Author Topic: How to plan for a home upsizing instead of downsizing in retirement?  (Read 6912 times)

StacheInAFlash

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Has anyone planned (or done!) a home upsizing after FIRE? It seems that most people always talk about downsizing or moving away from a HCOL area to a LCOL area and banking that housing cost difference. My wife and I are thinking doing somewhat of the opposite, and we just aren’t sure how best to plan for it.
 
We live in a very sensible 1930s built 2Bed/1Bath home on a postage stamp sized lot in the big city worth about $220K. It meets our needs beautifully during this wealth accumulation phase that I estimate will last another 8 or 9 years. In 8 or 9 years, it will probably be worth $260K or maybe way more as the area is gaining in popularity.  At that time, we would still owe about $60k on the 15 year mortgage unless we paid ahead, which with a 2.875% rate does not seem prudent. Our goal is to FIRE just outside a particular small and very scenic town on 5 acres or so and build (have built for us) a modern style home that would probably be $400k ($100k for land and $300k for home). This home would not be outlandish in size (1500-1800sqft, 2bed 2bath with an additional large flex space) and money would be spent upfront to minimize the long term utility costs, so we aren’t talking about some big and stupid McMansion. Ideally, we’d find that this perfect house was already for sale so we could buy used and save a ton of money. However, I’m guessing that won’t happen so we are planning to build.

So, for those still reading, that basically means we’d be upsizing to a home that would be $200K more than we’d be netting on the old home. (-400K + 260K - 60K = -200K) in about 8 or 9 years from now. So, how do we plan for that financially? Do you just build your stash accordingly so you could pay a mortgage payment for 15 or 30 years as part of your FIRE annual expenses? Do you try to build a separate fund of $200K in a taxable account to drain completely when the time comes, or maybe only if interest rates aren’t super low still? Some other financial instrument I don’t even know about!? Another option we’re definitely toying with is buying the land far in advance (like in the next few years…) and sitting on it while paying that off before it is time to build. My wife and I like that idea in the sense that it would give us serious motivation and direction and a very physical reminder of why we’re working so hard. Plus we could get a little popup camper someday to vacation on the land. However, I’m pretty sure this is a horrible financial decision as I don’t see the land skyrocketing in value so why put so much money into a barely appreciating asset while paying a mortgage on it or using the HELOC and paying some carrying costs (less than $1000 all in) when instead that money could be put into Index funds and making a nice return? Plus, if we change our mind about where we want to FIRE or if we come into some money problems we don’t have to deal with trying to sell it…still though, something about buying some land with a scenic view and a lot of dreams is hard to resist. Maybe do that when we’re only a few years from FIRE?

So, Mustachians, how would you plan a home upsizing in FIRE??

Jesstache

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #1 on: October 15, 2015, 01:19:04 PM »
Is it possible to buy your land such that it has income in the interim?  Like something you could rent to a farmer for crop production or something like that?  That way you can have it (hopefully) pay for part or all of itself and minimize the cost to purchase/risk of owning?

StacheInAFlash

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #2 on: October 15, 2015, 01:44:54 PM »
Is it possible to buy your land such that it has income in the interim?  Like something you could rent to a farmer for crop production or something like that?  That way you can have it (hopefully) pay for part or all of itself and minimize the cost to purchase/risk of owning?


I don't believe this would be possible. The land we'd be looking at is not in an agricultural setting. It is a mixture of forest & native grasses, with a nice view near a desirable tourist town. One thing I guess we have briefly thought about is buying the land and putting up a cabin with the intent of using it mostly as a vacation rental. I think that is a horrible idea though, as we definitely aren't looking to get saddled with a vacation home for the next decade...that is a sure fire way to just hemorrhage money.

zolotiyeruki

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #3 on: October 16, 2015, 11:24:27 AM »
I've never priced out new, custom home construction, but $300k for a 1500-1800 sqft house seems a bit high, especially with the land cost separate.  What's your basis for $165-200/sqft?

StacheInAFlash

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #4 on: October 16, 2015, 01:20:02 PM »
I've never priced out new, custom home construction, but $300k for a 1500-1800 sqft house seems a bit high, especially with the land cost separate.  What's your basis for $165-200/sqft?

Well I haven't actually gotten any quotes at this point, so it is just a rough guess based on what typical homes cost in the area, factoring in a rough 20% premium for new construction over pre-built plus some extra for the non-traditional home style and the added emphasis on things like geothermal, a ton of windows, and whatnot that typical home doesn't have. Plus, I'm trying to think 8 or 9 years down the road rather than today prices, and having dealt with enough construction projects to know they always go WAY over budget, I'm trying to plan with a healthy cushion that I pray isn't necessary. 

With the land, I'm also factoring in the cost of septic and well and driveway.

Another option would be to find an existing home and do a major gut job on it and restyle it considerably to the modern style we want...similar to what MMM recently did. That may be the smartest option if we can find something that works. Unfortunately, it seems everything out there that is on the right land in the right area is a 3000+ sqft home or a tiny cabin that you'd have to demolish and build fresh on. Thankfully we have plenty of time to keep looking and researching, but now is the time to plan! Anybody else out there planning something similar?
« Last Edit: October 16, 2015, 01:21:40 PM by StacheInAFlash »

Faraday

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #5 on: October 16, 2015, 01:29:56 PM »
Has anyone planned (or done!) a home upsizing after FIRE? It seems that most people always talk about downsizing or moving away from a HCOL area to a LCOL area and banking that housing cost difference. My wife and I are thinking doing somewhat of the opposite, and we just aren’t sure how best to plan for it.
...
So, Mustachians, how would you plan a home upsizing in FIRE??

We did exactly this after our boys went to college, because:
- we wanted an acre wooded lot or more, all one level
- we wanted to build a brick ranch with no more than 3 steps up-or-down
- we wanted that giant garage I never got
- we wanted more space between us and the neighbors
- we wanted to drop our cost of living by having well/septic and no HOA, lower taxes, more freedom
- possibly, using cut wood on the land to heat the house

What we did was:
1) Bought land 6-7 years ahead of time and paid it off.
2) Researched builder companies and found one that would work with us.
3) Got a construction-to-perm loan that turns into a mortgage at closing.
4) Moved in and continued refinancing the house whenever it would save money.

The risk you take with this is that job loss or illness could put a hard-stop on both savings/investment and mortgage payments/paydown.  Our response to this has been to accelerate principal abatement on the new house to get it paid down while we are in our peak earnings years.

I am planning a fifth (and final?) refinancing to a 10 year loan in January 2016 if rates are as low as I hope they will be. The objective being to get the house payment low enough that we could make the payment if either one of us could not work for some reason or if either/both of us got jobs that didn't pay as well as the ones we have now.

And barring all that, if we lower the mortgage payment and we get to keep working our current jobs for the indefinite future until FIRE, we'll be able to push even more money towards savings and investment.

zolotiyeruki

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #6 on: October 16, 2015, 02:51:44 PM »
I have dreams of doing exactly the same thing, although we'd definitely be downsizing from our current home. Since both our home purchases have been existing homes, I'd be *very* interested in hearing more about your experiences in designing and building your own home, mefla.

Faraday

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #7 on: October 17, 2015, 08:22:40 PM »
I have dreams of doing exactly the same thing, although we'd definitely be downsizing from our current home. Since both our home purchases have been existing homes, I'd be *very* interested in hearing more about your experiences in designing and building your own home, mefla.

Our entire plan was predicated on the idea that we could do a LOT better than your typical builder stamping out two-story homes on 1/4 acre lots. Our objectives were to get started with high energy efficiency, low maintenance and few stairs. (plus my lifelong goal of a big, giant garage for projects)

First we found and bought the land, a wooded acre in a subdivided set of lots that is oriented so that the back side and roof of the house is perfectly set for solar hot water and electric.

In that time, we also searched for 10 years to find a ranch floorplan we liked. (Ranch floorplans are important when you reach 50, since climbing steps becomes a great deal more risky.)

We eventually found a builder with a stock floorplan that looked VERY close to our ideal layout. We went to that builder and asked if they could make all exterior walls to 6" thick, add more insulation in the walls, add vinyl energy efficient windows, double the insulation in the attic and go another couple inches thicker in the floors.

In this plan, 75% of the windows are on the south side of the house, no windows on east or west and a big garage on the northeast corner. The 2200 square foot house is all-electric and our total energy bill averages about $140, with a wintertime peak around $240-$260 in really cold winters. (I'm still doing things to the house to improve energy efficiency, so I'm trying to drive the average down to $100 with peaks at-or-under $200.)

I know that the house we ended up with exceeds the US Energy Star standard, although I've never performed the "Blower Door Test" which certifies it to be Energy Star compliant. I see no point to that since my goal is to reach net-zero-energy performance. I'll prove the house's efficiency using my monthly electric bills.

For maintenance freedom, we went with all-brick exterior and aluminum eave inserts. So far, the only structural maintenance I've had to do is powerwash an eave over the garage with vinyl siding in it and exterior and seasonally spray for bugs. (We also pay a professional company for termite-proofing and inspections, but we have to do that by law in NC. We can decide to stop those treatments, but we would have big problems if we ever sold the house.

There's been a lot of debate on these forums about pre-paying mortgages vs. investing. There's even debate on whether or not it even makes sense to buy a house vs. simply renting and investing as much as possible. I get the math and I understand those numbers, no problem.

But when we planned and executed on this house, the intent was to start with a fairly average, normal-cost structure and use it as a platform to work toward a very-low-energy, very low cost lifestyle with the goal of reaching net-zero sometime before FIRE, by 2020.

Comparing this house to the last house (a 1400 square-foot two story in a subdivision), we have eliminated:
- $6/month streetlight fee
- $80/month water/sewer fees
- $20/month homeowner's dues
- exterior maintenance costs required both by deterioration and by HOA

We've also cut our energy bills by 30% in the new house vs. the old house. So I guess my whole point is that the new house had very specific goals attached to it that I conjured up because I'm an engineer and will always seek efficiency with improved quality of life.

You know what's been the most wonderful thing about this experience? My 30-year-old opinion is suddenly getting validated by my peers, family and co-workers, who are all looking for ranch floorplans with low-maintenance exteriors and energy efficiency.

I apologize if I've side-tracked this thread. I'd be glad to start another thread on "Energy- and Maintenance-efficient homes for people 50 and older", or something like that.

StacheInAFlash

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #8 on: October 18, 2015, 07:40:21 AM »
Our entire plan was predicated on the idea that we could do a LOT better than your typical builder stamping out two-story homes on 1/4 acre lots. Our objectives were to get started with high energy efficiency, low maintenance and few stairs. (plus my lifelong goal of a big, giant garage for projects)

Exactly! I know for a better price I could get a nice, new generic home that at first glance is great. But it wouldn't be as energy efficient, it wouldn't be unique, and it wouldn't be us. I know we can do better, because that is what Mustachians do.

Quote
We eventually found a builder with a stock floorplan that looked VERY close to our ideal layout. We went to that builder and asked if they could make all exterior walls to 6" thick, add more insulation in the walls, add vinyl energy efficient windows, double the insulation in the attic and go another couple inches thicker in the floors.

Great info mefla! I've simply assumed that a builder wouldn't have any stock floorplans that we like since we're looking for a modern home rather than the typical styles for the area. If we can find a builder who has something very close to what we want it could save a ton of money. We really want a "cool" architecturally designed modern house, but at the same time, the thought of paying an architect $20-30K makes me sick to my stomach. Even though we're many years out, it probably wouldn't hurt to check on a few builders in the area (there aren't that many as it is) to just see if they have any floorplans that might work without involving the full services of an architect.

Quote
I apologize if I've side-tracked this thread. I'd be glad to start another thread on "Energy- and Maintenance-efficient homes for people 50 and older", or something like that.

No need to apologize as you've provided some great info. That being said, I'm guessing that thread you mention would be a hot topic for this group!


zolotiyeruki

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #9 on: October 18, 2015, 09:40:01 AM »
Mefla, I think you could be my twin. We need to start a "how top get your mustachian retirement dream home" subforum!

Faraday

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #10 on: October 18, 2015, 11:08:22 AM »
Mefla, I think you could be my twin. We need to start a "how top get your mustachian retirement dream home" subforum!

Guys, thanks for the props, much appreciated. Zolotiyeruki and StacheInAFlash, I'm glad to share whatever info I can provide. Just so you know where I'm at with this, I'm attaching the original floorplan. What we ended up is not identical to this, we changed the section of the house between the garage and the bedroom. The exterior is all brick, not the mixed rock/siding that's shown.

The builder we went with was these guys: http://www.americashomeplace.com/.  Now, I'm not spamming you for this builder - not everything went perfectly, which I believe is true for just about any project of this size and cost. However, 8 years later, I'm still glad we did this and I'm still improving the energy efficiency of the original design "platform".

It's very hard to tell from the PDF, but the back side of the house has windows in every room for good south-facing solar gain. The eaves are two feet wide in the stock plan, wide enough to give good summertime shading. We deleted the fireplace, it's just a hole for heat to escape from. The garage doors are on the front, not the side and we deleted the windows in the garage.

What would I have done differently? I'd have specified even more efficient windows that have built-in storm windows, I'd have installed storm doors much sooner and I'd have gone with a metal roof. I'd have solar hot water heat by now and be laying in solar electric panels to offset my power bill. Right now, my highest utility bill is electric power and I'm working on trimming that down as quickly as possible.

I plan to replace the heat pump at the 10 year mark. It's a "contractor grade" heat pump rated 13 SEER/9.5 EER and the builder badly oversized it for this house (it's 4.5 ton and should have been 3 ton). I'd like to go back in with something at least 18 SEER/11 EER, 3 ton and half the power draw. It's a guessing game on when to do this because I don't have good information on what new heat pumps are coming to market.

I installed the storm doors myself a year ago this past summer and they have been fantastic. The improvement in comfort during the cold winters has been easy to perceive and it made a clear difference in the year-to-year energy efficiency of the house.

I'm struggling right now to find cost-effective thermal interior window blinds. My problem is that the wife and I have "good taste" and that means everything we find that we like is over $200 per window, which is more than the window itself costs. 
« Last Edit: October 18, 2015, 11:16:53 AM by mefla »

zolotiyeruki

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #11 on: October 18, 2015, 04:29:50 PM »
In our area, most of the builders are either A) national builders in master-planned neighborhoods, with limited options offered, or B) high-end custom home builders.  Did your house come in prefab sections, or was it stick-built on site?  How hard was it to convince them to make the modifications you asked for, like the layout and the 2x6 external walls?

Faraday

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #12 on: October 18, 2015, 10:33:42 PM »
In our area, most of the builders are either A) national builders in master-planned neighborhoods, with limited options offered, or B) high-end custom home builders.  Did your house come in prefab sections, or was it stick-built on site?  How hard was it to convince them to make the modifications you asked for, like the layout and the 2x6 external walls?

It was stick-built on site. Absolutely no problem asking them to do the mods. In fact, they had a "book of mods" with prices, so they were able to come up with the price for the change almost as fast as I could ask for it.

There's a similar, competing builder called "Schumacher Homes". In the southeast, you'll see billboards advertising them Also a company called "Nationwide Homes", although I'm not so sure they are as happy to do mods as these guys were.

The_path_less_taken

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #13 on: October 20, 2015, 09:43:08 AM »
Just a thought, but if you're thinking fruit trees...8-9 years is optimum for having producing trees. And some big greenscape things, like a privacy hedge or a shade tree to help with home heating/cooling.

Another option is to lease with the option to buy: you can sometimes lock in a price for up to 5 years doing this.

IOW, if property (you mentioned this was nice 'view' property) goes up and you are in danger of possibly losing that dream lot, you could approach the owner and say you'd "like" to buy it if you could option it at a reasonable rate and pay something every month for it. They would then be getting 'something' every month for it---which is not happening now for them--- and you could exercise the option or walk away at a pre-agreed upon point.

A reasonable rate to me would be 3%.

StacheInAFlash

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #14 on: October 20, 2015, 10:04:57 AM »
Just a thought, but if you're thinking fruit trees...8-9 years is optimum for having producing trees. And some big greenscape things, like a privacy hedge or a shade tree to help with home heating/cooling.

Another option is to lease with the option to buy: you can sometimes lock in a price for up to 5 years doing this.

IOW, if property (you mentioned this was nice 'view' property) goes up and you are in danger of possibly losing that dream lot, you could approach the owner and say you'd "like" to buy it if you could option it at a reasonable rate and pay something every month for it. They would then be getting 'something' every month for it---which is not happening now for them--- and you could exercise the option or walk away at a pre-agreed upon point.

A reasonable rate to me would be 3%.

Excellent comments! In particular the fruit tree item. A nice assortment of fruit bearing trees and bushes is definitely on our list and being able to plant them years before you'll "need" them is a huge benefit.

A lease to own is a interesting idea. I've always shied away from anything listed as contract for deed or the like, but that is something to consider. Of course, if you end up walking away after 5 years, you basically just threw the money away, whereas if you just bought the land outright with a loan of some sort, you could probably get most of your money out of it. When you say a reasonable rate is 3%, what are you are actually meaning by that? 3% of what?

ShoulderThingThatGoesUp

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #15 on: October 20, 2015, 10:17:46 AM »
Is Lyme disease not a concern to those of you living in the boonies on wooded lots? I got it living walking distance from Philadelphia city limits and it was pretty unpleasant (antibiotics are one of the great achievements of civilization, thankfully).

The_path_less_taken

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #16 on: October 20, 2015, 10:31:03 AM »
Just a thought, but if you're thinking fruit trees...8-9 years is optimum for having producing trees. And some big greenscape things, like a privacy hedge or a shade tree to help with home heating/cooling.

Another option is to lease with the option to buy: you can sometimes lock in a price for up to 5 years doing this.

IOW, if property (you mentioned this was nice 'view' property) goes up and you are in danger of possibly losing that dream lot, you could approach the owner and say you'd "like" to buy it if you could option it at a reasonable rate and pay something every month for it. They would then be getting 'something' every month for it---which is not happening now for them--- and you could exercise the option or walk away at a pre-agreed upon point.

A reasonable rate to me would be 3%.

Excellent comments! In particular the fruit tree item. A nice assortment of fruit bearing trees and bushes is definitely on our list and being able to plant them years before you'll "need" them is a huge benefit.

A lease to own is a interesting idea. I've always shied away from anything listed as contract for deed or the like, but that is something to consider. Of course, if you end up walking away after 5 years, you basically just threw the money away, whereas if you just bought the land outright with a loan of some sort, you could probably get most of your money out of it. When you say a reasonable rate is 3%, what are you are actually meaning by that? 3% of what?




Not sure where this property is, or how good you are at negotiating but I currently pay 3% finance rate on both of my current mortgages.

But since you are the one pitching the idea to them, you can couch it how you like:

"My family and I are thinking of...blah blah blah...and want to lease with an option to buy on xx-xx-20xx. We'd like to buy the lot for $xxxxxx at that point, paying you $xxx per month in the interim. Would you entertain a lease with an option to buy contract at 3%? We would really like to discuss this with you, at your convenience. The reason we're trying to do this now is so that we can plant fruit trees for the kids before we move onto the property."

(that last sentence psychologically implies 'ownership'. it is useful in negotiations to express your motivations...or what you want the other person to perceive to be your motivations. gives them something to chew on about your true intent.)

StacheInAFlash

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #17 on: October 20, 2015, 10:37:32 AM »
Is Lyme disease not a concern to those of you living in the boonies on wooded lots? I got it living walking distance from Philadelphia city limits and it was pretty unpleasant (antibiotics are one of the great achievements of civilization, thankfully).

I'm cognizant of deer ticks when hiking or in other heavily wooded areas, but I certainly am not curtailing a dream retirement home out of the fear of Lyme disease. That would just be silly. Take a look at  http://www.mrmoneymustache.com/2013/08/23/fear-is-just-a-chemical/.

Fishindude

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #18 on: October 20, 2015, 11:28:25 AM »
I wouldn't upsize post FIRE, unless I could pay cash for it.

StacheInAFlash

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #19 on: October 20, 2015, 11:47:31 AM »
I wouldn't upsize post FIRE, unless I could pay cash for it.

Oh, I definitely agree that the cash needs to be there "in theory". But whether I used the extra 200K outright to go mortgage free or if I just upped my planned annual budget accordingly is up for debate. I think there may be serious tax implications in either situation, and that is what I'm trying to figure out.  Do you just pull 200k out of taxable investments to pay for it, and accept that big hit to your liquid assets. Do you plan for a larger annual budget and pay the mortgage with funds through the 401k to roth pipeline, and if so, are funds being used to pay the taxes offset through mortgage deductions? I just don't know........

Dicey

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #20 on: October 20, 2015, 01:57:08 PM »
My two cents:

Unless you're 1,000% positive where you will want to live, 8 or 9 years is a little too far out to buy property. If your situations changes, you don't want to be stuck with land you can't unload.  And you'll have to pay taxes on that vacant land as well.

Save your asses off now, because cash in hand beats the hell out of land you can't sell.

Once you are 3 or 4 years away, you can start looking and planning in earnest.

If you're positive this is what you want to do, I'd call it a second home and build it before you sell your current home. You will find financing much easier to obtain while you're both still working.

In the meantime, dreaming and researching are still free, so do it to your heart's content.

StacheInAFlash

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #21 on: October 21, 2015, 02:01:59 PM »
My two cents:

Unless you're 1,000% positive where you will want to live, 8 or 9 years is a little too far out to buy property. If your situations changes, you don't want to be stuck with land you can't unload.  And you'll have to pay taxes on that vacant land as well.

Save your asses off now, because cash in hand beats the hell out of land you can't sell.

Once you are 3 or 4 years away, you can start looking and planning in earnest.

If you're positive this is what you want to do, I'd call it a second home and build it before you sell your current home. You will find financing much easier to obtain while you're both still working.

In the meantime, dreaming and researching are still free, so do it to your heart's content.

Good info! I didn't really think about doing it as a second/vacation home, but I suppose financing could be a bit more complicated if we've both just quit our jobs beforehand!

I agree that it would most likely be reckless to pull the trigger on land this far out, but damn...it is hard to resist sometimes. Going back to my original post, having that land bought I think would really give us (and my wife in particular) the motivation to keep kicking ass at saving as we plan for the next stage in life. But from a strictly financial point of view, it just doesn't make sense unless I thought the land was going to increase in value at a pretty rapid clip which I don't think will happen.

Faraday

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #22 on: October 22, 2015, 12:15:30 AM »
Unless you're 1,000% positive where you will want to live, 8 or 9 years is a little too far out to buy property. If your situations changes, you don't want to be stuck with land you can't unload.  And you'll have to pay taxes on that vacant land as well.

Good info! I didn't really think about doing it as a second/vacation home, but I suppose financing could be a bit more complicated if we've both just quit our jobs beforehand!

I agree that it would most likely be reckless to pull the trigger on land this far out, but damn...it is hard to resist sometimes. Going back to my original post, having that land bought I think would really give us (and my wife in particular) the motivation to keep kicking ass at saving as we plan for the next stage in life. But from a strictly financial point of view, it just doesn't make sense unless I thought the land was going to increase in value at a pretty rapid clip which I don't think will happen.

I don't mean to contradict Diane C here - she's factually correct. However, DW and I did exactly this and it worked out beautifully for us. Let me describe the context:

Home #1: Raised our two sons in a 1400 sq. ft. 2-story "transitional" home on 1/3rd acre. Decent neighborhood, great place for the kids to grow up, great schools, low COL area on the edge of a somewhat-high COL area.

When our boys got to high school, we started shopping land and found a wooded acre just over the county line a few miles away. We bought the lot using a HELOC on the prior home and paid it off over the years the boys were in high school.

When the boys went to college, we started building Home #2 with a construction-to-mortgage loan. When we closed on Home #2, we were making payments on two homes. We'd saved a reservoir of money to allow us to do that with the prior home plus the next home.

We closed and moved into Home #2, then put Home #1 on the market. Home #1 sold and we were into the new all-brick ranch home for very little out-of-pocket money. By the time we made it to Home #2, climbing the stairs in Home #1 became very difficult (DW and sons had all fallen down those stairs at least once!) and neighborhood started to accumulate rental tenants who weren't caring for the properties as well as the owners did. We were definitely ready to go.

A sobering thought that occurred to me about the time I discovered MMM was that we would not be able to afford the mortgage payment on this home in retirement. (given our previously insane lifestyle) Nor would we have been able to qualify for this same home and mortgage if one of us were not working or retired.

We are now working hard to pay off the mortgage on Home #1 so we'll not have that cash flow drain in FIRE. This home will be an excellent platform for easy retirement living, since it's very low maintenance, few stairs and well-designed for low-cost living. We would not have been able to achieve these advantages in the prior home. 

Dicey

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #23 on: October 22, 2015, 02:27:08 PM »
We are now working hard to pay off the mortgage on Home #1 so we'll not have that cash flow drain in FIRE. T
Mefla, it may surprise you to know that I applaud your decision to pay off your house, and that my primary home is also mortgage free. My strongly held position is that it is crucial to save for retirement before paying off the ol' homestead. After that, do whatever lets you sleep at night. Since you have a target date of 2020, I am assuming you have done this very thing.

Thanks for affirming my post, but let me tell you, my advice is based on some expensive experience. I skipped the details earlier, but here is a bit more info on why I gave the advice I did.

In 2003, I purchased a home that I intended to be my retirement home. It's in a fancy Del Webb resort community and I figured 1) I was never going to get married (I was 45 at the time, so safe assumption) and 2) By the time my portion of the Boomers got to retirement age, I believed I'd be priced out of the market. I paid $301k for it new in October of 2003 and rented it out. It is only just now approaching positive cash flow. Zillow says it's worth $428k now, which I doubt. So yes, I would have probably done better to have waited to purchase a retirement property. Fortunately, the property also has a guest house, which I have enjoyed thoroughly over the years. At least I had a place to stay when work needed to be done on the house, lol. But I'm pretty sure I could have had a much better return on my money via a different investment vehicle.

When I got married at 54, I was a) surprised and b) very concerned. What if DH didn't like the house or the area? Three years ago, the "Zestimate" wasn't nearly as "high". (This is for comparison only. Don't try to take Zillow numbers to the bank, or the market.) Fortunately, he does like the house and area, but that was a huge worry for a time. When we got married, he hadn't even seen the property, so this really was a valid concern. My point is that life can change a lot over the course of a few years. Five years ago, DH was married to his high school sweetheart. Then she got cancer and died. Life's funny/odd that way.

So now that he likes the area and the house, we have a new plan. We're buying anther house in the same development. Only this time, we scored what we hope is a much better deal. We purchased it for below its 2002 selling price, and $40k below the current "Zestimate". It needs a little work, all of which we can do ourselves. We will immediately have positive cash flow. So we are kind of dollar cost averaging, only with rental property. We could easily live in either of these properties, and probably will, at least part-time, eventually.

So, all of that is behind my reason for saying "WAIT!". We will be okay in the end, but simply investing the original down payment in 2003 and steadily adding to it would have been a helluva lot easier and quite possibly could have yielded much higher returns. (I didn't panic when the rest of my portfolio hit the skids in 2008, and have recovered so well that I'm FIRE now.) This also illustrates my theory that RE is a horseshoes-type game. You don't have to get every single thing perfect. Close enough can also win the game.

Faraday

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Re: How to plan for a home upsizing instead of downsizing in retirement?
« Reply #24 on: October 22, 2015, 10:14:10 PM »
We are now working hard to pay off the mortgage on Home #1 so we'll not have that cash flow drain in FIRE. T
Mefla, it may surprise you to know that I applaud your decision to pay off your house, and that my primary home is also mortgage free. My strongly held position is that it is crucial to save for retirement before paying off the ol' homestead. After that, do whatever lets you sleep at night. Since you have a target date of 2020, I am assuming you have done this very thing.

Thanks for affirming my post, but let me tell you, my advice is based on some expensive experience

NO problem, no problem. I was just trying to make sure this didn't turn into a "mortgage v. investing" fight. Your assumption is correct: I'm giving priority to pre-tax savings and investment but paying down the mortgage with a chunk of post-tax money. It's a cash-flow problem for me: I need to free up more post-tax debt so I can ram more in HSA and further lighten my tax burden.

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So, all of that is behind my reason for saying "WAIT!". ... This also illustrates my theory that RE is a horseshoes-type game. You don't have to get every single thing perfect. Close enough can also win the game.

Agreed!