Author Topic: Buying a new house, am I crazy???  (Read 1088 times)

Big

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Buying a new house, am I crazy???
« on: October 07, 2019, 02:45:45 PM »
My wife and I just recently sold our house, huge mistake on my part, regret it everyday.  I looked at it as excess that wasn't needed at the time.  Was a 2700 sq ft, brick home on 20 acres in the country.  There were a few underlying circumstances beyond just looking at it as excess, but those issues have since resolved.  Sold the house for basically what we paid for it 2 years ago, which was at least $60k too little in today's market.  I just wanted it to be gone and took an offer by a friend that wanted it.

Fast forward 6 months later and the regret of selling is constant.  We are both outdoors people and she has horses (which will be permanent fixtures for the next 15 years)  We moved to the city in an apartment and absolutely despise city living.  We miss the lifestyle of the country, and she is now boarding her horses to the tune of about $400 a month.  I'd never ask her to give them up as I realize they are a huge part of her life. 

She is 41 making about $60k a year, I'm 38 making between $125k-185k per year depending on how well my business does.  We will have about $270k in cash, $35k in my sep/ira, and $60k in her 403 by March 2020, when our lease is up.  My business is worth about $600k as I was just offered that as a buyout w/ trailing $75k salary for at least 3 years.

Not a ton of debt, $18k on my office building (worth about $50k and pays for itself via rent from my business), and $7,000 in student loans at 1.6%.  She has a small student loan for around $7,000 at 4ish%.  She also has a pension that will pay her about $2200 a month when she retires at this point, will be adjusted for inflation.  Everything else is paid for and I'm saving between $5000 a month of my net income. 

These properties are all situated on acreage of about 20+ acres and have facilities for the horses and our hobbies.  We don't take many trips (maybe one every 3 years that costs $1500), so we put a lot of importance on being able to enjoy our home and the peace it provides from our busy lives.  We do have one son, who is self sufficient and making a very good living as a PA.  Don't plan on kids.  I'd like to retire by 55-60 and she'd like to work til at least 65.  I am looking at the home as a long-term residence (20ish years) and we would probably stay there til we couldn't provide the upkeep anymore. 

I know it isn't congruent with the mustachian lifestyle, but am I crazy for looking at houses in the $400-$500k range?  Basically, putting more value on country lifestyle than say buying a house for $250-300k and living in the city. 

Open for thoughts, comments, discussion of any sort. 
 

affordablehousing

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Re: Buying a new house, am I crazy???
« Reply #1 on: October 08, 2019, 01:33:08 PM »
So sorry you left a good situation. That sucks. Seems to me you are asking permission to buy a house ~2x your salaries. Seems very reasonable. We bought a house 2.25x our salaries and it's very manageable expense wise. People are all over the place on the forum, but only you know the combination of goals you have, how miserable you are, what risk you're willing to take on, and how you intend to use your property. Go with your gut, and if you want a horse property, get after it!

AMandM

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Re: Buying a new house, am I crazy???
« Reply #2 on: October 10, 2019, 08:02:50 AM »
I don't think it's at all crazy to consider buying the kind of house that will make you happy. What would be crazy is to actually buy such a house without considering your whole situation and other goals. (But it would also be crazy to buy a house that you know will keep you miserable--if you decide you can't afford the horse house now, I would keep renting, reduce expenses, and save for the horse house.)

A few thoughts off the top of my head:
(A pessimistic one) Suppose you sold your business on the terms you mentioned. You could buy the house you want in cash, which would reduce your living expenses by rent + boarding fees, but your income would go down by $50k-100k. So you probably could cover all your expenses but not keep saving $5000 a month. How will it still be possible for you to retire at 55-60 if you are not saving?

(An optimistic one) Suppose you don't sell your business, but keep working. How would the cost of buying the house compare to the current rent + boarding costs?  Even if buying costs $2500 more per month, so your monthly savings go down to $2500 a month, that $2500/month if invested would likely be worth over $1M in 20 years. Would that plus your wife's pension be enough for you to retire on?

Either way, if you and your wife combined make $185-245, and you're saving $5k a month, your total spending is $125k-185k. That seems really, really high. That suggests to me that the house is actually quite affordable, either because you already save more  than the $5k you mentioned, or because there is room to trim a lot of spending.

Big

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Re: Buying a new house, am I crazy???
« Reply #3 on: October 10, 2019, 07:30:12 PM »
I don't think it's at all crazy to consider buying the kind of house that will make you happy. What would be crazy is to actually buy such a house without considering your whole situation and other goals. (But it would also be crazy to buy a house that you know will keep you miserable--if you decide you can't afford the horse house now, I would keep renting, reduce expenses, and save for the horse house.)

A few thoughts off the top of my head:
(A pessimistic one) Suppose you sold your business on the terms you mentioned. You could buy the house you want in cash, which would reduce your living expenses by rent + boarding fees, but your income would go down by $50k-100k. So you probably could cover all your expenses but not keep saving $5000 a month. How will it still be possible for you to retire at 55-60 if you are not saving

—— That’s one of the issues I’m running into is that savings would drop substantially.  I think if I sold the business, I’d not go 100% cash on a house.  I think given the lower mortgage rates, I’d put down an amount that gets us to affordable payment and let the rest ride in the market til retirement.    I need to work the numbers some more after I get the final offer, payout terms, and salary offer, which is tomorrow.

(An optimistic one) Suppose you don't sell your business, but keep working. How would the cost of buying the house compare to the current rent + boarding costs?  Even if buying costs $2500 more per month, so your monthly savings go down to $2500 a month, that $2500/month if invested would likely be worth over $1M in 20 years. Would that plus your wife's pension be enough for you to retire on

—— It would be cheaper to buy for sure.  I ran the numbers and came up with the realization that if I wait to buy until I save an additional 80k, basically the down payment on 400k house, that we would need to save about 18500 a year to hit our retirement goal, given our assumptions.  I have to reverify the numbers once more and adjust a few things. 

Either way, if you and your wife combined make $185-245, and you're saving $5k a month, your total spending is $125k-185k. That seems really, really high. That suggests to me that the house is actually quite affordable, either because you already save more  than the $5k you mentioned, or because there is room to trim a lot of spending.

—— We pay a ton in taxes, so our expenses aren’t quite as high as you mentioned.  No real opportunity for pretax savings other than wife’s 403b.  You are correct, we are saving more than the 5k.  I get a fairly large profit sharing in March and bank the entire thing, it usually results in an extra 50k after taxes  that goes to my brokerage account.  Problem is that it is not guaranteed so I consider it icing on the cake so to speak.  This is why I need to normalize my salary (see above) factoring those bonuses out as they are not guaranteed.  My wife doesn’t save much, I’m the primary saver, I’m working on her to save more or at least max out her 403b. 

I feel I dont Have enough in terms of cash, so I’m nervous.  I basically started saving heavy for the past 5 years, the rest of the money went back into the business and remodeling my commercial property, etc.   
« Last Edit: October 10, 2019, 08:23:59 PM by Big »