Author Topic: Would you do this?  (Read 4013 times)

frugaldrummer

  • Pencil Stache
  • ****
  • Posts: 709
Would you do this?
« on: October 07, 2017, 01:18:37 PM »
Ok, idle daydreaming here, but wondering what your take would be.  I own a home worth 600k on which I owe $185k.  I currently have two adult sons and my mother living with me. The house is 2300 sf. I realize this is luxurious by most standards.

There's a house for sale not far from here that would increase my mortgage to about $450k. It's slightly older than my current house, but has 4,000sf, architect designed, pool, large lot, and a separate one bedroom guest house that I could rent out.

The increase in mortgage payments at today's rates and property taxes would be offset by the rent from the guest house (which would be extremely easy to rent). There would also be an extra bedroom in the house which could be rented out. Basically, it would be a major upgrade in housing for the cost of pool maintenance and increased heating bills (relatively cheap in our mild climate  and installing solar would reduce probably back to what I pay now).

Just for reference, the market here is hot, median home price sold in my town 514k, median listing 575k.  So this luxury home is only about 50% above the median. Still, I wouldn't consider it except for the rental income which offsets the price increase.

Would you do it? I intend to keep working for several more years for personal and professional reasons but could still swing the mortgage payment with the rental income if I retired tomorrow. Seems like a low cost way to get a significant upgrade in housing, and possibly have even more equity if I choose to downsize in the distant future. So although it seems like a very unmustachian thing to do, it might actually be a better investment.
« Last Edit: October 07, 2017, 01:33:49 PM by frugaldrummer »

Janie

  • 5 O'Clock Shadow
  • *
  • Posts: 77
Re: Would you do this?
« Reply #1 on: October 07, 2017, 01:25:58 PM »
no

frugaldrummer

  • Pencil Stache
  • ****
  • Posts: 709
Re: Would you do this?
« Reply #2 on: October 07, 2017, 01:39:48 PM »
Reasons?

ender

  • Magnum Stache
  • ******
  • Posts: 4942
Re: Would you do this?
« Reply #3 on: October 07, 2017, 01:44:22 PM »
You haven't given a single compelling reason to do this.

If you want to use "rental justification" you need to  have a lot more actual math/numbers involved than what you've put here.

To even be able to break even on another $300k mortgage (excluding any additional expenses related to property taxes, maintenance, utilities, insurance, vacancies, etc) you need to be able to rent the guest house for a minimum of $1500. Keep in mind that this would be an incredibly poor rental at this point so unless you can bring in considerably more than $1500 it straight up doesn't make any sense at all mathematically.

How much do 1BR houses rent for in your area?

It feels like you want a bigger house and are searching to find justifications.

frugaldrummer

  • Pencil Stache
  • ****
  • Posts: 709
Re: Would you do this?
« Reply #4 on: October 07, 2017, 02:02:11 PM »
A one bedroom APARTMENT rents for $1600 and up. The additional mortgage and property taxes would come to about $1500. With multigenerational living in my home right now, the additional space would enhance everyone's lifestyle significantly. I expect my mom to live at least another decade ( her mother died at 99, mom is 85 and works three days a week, in excellent health. ) One son, who has mild Aspergers, might continue living with me for years. A second son, suffering from severe depression, might be more inclined to stay long enough to get well if he had his own space (crammed into a small bedroom). Also I like the idea of having a pool ( never lived anywhere with one, not even an apartment complex) and room to take in friends in need.

A secondary, less reliable reason would be building more equity through the guest cottage rental (yes, I know it doesn't quite pencil out as a stand-alone rental, but I could probably fill it with a friend or relative at a mutually beneficial rate long term.

ender

  • Magnum Stache
  • ******
  • Posts: 4942
Re: Would you do this?
« Reply #5 on: October 07, 2017, 02:10:47 PM »
So $1600 and up for apartment rent. What is a 1BR house renting for? $2000? $5000?

Like I said, this feels like you want a bigger house and are trying to find some financial justifications. The fact that you've not really thought about the financial side in detail but are trying to use it as justification seems to confirm that for me.

lbmustache

  • Pencil Stache
  • ****
  • Posts: 930
Re: Would you do this?
« Reply #6 on: October 07, 2017, 02:18:46 PM »
You haven't given a single compelling reason to do this.

It feels like you want a bigger house and are searching to find justifications.

Agreed.

How old is your mom? Are your sons planning on living with you forever? I don't really see any reason to take on a new mortgage for a bigger space.

frugaldrummer

  • Pencil Stache
  • ****
  • Posts: 709
Re: Would you do this?
« Reply #7 on: October 07, 2017, 04:05:46 PM »
As mentioned before, expect mom to live 10-15 more years. Asperger's son might always live with me.

happy

  • Walrus Stache
  • *******
  • Posts: 5426
  • Location: NSW Australia
Re: Would you do this?
« Reply #8 on: October 07, 2017, 04:32:43 PM »
No, do not do it. Its a clown house. It will cost a lot more in maintenance/running costs. You already have a large house. Maybe sell it, downsize and invest the difference in index funds.

frugaldrummer

  • Pencil Stache
  • ****
  • Posts: 709
Re: Would you do this?
« Reply #9 on: October 07, 2017, 05:58:10 PM »
There's no downsizing with five adults living in my 4 bedroom house. Even buying a less expensive 4 bedroom house in my area would only save $100k at best and would be MUCH  smaller and significantly older, requiring more expensive repairs in the long run. (Yes, I know it seems odd that size and quality drops off so quickly below my house, but it's true now and was true when I bought it as well. )










mc6

  • Stubble
  • **
  • Posts: 242
Re: Would you do this?
« Reply #10 on: October 07, 2017, 06:48:53 PM »
If you want more space and a pool, could you do some improvements on your current home vice the expense and hassle of you all moving? 

I would not do the new house, but thatís because I think moving is a pain.

tralfamadorian

  • Handlebar Stache
  • *****
  • Posts: 1213
Re: Would you do this?
« Reply #11 on: October 07, 2017, 07:39:44 PM »
MMM is not the forum from which to obtain internet stranger permission for a mcmansion.  Sorry.

2Birds1Stone

  • Walrus Stache
  • *******
  • Posts: 5667
  • Age: 1
  • Location: Earth
  • K Thnx Bye
Re: Would you do this?
« Reply #12 on: October 07, 2017, 07:53:45 PM »
Your house is fine, if you have money burning a hole in your pocket, got buy some index funds ;)

Laura33

  • Handlebar Stache
  • *****
  • Posts: 2380
  • Location: Mid-Atlantic
Re: Would you do this?
« Reply #13 on: October 07, 2017, 07:56:37 PM »
If you want to know whether you can afford this, post a full case study.

If you want people to rationalize an emotional decision based on squishy math, this likely isn't the right audience.  But you also don't need anyone's permission either.

FWIW, I recently said no to a similar temptation -- for us, it was the school district vs. issues with parents and grown kids, but a larger house that hit a lot of emotional buttons in me.  And it had two separate apartments that we could have rented to (probably) offset the higher mortgage.  But then I thought, you know, even if my current house isn't perfect, it's pretty damn good and gives me everything I need and then some.  And we are down to @$300k on a 2.875% mortgage, and I'd need to re-start that at @$450k and a higher rate -- followed by more $$$ on the inevitable repairs and upgrades (I can tell myself it's fine and I wouldn't need to change anything, but I have met myself before and can recognize my own bullshit when I hear it). 

In sum, I have an objectively great situation here already in terms of both luxury and cost.  For me, it wasn't worth risking a known "good enough for the likes of me" deal for more luxury that might end up paying for itself.

That said, if my mother was living with me, and I had the option of moving to a new house that allowed her to live in a separate apartment, I'd be moved in already and telling anyone who objected to go fuck themselves.  Because I love my mother, but ye gods, there's no way we'd survive under the same roof.

frugaldrummer

  • Pencil Stache
  • ****
  • Posts: 709
Re: Would you do this?
« Reply #14 on: October 07, 2017, 10:42:19 PM »
Adding on to existing house isn't feasible - small tract lot with no room for additions or pool.
The math really isn't squishy - rent would cover increased mortgage and property tax. My increased costs would be increases in water bills and heating bills, plus pool maintenance. IF I chose to rent out the excess bedroom in the main house that would be covered too. And that's based on renting at a very desirable rate in a market that is very very tight on rentals. Over time, as rents go up and my mortgage payment remains the same, the rent on the guest house could even pay a growing percentage of the mortgage.

What would I get? A better space for multigenerational living. Views (none from my current tract house). And the pool ( my favorite exercise at my gym, and usable most of the year in our climate with solar heating). More rapid equity building.

Downside? Property values can fall, but with $400k equity, I'd never be upside down. There'd be more yard work. Replacing things like carpets and roofs would cost a bit more eventually due to increased square footage. More to clean.






pk_aeryn

  • Stubble
  • **
  • Posts: 137
Re: Would you do this?
« Reply #15 on: October 07, 2017, 11:27:48 PM »
In your current house, does everyone have their own bedroom? If so, what would you realistically use any extra space for, aside from renting the guesthouse?

bacchi

  • Magnum Stache
  • ******
  • Posts: 4022
Re: Would you do this?
« Reply #16 on: October 07, 2017, 11:39:24 PM »
Pools, like boats, are best enjoyed when friends own them.

frugaldrummer

  • Pencil Stache
  • ****
  • Posts: 709
Re: Would you do this?
« Reply #17 on: October 08, 2017, 12:20:19 AM »
Son and his girlfriend are in a small bedroom with basically just room enough to walk around the bed. No room to sit, work. Grandma dominates the living room watching her cop shows, so giving each adult a little more personal space would enhance the multigenerational living situation significantly. The houses in the range I looked at have more generously sized bedrooms.

Warning about the pool taken.


former player

  • Magnum Stache
  • ******
  • Posts: 4683
  • Location: Avalon
Re: Would you do this?
« Reply #18 on: October 08, 2017, 02:04:38 AM »
How old are your sons?  Sooner or later they will probably both be gone.  Truth be told the best way for them both to be gone is to stay in the house you have.

Is depressed son the son who has his girlfriend living with him in a small bedroom in your house?  You should be working to get him well, get him working and get him a place of his own, with or without girlfriend.  (Frankly, I'd have said no to the girlfriend in the first place, given the small room and the depression.)  Same with Asperger's son: he needs to learn to adult as best he can, which at some point includes living on his own (he'll have to do it when you die, best he learn now).

Is this bigger house just an attempt to keep your sons dependent on you for the rest of their lives?

OK, that's all probably a bit more facepunchy than I possibly intended.  I don't know your situation beyond what you've posted.  But the only good reason for having children is to send them out into the world as independent adults who make their own way in life.  Don't hold them back by wrapping them in even more cotton wool at home.

frugaldrummer

  • Pencil Stache
  • ****
  • Posts: 709
Re: Would you do this?
« Reply #19 on: October 08, 2017, 09:09:47 AM »
No offense taken.
As for depressed son, taking the girlfriend in was part of the deal to get him home and into treatment. He had impulsively moved to L.A. to live with her but they were failing to make enough money to live on which resulted in me paying their expenses there. Told them I couldn't afford to continue to do that but they could come live with me, work here and save money until they can get on their feet. (Girlfriend doesn't have functional family to return to; I like here and don't mind helping). My hope is to help him get well enough to eventually make a career at something where he can be independent (he definitely would prefer not to live with mom). However he needs to stay with me long enough to get his mental health stabilized and this has been a problem in the past.

Asperger's son is thirty, definitely capable of living alone but not currently making enough to do so, and neither are his friends. (Remember a one bedroom apartment in this area goes for $1600 and up!).  He enjoys living with me and mom. Challenge with him is he is underemployed, a hard worker in a low wage job where he's comfortable. (Extreme anxiety is part of his Asperger's.) Need to help him move into a more profitable career but it's not easy. Unfortunately he's not interested in programming. He couldn't teach school because he couldn't negotiate the social aspects with parents and students. We're working on it.

Truthfully, I thought my kids would all be out of the house at 18 and that would be it. However all three have faced serious mental health issues (middle child is a trans man with history of depression, currently in college to be a social worker, some small chance he might end up living with me for a year while pursuing his masters if he gets accepted to the school near me, which is his second choice.

If it was only me, I'd be happy with a smaller place. If I had the money, I'd help them all buy homes, as their echo boom generation will drive prices up again. But since I can't afford that, the idea of being able to buy a home that would accommodate all of us if needed, for little more than I pay now, holds some attraction.

And if I found myself 5 or 10 years from now alone in that large house, I'm the kind of person that would move in a couple of roommates or take in old friends.

Don't worry, I'm not running out to do this, just contemplating.

On a related not - some (not all) of these properties have septic and propane. Relatively uncommon in Southern California, a remnant of the semi-rural area becoming suburban.  Any input on the relative expense, difficulty of selling a property with septic in an area where most people are connected to sewer?

backyardfeast

  • Pencil Stache
  • ****
  • Posts: 899
  • Location: Vancouver Island, BC
    • My journal
Re: Would you do this?
« Reply #20 on: October 08, 2017, 10:22:06 AM »
Quote
If it was only me, I'd be happy with a smaller place. If I had the money, I'd help them all buy homes, as their echo boom generation will drive prices up again. But since I can't afford that, the idea of being able to buy a home that would accommodate all of us if needed, for little more than I pay now, holds some attraction.

And if I found myself 5 or 10 years from now alone in that large house, I'm the kind of person that would move in a couple of roommates or take in old friends.

I think this is the key thing to think about.  If you are committed to living in an intergenerational large house with a pool as a dream lifestyle for the long haul, then perhaps the listing you're looking at is a sane way to meet that goal.  I think what people are reacting to, beyond just the usual MMM "don't pay extra $ for anything!", is that your general description, on the surface, sounds like a temporary challenge that you're trying to overcome with an overly large solution.  Buying and selling houses, and moving, is expensive and a lot of work, and it's best done rarely.  So how do you see yourself living in 3-5 years?  Would this still be what you wanted?  Or if the market tanked, would you have an overly large white elephant on your hands?

If you are genuinely wanting to create a home that your sons won't have to leave, that you and your mother will comfortably share for a decade, and that, should anything change with anyone's lives, you can both afford and be comfortable renting out rooms in because you love to have lots of people around you and good roommates are easy to find in your area, then, hey, go for it!

Have you gone and walked through this house?  If it's niggling at you, I would go visit it.  Homes feel very different in person than in our imaginations, and you will know immediately if this 4000 sq ft feels cavernous and wasteful.  Layout, etc can be everything. Utility costs and pool maintenance are not small things, and mcmansion homes are often very poorly constructed.  Beware of huge open foyers with vaulted ceilings, for instance! :)  Then there's furniture for all the new spaces, etc.

Do consider carefully, though.  Remember that homes designed to give everyone their own spaces mean that families spend much less time together, crossing paths, etc.  It's a very different rhythm of life, where everyone is more independent.  That can be good, especially if the goal is long term comfort together, but it can also backfire if the goal is more direct support and contact for your depressed son, for instance. Both of your sons right now have some mild discomfort in lack of space that provides motivation to move on.  That motivation would likely disappear with a larger space and more privacy.  If that's what you want, again, no judgement.  Leave the house to your Asperger's son in your estate, and he can rent out all the rooms as a supplement to his own income?

FWIW, my mom and husband and I have just finished renovating a 2500 sq ft home to suit the three of us for the long haul.  It's ridiculous luxury of space, and it's weird figuring out where we will all spend our time.  We definitely hide in our own private spaces, and hang out less together.  But, as mom is young and active and we all do want independence from each other, and plan to live together indefinitely (15-20 yrs for sure, unless something dramatic happens), it feels well worth it.  Financially it was a reasonable, but not totally optimal move, but because of the long timeline, we're ok with that. YMMV.

Hargrove

  • Pencil Stache
  • ****
  • Posts: 718
Re: Would you do this?
« Reply #21 on: October 08, 2017, 10:59:14 AM »
I think what people are reacting to, beyond just the usual MMM "don't pay extra $ for anything!", is that your general description, on the surface, sounds like a temporary challenge that you're trying to overcome with an overly large solution.

That's really a big part of the gist of MMM (not "don't pay more $ for anything"). :p

OP, you want to solve what may be a 1-5 year problem with a 10-year (minimum) solution that's extremely wasteful, requires a massive debt load you'll just be taking on yourself, and requires the part-time job of renting out a section of it (assuming with the existing troubles that renters will mesh well enough with your family). And, you're looking at it backwards - you don't assume the rental pays for the space before you check how hard your life will be if it isn't rented out for a few months.

This is like dramatically increasing all household bills and making a bet there won't be a housing slump in 10 years in exchange for making your house much more comfortable for mostly people who, ostensibly, are doing everything they can to leave it.

frugaldrummer

  • Pencil Stache
  • ****
  • Posts: 709
Re: Would you do this?
« Reply #22 on: October 08, 2017, 11:23:40 AM »
Everybody seems quite worried about vacancies in the guest house rental. Honestly, that's not an issue. Yes, I have the money to cover it if it is vacant for a few months. No, that's not likely to happen. We live in a VERY tight rental market with forecasted extreme housing shortages, renting out such a desirable affordable place would be easy. My biggest concern would be maintenance on a larger home and water costs for a larger lot.

As for construction issues - my current home has a two story vaulted ceiling in the living room - should I be worried??? The properties I'd be looking at are not tract McMansions but custom built homes. Quality and maintenance on most are probably better than lower cost tract homes. I would have concerns about the modern architect designed home though - architects aren't always good builders, look at Frank Lloyd Wright.


Roe

  • Stubble
  • **
  • Posts: 196
Re: Would you do this?
« Reply #23 on: October 08, 2017, 11:45:32 AM »
...increased heating bills (relatively cheap in our mild climate  and installing solar would reduce probably back to what I pay now).


Wouldn't the same investment be possible at your current place, keeping the increase the same with a move?

Having an adult relative with severe depression, I would be careful with increasing the living space for him. Your son might be different, but in hindsight the similar decisions that has been made about my relative have only locked him into depression. While intentions are caring and loving, they might doom the recipient to a life on the outside.


dreams_and_discoveries

  • Pencil Stache
  • ****
  • Posts: 929
  • Location: London, UK
Re: Would you do this?
« Reply #24 on: October 08, 2017, 12:33:03 PM »
I'm going to go against the grain here, whilst I think you are mad taking on $300k more debt for this house, from your posts I get the feeling that this may be a balanced choice you have made.

Your posts read to me as someone who gets most satisfaction out of helping others, and loves having other people around. You come across as a caregiver, who want to spend their money making other people comfortable.

So for me it boils down to do you have the money? What is your overall financial situation? Do you need to work or are you actually FI? Are you prepared to work 2,5,10 years extra for this new house?



Linea_Norway

  • Walrus Stache
  • *******
  • Posts: 5830
  • Location: Norway
Re: Would you do this?
« Reply #25 on: October 08, 2017, 01:09:00 PM »

On a related not - some (not all) of these properties have septic and propane. Relatively uncommon in Southern California, a remnant of the semi-rural area becoming suburban.  Any input on the relative expense, difficulty of selling a property with septic in an area where most people are connected to sewer?

Our previous house had own drinkg water well, septic tank for grey water and a closed tank for toilet. We lived quite rural, but most other houses had communal water an sewer.
When we bought it in year 2000 we were a bit sceptic. But as this was the best house we could afford and came close to our dream house at that time, we bought it. It was very cheap.
I think we saved a lot of money by not having these communal services. We had free water. We paid for three water tests in 15 years and eventually for a light-based water filter. No other costs. The toilet tank was emptied once a year (household with 2 adults). We adjusted the toilet on using very little water. With more people, or with people spending a lot of time at home, such a closed tank fills up quickly. We paid something like 300 USD per emptying, in a very expensive country. We had the septic with grey water (shower, washing machine, etc) emptied once every two years. If we combined it with the other tank, we paid 50% or so more.
In your case with a house full of people, I think it depends on whether you pay a fixed price for communal services, or price per unit of water. If you have fixed price, I guess it is cheaper to be communal.
When we sold our previous house, it took a long time. We had many viewers, but it took a long time before someone made an offer. I don't know how far this septic played a role, or whether it was the very steep road, the state of the house, or the bad broker we had in the beginning.

Hargrove

  • Pencil Stache
  • ****
  • Posts: 718
Re: Would you do this?
« Reply #26 on: October 08, 2017, 02:16:24 PM »
Everybody seems quite worried about vacancies in the guest house rental. Honestly, that's not an issue. Yes, I have the money to cover it if it is vacant for a few months. No, that's not likely to happen. We live in a VERY tight rental market with forecasted extreme housing shortages, renting out such a desirable affordable place would be easy. My biggest concern would be maintenance on a larger home and water costs for a larger lot.

What people are suggesting is that things can change and that renting is not always easy. I don't know successful landlords who expect to always have everything occupied and to get great tenants every time. Anywhere.

Ultimately, you don't need a single person here to agree with you to make whatever decision you want. On a forum about efficient living, smaller environmental footprints, and financial freedom, the answer to the question of "would you get a much bigger house?" is, reassuringly, "no," or "no, but I might do this other thing."