Author Topic: Kill the mortgage... Living simply & free (ADVICE???)  (Read 3850 times)

mmmatt-stache

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Kill the mortgage... Living simply & free (ADVICE???)
« on: November 08, 2014, 08:47:05 AM »
Mustachians,

The Summary: I'm building my house to get out of debt.  Should I live in it. rent it. or sell it?

I too am a builder, currently building my own home with the goal of getting out of debt in a few years.

Current Situation:

The home I currently live in has been completely remodeled over the past six years and I'm ready to sell it.  I currently owe $108k (my only debt) and estimate it's value between $150-$160k.  After realtor commissions, I should net $40k +/-

The plan is to roll that capital into the home I'm currently building, which is being funded by a construction loan at 5% (which will be rolled into a conventional mortgage upon completion).

The New Home:

The New Home will be an incredibly efficient 1900 sq.ft. cottage (3 bed + 2 bath + bonus room upstairs) in a great neighborhood close to the local affluent liberal arts college.  Numerous people stop by weekly inquiring about the home, often expressing interest in buying it.  This is an old, desirable neighborhood... finding/making a vacant lot is very rare... but I was able to put a deal together to subdivide a larger lot without harming the neighborhood feel or community.  It fits in perfectly & many folks think I'm remodeling an existing home... not building from scratch.

I'm hoping to have $130k in the home construction (including the lot) & expect the home to be worth $200k - $215k.  After rolling in the equity from the sale of my old home I will be financing $90k.

My initial intent was to build the home & move into it for at least 2 years to gain the tax benefits.  However, I'm a 30 year old bachelor still living in my conservative home town with a successful construction business... but things are changing.

Taking your advice, I'm slashing my spending, increasing investment, choosing freedom over B.S.  I'm simplifying.  Living smaller, I want to travel & create a more autonomous work environment (possibly including some 'Carpentourism').  With that said, 1900 sq.ft. is really absurd for a single dude.  In all actuality, I need about 300 sq.ft. of living space, room for my tool trailer, a spot for my truck, and a place to hang my bicycle.

In the spring, I began construction of a Tiny Home on wheels... just for fun mainly, but it's also an available option for frugal living once complete.

Now that all the details are out of the way, the purpose of this inquiry is seeking Mustachian wisdom & advice on the options...

The goal for building this new home is to live for free and/or get completely out of debt, here are the options I see...

1.) Get 2-3 roommates allowing their rent to cover mortgage, utilities, and taxes... sell in 2 years and clear $100k (living for "free" for a couple years).

2.) Rent the home completely (I will live elsewhere) & forgo the tax benefit, allowing renters to cover mortgage, taxes, etc. plus cash flow $200/month.  Hold home as investment property & sell at some point down the road.

3.) Sell new home once complete & clear $100k now, and then move, build something else, or live in the Tiny Home.

Advice, suggestions, and additional options...? Hit me!

-MMMatt-Stache
Dreamer + Builder + Collaborator

« Last Edit: November 08, 2014, 09:02:08 AM by mmmatt-stache »

frugaliknowit

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Re: Kill the mortgage... Living simply & free (ADVICE???)
« Reply #1 on: November 08, 2014, 09:09:14 AM »
Of the three, I recommend option#1.  The reasons:

1.  You say you are willing to live in 300SF.  I doubt you will want to for long.  I live in 600SF and can't imagine living smaller than that...
2.  You are putting your blood, sweat and tears into this property.  If you rent it out, over time you will be disappointed over how it is kept and might be frustrated with all of the "do-do" you have to clean up when there's a move out.

3.  Options are great.  If you get tired of living with "roomies" it is easy to convert to living alone.

taekvideo

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Re: Kill the mortgage... Living simply & free (ADVICE???)
« Reply #2 on: November 08, 2014, 03:48:00 PM »
Of the three, I recommend option#1.  The reasons:

1.  You say you are willing to live in 300SF.  I doubt you will want to for long.  I live in 600SF and can't imagine living smaller than that...
2.  You are putting your blood, sweat and tears into this property.  If you rent it out, over time you will be disappointed over how it is kept and might be frustrated with all of the "do-do" you have to clean up when there's a move out.

3.  Options are great.  If you get tired of living with "roomies" it is easy to convert to living alone.
Agreed, I went the roommate route and it's working great.

deborah

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Re: Kill the mortgage... Living simply & free (ADVICE???)
« Reply #3 on: November 08, 2014, 03:54:15 PM »
There is a fourth option - have the tiny house on the property (sort of as a granny flat) and rent out the big house. That way you can see if it is really right for you. When the lease expires, you would till have option 1 available, and you could lease out the tiny house.

Spiffsome

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Re: Kill the mortgage... Living simply & free (ADVICE???)
« Reply #4 on: November 08, 2014, 06:08:06 PM »
Another vote for roommates. If you get the right one, it can do wonders for your savings rate. My husband and I lived with a mutual friend for about 8 years total, including 3 years after we got married. That allowed us to save up a larger deposit and take out a much smaller mortgage than would otherwise have been possible.

The best way to get a good housemate is by word of mouth. Ask your friends about people they've lived with. Friends of friends are probably the best - living with your closest friends will show you things about them that you may not have wanted to know, and you will want to get away from your housemates sometimes.

mmmatt-stache

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Re: Kill the mortgage... Living simply & free (ADVICE???)
« Reply #5 on: November 09, 2014, 05:11:32 AM »
Roommates it is then... thanks for the input!  Like you all said, if it doesn't work, I've always got the other options to fall back on.

...and I like the Tiny House option as well, it'd make a nice 4th bedroom!


GordonCopestake

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Re: Kill the mortgage... Living simply & free (ADVICE???)
« Reply #6 on: November 09, 2014, 05:24:10 AM »
Just a thought, if you can afford it, why not keep both houses and rent them out whilst living in your tiny house? That way you'll have 2 houses and when all the mortgages are paid off a nice income.