Author Topic: advice please  (Read 1206 times)

kbear

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advice please
« on: May 10, 2021, 12:24:06 PM »
We are  48 and 50 and planning on retiring in about 2-3 yrs.
Next summer we are planning on buying a built out Sprinter and working remotely/travel for a yr or two then just travel until we've had enough of that life style.We are both long distance hikers(AT and PCT)so know this lifestyle suits us well.
My question is whether or not to sell our house now( since market crazy) and if we do ,what to do with the $? The house is paid off and worth about $280K. If we sold it, we would rent an apt for a year. Or do we just wait and sell next summer? We were in FL during 2008/2009 and saw the devastation in real estate so I think that experience haunts us that's why we feel the need to sell now instead of waiting, but are we being rational?
We've always looked at the house as our bond allocation, so if we sell should we put the $ in total bond market? Or since we have a big cash cushion, should we add it to our investments?  Or just keep it in cash ready to deploy when market crashes? We are both still working for another 2-3 yrs.
Two kids in university. Son has 2 yrs left. Daughter has 3 maybe 4 if gets masters. We are paying for school, both in state schools. They both have their own 12 mth lease apts.
We have about 260K in cash due to paying for university and we are close to retirement and want to live off cash so we can qualify for ACA subsidies and also do Roth conversions.
Right now we have 1.5m in 401k/ira/brokerage all 100% VTSAX.
Any advice? Anything we aren't considering?
KBear




draco44

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Re: advice please
« Reply #1 on: May 10, 2021, 02:37:00 PM »
To me the answer would be highly dependent on how long you estimate it might be "until we've had enough of that life style," and where you'd want to settle down afterwards. Are we talking three years on the road? Ten years? Decades? (side note - especially if the answer to this is a shorter timeframe, do you really need to buy a top-of-the-line camper van)? If you might burn out on van life after just 2-3 years, it may not be worth selling your house if you then turn around and buy another home, at least if you want to return to the same area and aren't using the initial house sale as step 1 of a delayed geoarbitrage move, which would be a different story. Could you rent the current house out if you think you may be gone for a shorter period? You mention enjoying hiking, but I worry that permanent van living will still be a lifestyle adjustment. But if it's the adventure for you, have fun!

I'm also a little unclear on what your primary motivation is for thinking of selling your home. Is it to simplify your life overall? To permanently downsize and get a smaller place after you stop living in the Sprinter?  With 1.5 million in investments it doesn't sound like you'd need to sell the house in order to have the money to buy a van, so you have definitely have options.

Other thoughts:
- Is renting out your current home something that would be of interest to you while you are on the road?
- Is the house you currently own one you could envision yourself moving back into at some point? You mention fear that house prices will plummet in the near future. Does that still matter if you'd eventually want to return to your current house?
- Would you need to buy another house in the same area where you live now once you are done with van life?

GoCubsGo

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Re: advice please
« Reply #2 on: May 10, 2021, 02:56:11 PM »
Definitely answer the question of where you'd want to live after van life as that is the main question.  If you are pretty flexible, and could live in a few different areas I'd definitely consider cashing in or this real estate market.  Being a landlord on your current home could be an option but it will add some more complexity. 

Since you plan on retiring in a few years and you are heavily allocated to equities, I think it would be prudent to put home sale proceeds into something less correlated to equities.  You definitely want to minimize sequence of return risks early in retirement and have a non stock resource to pull from in a downturn.  You just need to figure out if that is bonds or something else.

ChpBstrd

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Re: advice please
« Reply #3 on: May 10, 2021, 03:07:25 PM »
Best Case Scenario:
You hire a good photographer and put your house on the market for an outrageous price, like $325k, and out of the blue someone gives you $310k for it.
You invest the tax-free proceeds in VTSAX and earn an average 5% per year for the next 3 years, with a lot of nail-biting choppiness.
Meanwhile, mortgage rates increase from <3% to 5.5%, popping the real estate bubble. Your old house is now worth $220k.
After the van life gets old in year 4, you buy a similar house for $220k in cash.
Your investments have done much better than housing, you've had a great adventure, and you made $90k inadvertantly timing the second housing bubble.

Worst Case Scenario:
You hire a good photographer and put your house on the market for an outrageous price, like $325k, but it does not sell.
Meanwhile your plans and dreams are on hold. You drop the price to $300k. Still no bites. $280k and now showings...
You put the funds earmarked for college in a bond fund like TLT while you wait so that it earns some interest.
Interest rates rise. Your house is now worth $220k, your bonds just lost 25%, and the stock market is volatile.
You take your house off the market because you're feeling like hunkering down.
Several years later you're back where you started but never did get around to having the adventure of a lifetime because of that house and a routine change in interest rates.

Worst than Worst Scenario:
You quickly sell your house for $280k and buy a $70k van.
Housing prices continue to skyrocket, and your old place goes up to $370k in the two years it takes for van life to get old.
You buy a similar house for $370k.
You lost $90k to housing price appreciation, plus the van depreciated by $50k.
Then the housing bubble bursts and the house you bought for $370k goes back down to $280k.


kbear

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Re: advice please
« Reply #4 on: May 10, 2021, 04:12:37 PM »
Draco44 - Thanks for reply. So, primary motivation for selling the house is that we live in Houston. Great for jobs and schools, but no beautiful nature here. Kids are in college now and work is remote, so we are free to go where we like. We were thinking eventually eastern TN/westernNC or NH. We did think about renting the house out, but it doesn't seem to make much sense. Rental rates for a house like ours are between $1850 - $2000/mth, then you have $6000 for taxes, $2400 insurance, $1200 HOA, so even with the house paid off it seems like terrible return on the money.

GoCubsGo - I agree, because we do worry about sequence of return risks. We are flexible, one option we were thinking about was purchasing some land in mountains building two tiny homes, one we live in and one we VRBO/let family stay in when they are visiting. Hard to tell what we'll be thinking in 5 yrs, especially if our kids get married and start having kids.

ChpBstrd - You made me laugh, hilarious!! Yes, this is the problem. This is why my mind keeps going round and round about what's the best decision. Does anyone have a crystal ball?

draco44

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Re: advice please
« Reply #5 on: May 10, 2021, 04:34:46 PM »
Draco44 - Thanks for reply. So, primary motivation for selling the house is that we live in Houston. Great for jobs and schools, but no beautiful nature here. Kids are in college now and work is remote, so we are free to go where we like. We were thinking eventually eastern TN/westernNC or NH.

Ah, got it. If you are planning on moving anyway it could be a great idea to sell now and invest the money while you live on the road. ChpBstrd is right that there's no way to know what will happen with real estate prices, but at least you'd have one less thing to worry about while adventuring.

Financial.Velociraptor

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Re: advice please
« Reply #6 on: May 12, 2021, 08:35:05 AM »
@kbear I'm also in H-town!

The lack of nature is kind of annoying.  I can go just around the corner to the free Mercer Arboretum and that helps a lot (I can actually walk there via a trail head in my subdivision).  Huntsville is an hour north of me but the park is just a muddy set of ponds full of gators and endless pine trees plus mosquitos.  I guess at least it has hills to climb.  Is Kemah/San Leon/Galveston close enough for a nature fix?

If I was in your situation, I would explore renting a Sprinter for a few weeks to test it out.  I think the main portal is called Outdoorsly.  You might find that traveling for two weeks and then hunkering down in an airbnb for two weeks suits you better than full van-life.  This might be cheaper overall than buying a top of the line unit new and taking the depreciation hit.  Also, your insurance costs will be much lower. 

I'd also hash out where you are going to live after van life is no longer exciting.  What is the cost of housing going to be at your new location? 

yachi

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Re: advice please
« Reply #7 on: May 13, 2021, 08:27:05 AM »
We were in FL during 2008/2009 and saw the devastation in real estate so I think that experience haunts us that's why we feel the need to sell now instead of waiting, but are we being rational?

I graduated in 2006 and sat out while my coworkers all ranted and raved about how I should buy a house.  Finally bought one in 2010 when the government was offering 10k for a downpayment.  Looking online for advice around 2007 on buying a house, *nobody* said to wait for prices to go down.  Have you seen a lot of price appreciation yet?  In our area, I see houses selling much quicker than they have in the past, and prices are elevated, but not where I would call them disconnected from salaries in the area.

theolympians

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Re: advice please
« Reply #8 on: May 25, 2021, 05:41:27 PM »
Where is the house located? If in any of certain areas of the PNW you could put it on the market for $325,000 and have offers for $375,000.

Rdy2Fire

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Re: advice please
« Reply #9 on: May 26, 2021, 06:34:40 AM »
Following because I think about sell vs stay every day or every few days. I keep trying to play through exactly what @ChpBstrd has written but like you @kbear my mind keeps spinning. Let me know if you find the crystal ball :)