, 09:04:34 AM »
Bulery326 hit the nail on the head. My parents were private school teachers who sent me to very expensive private schools and then to the Ivy League for my undergraduate degree and MBA. Many of my classmates at private school had been provided with lavish trust funds. These did not do them any favors. Coming from no money, I am one of the highest achievers in my class. I had advantages my classmates didn't: the hard-working example of my parents, and the understanding that I would have no one but myself to rely on financially. Parents who give their children everything can inadvertently rob them of motivation. SanDiegoFIRE, I have so many friends like you. Do not deny your children the opportunity to make their own way in life. The most important support you can provide them is not financial.  As for your own life, you have already accumulated enough to retire, should you choose. But you will have to leave your present life behind. Are you prepared to do that? As others have said, the hardest work you have in front of you is deciding what's important, for you and your family. That will give you the answer to your initial question, of whether to stay put or move.

MrsPete

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #24 on: April 08, 2015, 03:33:26 PM »
Thanks again for all the replies

To provide some context of our child-rearing philosophy:

We aren't naive about what it takes to be successful.  Our kids get A's, have high test scores and participate/compete in a few concentrated extracurricular activities at a very high level.  They are well-grounded and we have always focused on developing character, process over results, means and not just ends.  They know the value of $1, and are exposed to peers who have both a lot more and a lot less than they do.

Of course getting into Harvard doesn't guarantee professional success (nor do the things above guarantee admission), but it definitely increases the chances of it.  No credential is magic and sets one up for life, but everything in aggregate dramatically tilts the scale in favor of it:
* the discipline developed over many years of practicing a sport or instrument
* the confidence acquired from competing at a high level and winning
* the knowledge from studying hard and going above and beyond what is required to just 'get by' in school (via careful tutelage and focused attention on their development)
* being exposed to people who are learned, cultured and successful and emulating them (EQ and soft skills)
* work experiences in the real world (via internships) that helps them understand and realize early on what career they may want to pursue
* cultural experiences (travel, arts, etc) that everyone on these forums seems to live for

These things aren't really available for free - but I think there is no question they help children get ahead in life
You're putting an "educational, all for the kids" spin on it here, but your overall posts seem to indicate that your priorities are having the big house, social status, and the ability to spend heavily.  In short, it sounds like a consumer-based, materialistic lifestyle, and you won't find a great deal of support for those values here.

If I've interpreted this incorrectly, I'm sorry, but that's what I'm hearing from your posts.

SanDiegoFIRE

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #25 on: April 09, 2015, 09:31:03 AM »
Thanks again for all the replies

To provide some context of our child-rearing philosophy:

We aren't naive about what it takes to be successful.  Our kids get A's, have high test scores and participate/compete in a few concentrated extracurricular activities at a very high level.  They are well-grounded and we have always focused on developing character, process over results, means and not just ends.  They know the value of $1, and are exposed to peers who have both a lot more and a lot less than they do.

Of course getting into Harvard doesn't guarantee professional success (nor do the things above guarantee admission), but it definitely increases the chances of it.  No credential is magic and sets one up for life, but everything in aggregate dramatically tilts the scale in favor of it:
* the discipline developed over many years of practicing a sport or instrument
* the confidence acquired from competing at a high level and winning
* the knowledge from studying hard and going above and beyond what is required to just 'get by' in school (via careful tutelage and focused attention on their development)
* being exposed to people who are learned, cultured and successful and emulating them (EQ and soft skills)
* work experiences in the real world (via internships) that helps them understand and realize early on what career they may want to pursue
* cultural experiences (travel, arts, etc) that everyone on these forums seems to live for

These things aren't really available for free - but I think there is no question they help children get ahead in life
You're putting an "educational, all for the kids" spin on it here, but your overall posts seem to indicate that your priorities are having the big house, social status, and the ability to spend heavily.  In short, it sounds like a consumer-based, materialistic lifestyle, and you won't find a great deal of support for those values here.

If I've interpreted this incorrectly, I'm sorry, but that's what I'm hearing from your posts.

My original post asks about housing possibilities.  I shared a bit of our child-rearing philosophy, in response to some other comments.  The reality is they are all related.

"Social status", or knowing the right people (whether you agree with the way they live or respect them) is an important part of being successful in the material world. 

"Spending heavily" as you describe is unfortunately a cost of admission to being part of that elite group.  I think you may have some misconceptions about what it entails, however.

We actually don't consume a lot or spend a lot on material things, which is why the housing decision has not been an easy one.

While I am sure I could retire today, the fact is I don't feel the desire or need to, so I have decided to use our resources to improve our family's happiness, both now and in the future. 

bacchi

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #26 on: April 09, 2015, 10:18:48 AM »
While I am sure I could retire today, the fact is I don't feel the desire or need to, so I have decided to use our resources to improve our family's happiness, both now and in the future.

You could retire today but, let's face it, you'd be miserable because of the social status downfall and being kicked out of that elite group. I can see how that would hinder your family's happiness.

Sounds like you know what you want to do. Good luck.


(WestchesterFrugal, is that you?)

ShoulderThingThatGoesUp

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #27 on: April 09, 2015, 10:41:19 AM »
This thread is hilarious. You owe $1,900,000 on a house you don't even like? HAHAHAHA!

Also I grew up with lots of school pressure and scheduling and extracurriculars, and I broke as a person for a few years in college (and yes, it was Ivy League). I didn't know what to do with myself because I hadn't been bored and in need of something to do since middle school. I don't know if that's what you're doing, but it requires more balance than I got. Certainly my parents were nothing but well-intentioned, but it almost turned out very poorly for me.

rocksinmyhead

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #28 on: April 09, 2015, 10:43:02 AM »
(WestchesterFrugal, is that you?)

bahahaha I have deja vu.

Valhalla

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #29 on: April 09, 2015, 10:45:50 AM »
This thread is hilarious. You owe $1,900,000 on a house you don't even like? HAHAHAHA!

Also I grew up with lots of school pressure and scheduling and extracurriculars, and I broke as a person for a few years in college (and yes, it was Ivy League). I didn't know what to do with myself because I hadn't been bored and in need of something to do since middle school. I don't know if that's what you're doing, but it requires more balance than I got. Certainly my parents were nothing but well-intentioned, but it almost turned out very poorly for me.
I know it sounds outrageous, but go easy on the OP.

I know where he's coming from. California is out of control.  I was debating moving to California for the nice weather, as I get paid "California wages" but live in a much lower COL area.

The real estate in California shocks me.  My current $300k house would be worth $1.5 million in California, at least.  It's insane.  I looked at $1 million homes in some areas and they are a joke.  That's right, a $1 million home with virtually no yard, or an older home with a larger yard but needs some renovation to make it enjoyable, at least with my standard of living from outside of California.

I like the weather, but I ain't willing to sell my soul to the devil for that.  I'd much rather become FIRE and then take frequent "mental vacations" to the nice weather areas, than be a slave to the insanity that California is.

OP's income shocks me though - $900k - $1million is hard to achieve...what line of work do you do, OP?   And why does it fluctuate so much? Is it in sales? If so bank as much as you can because what's good today can be gone tomorrow, and start looking for an exit strategy out of this insanity.

Emg03063

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #30 on: April 09, 2015, 05:22:12 PM »
Option 5:  Modified option 2.  Phased renovation focusing on your biggest payoff areas (in terms of happiness gained per dollar spent).  Pareto principle likely applies.  Consider finding a GC that will guide you through work as a DIY project, and put in sweat equity.  At some point you'll decide you've hit your point of diminishing return and be satisfied.

LouLou

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #31 on: April 09, 2015, 09:34:05 PM »
Thanks again for all the replies

To provide some context of our child-rearing philosophy:

We aren't naive about what it takes to be successful.  Our kids get A's, have high test scores and participate/compete in a few concentrated extracurricular activities at a very high level.  They are well-grounded and we have always focused on developing character, process over results, means and not just ends.  They know the value of $1, and are exposed to peers who have both a lot more and a lot less than they do.

Of course getting into Harvard doesn't guarantee professional success (nor do the things above guarantee admission), but it definitely increases the chances of it.  No credential is magic and sets one up for life, but everything in aggregate dramatically tilts the scale in favor of it:
* the discipline developed over many years of practicing a sport or instrument
* the confidence acquired from competing at a high level and winning
* the knowledge from studying hard and going above and beyond what is required to just 'get by' in school (via careful tutelage and focused attention on their development)
* being exposed to people who are learned, cultured and successful and emulating them (EQ and soft skills)
* work experiences in the real world (via internships) that helps them understand and realize early on what career they may want to pursue
* cultural experiences (travel, arts, etc) that everyone on these forums seems to live for

These things aren't really available for free - but I think there is no question they help children get ahead in life
You're putting an "educational, all for the kids" spin on it here, but your overall posts seem to indicate that your priorities are having the big house, social status, and the ability to spend heavily.  In short, it sounds like a consumer-based, materialistic lifestyle, and you won't find a great deal of support for those values here.

If I've interpreted this incorrectly, I'm sorry, but that's what I'm hearing from your posts.

My original post asks about housing possibilities.  I shared a bit of our child-rearing philosophy, in response to some other comments.  The reality is they are all related.

"Social status", or knowing the right people (whether you agree with the way they live or respect them) is an important part of being successful in the material world. 

"Spending heavily" as you describe is unfortunately a cost of admission to being part of that elite group.  I think you may have some misconceptions about what it entails, however.

We actually don't consume a lot or spend a lot on material things, which is why the housing decision has not been an easy one.

While I am sure I could retire today, the fact is I don't feel the desire or need to, so I have decided to use our resources to improve our family's happiness, both now and in the future.

I knew (and know) many, many, many people like you! I went to highly ranked, competitive institutions for middle school, high school, university, and law school. I work at a highly regarded law firm now as an adult.  None of that required: a large expensive house, expensive cars, country club memberships, or other material things to fit into an "elite" group.

Many people are concerned about your kids being unable to cope in less fancy digs later in life, but I know many people who grew up in literal mansions who are fine living in smaller places that fit their current budgets. Just make sure you don't support them in lavish lifestyles when they are all adults. Some of my wealthier friends really floundered until they became responsible for their own bills. Then they immediately cut back or worked a lot harder.

Now onto your actual question!

If you are in the perfect location with a big lot, I say definitely don't move. Whether to renovate or rebuild is not something I can know without more details about the house itself. (Feel free to provide more details.  I love houses, renovations, home buying, all that stuff!)

That said, if you rebuild, I would recommend not building bigger. It sounds like the problem with your house is its curb appeal and its layout.  If you custom build, you can develop a floor plan that fits your needs perfectly without having to be bigger. Bigger house --> bigger headaches. You should aim for just big enough. DH and I planned to custom build and want a family your size (bought an existing house instead). 3500 sqft was just about the right size.

Take some time and figure out precisely what your family wants/needs in a house and make list, then work backwards. Does entertaining mean more open floor plan or a more closed one? A better indoor/outdoor transition since you have a great backyard? Do you want your bedroom near the kids or away from them?  Then, look at floorplans online for what you like and dislike. Simplify to get rid of extra building costs - bathrooms on top of each other instead of randomly throughout the floor plan, no extra corners on the exterior, etc. And try to think smaller. A well designed, smaller house would probably make you happier than some giant one with tons of unnecessary stuff.

The "building a home" forum on That Home Site! is a wealth of information.

greaper007

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #32 on: April 09, 2015, 09:36:44 PM »
A million a year?    Sell the house, buy something reasonable in the $300k range.     Save say 50% of your income for a few years and quit everything.   That's what I would do at least.    Why exactly do you have to spend large amounts of money to live among the elite as you say?    My dad was a captain at a major airline (when pilots used to make bank) my entire childhood and he drove a Camry and we went to public schools.

Do your kids want to go to Harvard, or do you want them to go to Harvard?    I spent my 20s chasing after what my dad told me to do and ended up breaking down and quitting at 29 after I had actually achieved the dream.    Now I wish I would have spent my 20s having sex and doing something creative.     I often daydream about living in a van and cooking interesting food.

Valhalla

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #33 on: April 10, 2015, 01:22:33 AM »
A million a year?    Sell the house, buy something reasonable in the $300k range.     Save say 50% of your income for a few years and quit everything.   That's what I would do at least.    Why exactly do you have to spend large amounts of money to live among the elite as you say?    My dad was a captain at a major airline (when pilots used to make bank) my entire childhood and he drove a Camry and we went to public schools.

Do your kids want to go to Harvard, or do you want them to go to Harvard?    I spent my 20s chasing after what my dad told me to do and ended up breaking down and quitting at 29 after I had actually achieved the dream.    Now I wish I would have spent my 20s having sex and doing something creative.     I often daydream about living in a van and cooking interesting food.
OP really can't sell and get something decent for $300k in San Diego. You can barely buy a shack for $500k there.  It's obscene.

MrsPete

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #34 on: April 10, 2015, 06:39:29 AM »
Thanks again for all the replies

To provide some context of our child-rearing philosophy:

We aren't naive about what it takes to be successful.  Our kids get A's, have high test scores and participate/compete in a few concentrated extracurricular activities at a very high level.  They are well-grounded and we have always focused on developing character, process over results, means and not just ends.  They know the value of $1, and are exposed to peers who have both a lot more and a lot less than they do.

Of course getting into Harvard doesn't guarantee professional success (nor do the things above guarantee admission), but it definitely increases the chances of it.  No credential is magic and sets one up for life, but everything in aggregate dramatically tilts the scale in favor of it:
* the discipline developed over many years of practicing a sport or instrument
* the confidence acquired from competing at a high level and winning
* the knowledge from studying hard and going above and beyond what is required to just 'get by' in school (via careful tutelage and focused attention on their development)
* being exposed to people who are learned, cultured and successful and emulating them (EQ and soft skills)
* work experiences in the real world (via internships) that helps them understand and realize early on what career they may want to pursue
* cultural experiences (travel, arts, etc) that everyone on these forums seems to live for

These things aren't really available for free - but I think there is no question they help children get ahead in life
You're putting an "educational, all for the kids" spin on it here, but your overall posts seem to indicate that your priorities are having the big house, social status, and the ability to spend heavily.  In short, it sounds like a consumer-based, materialistic lifestyle, and you won't find a great deal of support for those values here.

If I've interpreted this incorrectly, I'm sorry, but that's what I'm hearing from your posts.

My original post asks about housing possibilities.  I shared a bit of our child-rearing philosophy, in response to some other comments.  The reality is they are all related.

"Social status", or knowing the right people (whether you agree with the way they live or respect them) is an important part of being successful in the material world. 

"Spending heavily" as you describe is unfortunately a cost of admission to being part of that elite group.  I think you may have some misconceptions about what it entails, however.

We actually don't consume a lot or spend a lot on material things, which is why the housing decision has not been an easy one.

While I am sure I could retire today, the fact is I don't feel the desire or need to, so I have decided to use our resources to improve our family's happiness, both now and in the future.
So what I'm hearing is that I've understood you correctly ... and you're fine prioritizing consumer spending, seeing it as a method of advancement for the kids, yet your rationalization shows that you're also a bit uncomfortable with it.  Cognitive dissonance. 

rocksinmyhead

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #35 on: April 10, 2015, 07:12:04 AM »
This thread is hilarious. You owe $1,900,000 on a house you don't even like? HAHAHAHA!

Also I grew up with lots of school pressure and scheduling and extracurriculars, and I broke as a person for a few years in college (and yes, it was Ivy League). I didn't know what to do with myself because I hadn't been bored and in need of something to do since middle school. I don't know if that's what you're doing, but it requires more balance than I got. Certainly my parents were nothing but well-intentioned, but it almost turned out very poorly for me.
I know it sounds outrageous, but go easy on the OP.

I know where he's coming from. California is out of control.  I was debating moving to California for the nice weather, as I get paid "California wages" but live in a much lower COL area.

The real estate in California shocks me.  My current $300k house would be worth $1.5 million in California, at least.  It's insane.  I looked at $1 million homes in some areas and they are a joke.  That's right, a $1 million home with virtually no yard, or an older home with a larger yard but needs some renovation to make it enjoyable, at least with my standard of living from outside of California.

I like the weather, but I ain't willing to sell my soul to the devil for that.  I'd much rather become FIRE and then take frequent "mental vacations" to the nice weather areas, than be a slave to the insanity that California is.

OP's income shocks me though - $900k - $1million is hard to achieve...what line of work do you do, OP?   And why does it fluctuate so much? Is it in sales? If so bank as much as you can because what's good today can be gone tomorrow, and start looking for an exit strategy out of this insanity.

Yeah but his current house isn't $1.5 million, it's $3 million (and 3500 sq ft!!) and it's still not good enough! I looked up La Jolla on Realtor.com and those $3MM homes are SWANK. I get wanting to entertain, but we entertain a shit ton in our 1000 sq ft house and our friends haven't ditched us yet. I get that expectations among the fancy people are different, but if you think that's that important you are on the wrong forum.

Do your kids want to go to Harvard, or do you want them to go to Harvard?

+1000000

Sorry for all of these comments that may be perceived as attacking your parenting and values, but I just don't think you're gonna find the advice you want here.
« Last Edit: April 10, 2015, 07:15:47 AM by rocksinmyhead »

SanDiegoFIRE

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #36 on: April 10, 2015, 07:22:27 AM »
Interesting responses

I find the well wishes from those who don't seem genuine to be antagonistic, but it is the internet so low expectations

While it is always prudent to consider the worst case scenario, suggestions that our children will grow up to be lost souls or failures (think Julian in "Less Than Zero") because we have means and afford them advantages in life, or that as a family we would be miserable if we decide to cut back on socializing and spending either out of necessity or by choice seem misguided due to ignorance at best (envy or a harbored hatred?)

Do I think the status and power of the people you associate with are important in order to maximize the chances of worldly success?  Yes, in most professions, and even if not there are other benefits of hobnobbing with the 'elite'.  Should that encompass the entire meaning and purpose of life?  An obvious rhetorical question.

I do think perhaps some self-reflection is needed before throwing stones:

If you dislike your boss or employer, do you tell them how you truly feel?  If not, why - to further your own self-interest?  How is it different than someone recognizing that status and "who you know" are important and optimizing one's connections?

If you made dramatic changes in your financial affairs (perhaps inspired by this blog) were you miserable or unable to continue living?  Is it impossible to believe others might be able to do the same?

Are all children who grow up privileged in life doomed for failure?  How about the ones who have already consistently displayed a high aptitude or level of performance in whatever they set out to do?

If you had the ability to give your children the resources and opportunities to do whatever they want, but not so much that they would feel like doing nothing, would you?

justajane

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #37 on: April 10, 2015, 07:32:59 AM »
SanDiegoFIRE - From my perspective, the disconnect here is that you see "worldly success" and all its relevant trappings as integral to your and your children's happiness, whereas the average poster on these thread seems to find their happiness in the freedom to live life on his or her own terms, regardless of what the rest of the world thinks.

SanDiegoFIRE

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #38 on: April 10, 2015, 08:02:34 AM »
SanDiegoFIRE - From my perspective, the disconnect here is that you see "worldly success" and all its relevant trappings as integral to your and your children's happiness, whereas the average poster on these thread seems to find their happiness in the freedom to live life on his or her own terms, regardless of what the rest of the world thinks.

Not sure how one could deduce that it is "integral" to our happiness - I have stated that I am simply using the resources available to me to maximize our joy in life.

While I think there are some individuals who would not change anything about his life if he were worth 1000x current wealth, I doubt any of them are posting cynical comments about how one chooses to allocate resources in enjoying life.

Anyway I am off to work (which I actually enjoy) - have a nice day all.

Valhalla

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #39 on: April 10, 2015, 05:05:07 PM »
Interesting responses

I find the well wishes from those who don't seem genuine to be antagonistic, but it is the internet so low expectations

I think most are simply unable to relate to your situation. You're the 1%.  Most of us, who are FIRE, are probably in the 5-10%, not anywhere close to the 1%.

And I sympathize with your situation in SD.  The real estate there is just unreal.  The numbers you mention may sound like absurdity to most people, but I have seen it first hand personally, so I understand where you're coming from.

Are you in the medical field? I'm curious what field you're in that pays so well.

greaper007

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #40 on: April 11, 2015, 03:13:35 PM »
Interesting responses

I find the well wishes from those who don't seem genuine to be antagonistic, but it is the internet so low expectations

While it is always prudent to consider the worst case scenario, suggestions that our children will grow up to be lost souls or failures (think Julian in "Less Than Zero") because we have means and afford them advantages in life, or that as a family we would be miserable if we decide to cut back on socializing and spending either out of necessity or by choice seem misguided due to ignorance at best (envy or a harbored hatred?)

Do I think the status and power of the people you associate with are important in order to maximize the chances of worldly success?  Yes, in most professions, and even if not there are other benefits of hobnobbing with the 'elite'.  Should that encompass the entire meaning and purpose of life?  An obvious rhetorical question.

I do think perhaps some self-reflection is needed before throwing stones:

If you dislike your boss or employer, do you tell them how you truly feel?  If not, why - to further your own self-interest?  How is it different than someone recognizing that status and "who you know" are important and optimizing one's connections?

If you made dramatic changes in your financial affairs (perhaps inspired by this blog) were you miserable or unable to continue living?  Is it impossible to believe others might be able to do the same?

Are all children who grow up privileged in life doomed for failure?  How about the ones who have already consistently displayed a high aptitude or level of performance in whatever they set out to do?

If you had the ability to give your children the resources and opportunities to do whatever they want, but not so much that they would feel like doing nothing, would you?

I remember reading an interview on Neil Young shortly after Cobain's suicide.     His response to the event was "Never look the devil in the eyes..."   Wealth, fame, success or other ego boosters shouldn't be considered substitutes for a grounded, centered life.   I don't think you achieve that by valuing things like "performing at an elite level."   Unless that means you have a kid that volunteers 40 hours a week on skid row or a hospice.    I have a feeling that's not what you mean though.

Don't forget, Joe Kennedy came from meager means, had success and essentially set out to make his son president.    That son died trying to fly a top secret heroic mission in WWII.    The next one made it and was assassinated, and the next one...Be careful what you wish for.


Honestly, this isn't coming from a place of jealousy.    I came from a wealthy family that pushed success in the same way you seem to be doing.     Most of the other wealthy people in our neighborhood became philandering drug addicts by the time I was in college.   They were some of the richest, most unhappy people I've ever met.    I wouldn't ever want my children to be around that element.    It was a really dangerous, creepy vibe.   YMMV

As for your previous question, it seems like you don't have a lot of savings considering your income level.     You also indicated that you're in a career that might have a mercurial job security level.     So I think you have your answer, save enough money that you're financially independent before you do anything like pushing a lot of money into having a party house.   GL


firedup

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #41 on: April 11, 2015, 06:38:50 PM »
I doubt this is a troll. They just landed in the wrong place.

Why ask the plebes what they think? You do realize you make more in a year than most of make in a decade, some of us in two or three decades?

If your wants are to build a house so that you can have live-in help, probably less than one percent of the commenters on here can relate or provide you advice that fits your situation.

Your question is so far-fetched to most of us that it's almost like someone coming on here and asking what 10k handbag they should buy. Does. not. compute.


.......or lifetime.......lol......

We had a friend visit from San Diego and he said our house would be worth well over 1 million in SD and we were shocked. Current market puts us about 250-275 right now so location does make a difference.
« Last Edit: April 11, 2015, 06:43:06 PM by firedup »


Abe

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #43 on: April 11, 2015, 08:21:24 PM »
What you do with the house depends on how long you want to stay there. If you plan for your kids to grow up in it, consider renovations if there are major structural issues with the house. Spending $500k on cosmetics is probably a bit much for the value you'd get, unless you really like staring at your house and are planning on living there a long time. People over-estimate the value that renovations bring.  Tearing and rebuild doesn't sound worth it with the added stress and relocation-related expenses. Moving is definitely an option, but I'd move out of that area due to the costs.

greaper007

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #44 on: April 11, 2015, 09:31:25 PM »
http://www.nytimes.com/2015/04/12/opinion/sunday/frank-bruni-best-brightest-and-saddest.html?smid=fb-share

Great link, thanks.

I've had the unique experience of existing both in the very wealthy and the very hopeless areas of society within my relatively short lifetime.   The wealthy experience was granted to me by birth, and the hopeless was granted by a misbegotten later youth spent in drug houses in what many people would deem the ghetto.    Remarkably, I've found that the expressions on the faces of both the elite and the forgotten are largely the same.    It's sort of a mixture between blank and angry.    A challenge to "come fuck with me, I will destroy you."    Really though it said "'I'm desperately holding on to what I have and I'm scared to death."     I'm sure we've all seen this expression in ghettos, Native American reservations or developing countries.    Stop and look next time you're in Whole Foods though, the expressions are the same.   

To me, the fact that so many rich people are scared and angry is the ultimate sadness.    When I look at my children and their wide eyed optimism and happiness to just exist I have to constantly remind myself that my first duty is to not fuck that up.    They're perfect, and they'll have a chance at happiness if I just help guide them to what they might enjoy in this incredibly short tenure on this planet.     Seriously, much like doctors, parents should have a Hippocratic oath that says "Don't fuck them up, because you will, and it will ruin their lives."

SanDiegoFIRE

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #45 on: April 12, 2015, 03:27:44 AM »
Don't forget, Joe Kennedy came from meager means, had success and essentially set out to make his son president.    That son died trying to fly a top secret heroic mission in WWII.    The next one made it and was assassinated, and the next one...Be careful what you wish for.

Honestly, this isn't coming from a place of jealousy.    I came from a wealthy family that pushed success in the same way you seem to be doing.     Most of the other wealthy people in our neighborhood became philandering drug addicts by the time I was in college.   They were some of the richest, most unhappy people I've ever met.    I wouldn't ever want my children to be around that element.    It was a really dangerous, creepy vibe.   YMMV

I've had the unique experience of existing both in the very wealthy and the very hopeless areas of society within my relatively short lifetime.   The wealthy experience was granted to me by birth, and the hopeless was granted by a misbegotten later youth spent in drug houses in what many people would deem the ghetto.    Remarkably, I've found that the expressions on the faces of both the elite and the forgotten are largely the same.    It's sort of a mixture between blank and angry.    A challenge to "come fuck with me, I will destroy you."    Really though it said "'I'm desperately holding on to what I have and I'm scared to death."     I'm sure we've all seen this expression in ghettos, Native American reservations or developing countries.    Stop and look next time you're in Whole Foods though, the expressions are the same.   

While I find the personal anecdotes interesting and instructive, I don't think they are particularly relevant or accurate. 

The Kennedy's?  Seriously?

I also doubt that "most of the other wealthy people in our neighborhood became philandering drug addicts by the time I was in college," unless you lived in a Hollywood movie.  Most of the affluent communities across the US are comprised of people who are much better than the "average," not just in household income, but in emphasizing family values (i.e. principles most would agree on in the realm of human decency), building community, abiding by the law, prioritizing education and understanding what brings true happiness in life.  The fictionalized stereotype of the average wealthy family and community being dysfunctional and horrible places to live are a myth, and if the experiences you've shared with the not-well-adjusted wealthy are the only ones you've come across then I would conclude that you may not have interacted with very many wealthy people.

We all know individuals who lost everything during the financial crisis just 6-7 years ago.  Buying houses and stocks at inflated levels, coupled with job loss and maybe some health issues or other uncontrollable events caused some people to become 'unlucky'.  They are the exceptions.

And just as their unfortunate experience doesn't make buying a home or investing in stocks bad financial choices for everyone else, neither should exaggerated anecdotes in identifying the exceptions in life (including a political dynasty, knowing a rich person who was a drug addict and unfaithful to his spouse, and comparing the hopelessness of the evil rich to that of the most hopeless and needy in society) be used to categorically determine the worth, happiness and human experience of a group of people who happen to have money.
« Last Edit: April 12, 2015, 03:35:41 AM by SanDiegoFIRE »

frugaldrummer

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #46 on: April 12, 2015, 09:10:15 AM »
Well, not to belabor the child rearing discussion, but Malcolm Gladwell today on GPS had some interesting things to say about the Downside of Affluence, and it does fit with what I observed raising my kids in la jolla. (Interesting, too, that as adults, my kids complain that being raised in a color-blind environment....they're white...gave them a false sense that racism had been eradicated).

As for the "ugly" house.... couldn't you beautify it for a lot less than $500k?  a new kitchen if needed, fresh flooring and paint, maybe some modest changes to the facade or landscaping, would probably go a long way and be doable for $100_ 150k. Nice outdoor space is the best party space in our climate. What style of house is it? I can't think of too many intrinsically ugly housing styles where you live.


bacchi

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #47 on: April 12, 2015, 10:00:18 AM »
I had to ask my partner, who is more well versed in such matters, whether this was a troll or not.

"Partner," I sez, "Is this for real? If we assume that she [the OP] is smarter than the average bear, and probably has an advanced degree from an elite university, then why would she spend so much time and energy trying to 'optimiz[e] one's connections' or 'know[] the right people'? Why so much concern about climbing the social ladder?"

My partner assured me that people like this are, indeed, real and do really worry about these things to an unhealthy degree. I'm still somewhat skeptical -- it's just...unfathomable.

Quote from: SanDiegoFIRE
or that as a family we would be miserable if we decide to cut back on socializing and spending either out of necessity or by choice seem misguided due to ignorance at best (envy or a harbored hatred?)

Nah, it was mockery and some pity. It was an attempt to hold up a fun-house mirror to what you were saying. It obviously didn't work and was a bad idea given that you've been pretty defensive throughout this thread.

Of course, I was also paraphrasing your words:

Quote from: SanDiegoFIRE
(i.e. the earlier we retire the worse our quality of life while we are working and the less respected we would be in the community).

Given that, I do sincerely wish you good luck and hope you find your way. There's obviously some hole to fill and I hope that you'll soon realize that you already have enough.* Cheers.


*
Quote from: KurtVonnegut
And Joe said, “I’ve got something he can never have.”
And I said, “What on earth could that be, Joe?”
And Joe said, “The knowledge that I’ve got enough.”

starguru

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #48 on: April 12, 2015, 12:34:54 PM »
OP

it might be helpful to do the following:

1.  Figure out when you want to stop working.
2.  Figure out how much you want to be able to spend in retirement.
3.  Figure out how much you are saving now.
4.  then judge your home renovation/upgrade options against the first 3 considerations.

from what I am reading you have 1.5MM in investments and an income between 900k and 1,400k.  It seems you have some investments properties but they are not bringing in significant income, although they are cash flow positive.  I think I read somewhere your annual spend is around 400k but you can get by on 250k. 

So lets make some assumptions here:

Take an income of 1MM, assuming the low side of the range you gave.  I assume your total federal/state tax liabilities are around 400-450k, leaving you with 500-550k net income.  Based on your spending, this leaves you 100-250k of savings every year. 

So, to support spending of 400k a year you need 10MM.  So you need to amass 8500k more.  Saving 250k, assuming 5% return, it'll take you around 18 years to reach that sum.  If we assume a 400k save a year, and 6% ROI, then you are 12 years out.  That is very very loose estimate, and it doesn't consider your investment properties, but I think it shows an important point -- you are no where near where you need to be for FI, given your annual spend rate and lifestyle goals. 

The other thing to consider if that you mention your job situation is not very stable and your worse case scenario would be to fall back on 500k a year income.  If that happened, your financial situation starts looking a little more precarious if you still want to spend 400k a year. 

Can you afford to build a new home?  Assuming the gravy train keeps rolling, you can do whatever you want, but its going to push your time to FI out a corresponding amount of time.  If you income drops, and you indicate it might, you might be in over your head.  Its up to you to balance your RE desire and your job risk against your desired lifestyle choices.

It might not be a bad idea to really try and up the savings.  Get to FI and *then* spend according to the 4% rule, instead of spending as if you are sure you are going to make it.

Best of luck!

PS What line of work are you in?  Im guessing plastic surgeon.
« Last Edit: April 12, 2015, 01:02:35 PM by starguru »

Erica/NWEdible

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Re: Case Study: Stay put, renovate, tear down and rebuild, or move?
« Reply #49 on: April 12, 2015, 02:07:38 PM »
Isn't real estate all about location, location, location? So I'm gonna go with....if you love the location, and you're in the crap house in the great neighborhood (which is supposedly a great position to be in!), tweak the house you have with a remodel, but try to keep the size increase and payout modest and focus on changes that will make your family truly more long-term happy. I love the outdoor entertaining area idea, since you said you have a large lot and it takes advantage of the weather.

You're not desperate to stop working, and you seem confident that you are spending the way you want to be. My advice is to look at how and where you spend (on this house and elsewhere as needed) as an exercise in balancing your values. Weigh increased security and financial freedom, retirement, etc. against the spend you feel is necessary to have that "door to influential people" stay open and buy your kids the opportunities you value. Just keep bringing your spending back to how in line it is with YOUR values and you'll find the right answer for you. Whether your values are the same as my values or anyone else on this forum is totally irrelevant.

That said, the collective values of this forum tend to be strongly anti-consumerist, DIY and...I guess not flashy with money is the best way to put it. It's just different from the world of success and access you are describing. So, I second the idea that you should check out Bogleheads - the folks there are more the high earner, super-high retirement goal types. You might find it easier to bounce ideas around with folks who are in a more similar position to yours.

Good luck!