Frozen In Place - Buying a Home - Don't know what to do

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Agcentral
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Frozen In Place - Buying a Home - Don't know what to do

Post by Agcentral » Thu Sep 13, 2018 9:17 pm

Your thoughts, please on the purchase of Real Estate (a home).

I am recently retired and am really stressed about spending large $’s on a home. Still, I want to, at least feel, some sense of stability that I believe a home can bring.

I moved out of state (to Florida) last year and am living in an apartment. My thought is to check out the various areas around me to see what appeals. I am not sure, yet, if I want to live here or move elsewhere. I will make that assessment and then commit accordingly if it feels right.

Without going in to long boring detail, here are the facts… goals:

1.) Legacy is important to me (primary). My goal is to live within my means which is to spend no more than my monthly Social Security retirement benefit + a small pension. To leave as much money as I can to my kids when I pass. I would like to see my assets grow. I know that is not a certainty (potential future medical expenses, stock market volatility etc.) nor is that entirely in my control.
2.) Reduce my expenses (e.g. apartment rent) by purchasing a home. I know that I am substituting rent dollars for Property Tax, Property Insurance, possible maintenance costs, unexpected expenses (roof replacement, A/C replacement, etc. etc.), higher utilities bills etc. Still, I believe those cost will be less, in the long run, than rent which will surely increase over and over… over time. I've lived that scenario (apartment) for the last 20 years.

My Question:

In your view, do you think that having a home as an asset, that as a percentage of total holdings ($$$) that 20% (hopefully much less like, conservatively, 17-18%) is reasonable for a home?

I am absolutely frozen in place. Moving forward, spending that kind of money is to me… VERY scary… mind blowing. I don’t like the apartment I’m currently living in and other apartments in the area, that are nice, have higher rent than I am currently paying.

I am talking about a mid-range home in a decent area (low crime) with hopes that a drop-in value (say 25%), should that happen, over time won’t be too bad for my kids.

Please oh please... advise. I would like to enjoy some level of satisfaction in my retirement ... to relax so I can get engaged. I don't want to be a 'failed retiree'.

btenny
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Re: Frozen In Place - Buying a Home - Don't know what to do

Post by btenny » Thu Sep 13, 2018 9:26 pm

I think you need to give us a lot more details on your actual expenses and investments and SS and pensions. Then we can do the math and provide some guidsnce. Without that data any answer is pure guess.

Good luck.

Agcentral
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Re: Frozen In Place - Buying a Home - Don't know what to do

Post by Agcentral » Thu Sep 13, 2018 9:32 pm

Thanks btenny... I was hoping for a high level view on this without going into detail... that is, as a percentage of overall assets, if 20% for a home seemed reasonable to those with the smarts on this board.

Again, I am living within my means... expenses are less than revenue.
Last edited by Agcentral on Thu Sep 13, 2018 9:35 pm, edited 1 time in total.

delamer
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Re: Frozen In Place - Buying a Home - Don't know what to do

Post by delamer » Thu Sep 13, 2018 9:35 pm

It sounds like you are thinking about a single family home or townhouse.

Why not a condominium apartment to minimize some of the maintenance and utility costs (although you’ll have an HOA fee)?

If you have been living in apartments for 20 years, there must be a good reason.

Agcentral
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Re: Frozen In Place - Buying a Home - Don't know what to do

Post by Agcentral » Thu Sep 13, 2018 9:39 pm

I am receptive to condos, single family homes etc. I am wide open and considering all.

I have lived in apartments for the past 20 years as I have never felt comfortable/stable in my work life to put myself in a position of possibly being laid off (the energy industry has been WAY up and WAY down over the years) and being stuck with a large mortgage to offload at a much reduced home price in order to save my bacon. It was a conservative approach.

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jabberwockOG
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Re: Frozen In Place - Buying a Home - Don't know what to do

Post by jabberwockOG » Thu Sep 13, 2018 9:42 pm

delamer wrote:
Thu Sep 13, 2018 9:35 pm
It sounds like you are thinking about a single family home or townhouse.

Why not a condominium apartment to minimize some of the maintenance and utility costs (although you’ll have an HOA fee)?

If you have been living in apartments for 20 years, there must be a good reason.
The above is great advice. Buy a condo or maybe a townhouse. Given your the history and the sentiment you shared, you are most definitely not ready or in any shape to own and maintain a house.

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sergeant
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Re: Frozen In Place - Buying a Home - Don't know what to do

Post by sergeant » Thu Sep 13, 2018 9:42 pm

Do a rent vs, buy calculation to see what leaves the largest amount for your heirs. I definitely WOULD NOT shortchange my comfort to leave my heirs more money. As Nike says "just do it." If you at least give your age you might get better informed input.
Lincoln 3 EOW!

delamer
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Re: Frozen In Place - Buying a Home - Don't know what to do

Post by delamer » Thu Sep 13, 2018 9:50 pm

Agcentral wrote:
Thu Sep 13, 2018 9:32 pm
Thanks btenny... I was hoping for a high level view on this without going into detail... that is, as a percentage of overall assets, if 20% for a home seemed reasonable to those with the smarts on this board.

Again, I am living within my means... expenses are less than revenue.
We are within a couple years of full retirement, and our home equity is about 16% of our assets.

For what it’s worth.

My suggestion is that you gift some money now to your kids rather then preserving it all for them as an inheritance. Money that you give them now for a house downpayment or to pay for their own or their kids’ educations will be appreciated more than what they get when you are gone.

Good luck.

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jabberwockOG
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Re: Frozen In Place - Buying a Home - Don't know what to do

Post by jabberwockOG » Thu Sep 13, 2018 9:51 pm

Agcentral wrote:
Thu Sep 13, 2018 9:17 pm
Your thoughts, please on the purchase of Real Estate (a home).

I am recently retired and am really stressed about spending large $’s on a home.



Without going in to long boring detail, here are the facts… goals:




I am absolutely frozen in place. Moving forward, spending that kind of money is to me… VERY scary… mind blowing.

Please try to understand the difference between spending money and investing money.

You spend money on a vacation, an expensive cruise, a new wardrobe, a new car, or eating in a restaurant. Spending too much money on frivolous things should make a person anxious.

You invest money in a condo/house/real estate. Unless you buy in a real estate bubble market and have bad timing, real estate purchased carefully will typically retain its value and even appreciate over time if you make improvements and or market demand increases. If you don't like a home you purchased you can sell it in a couple of years and not lose anything or relatively little.

I have purchased and sold multiple houses over the years, making money on most but not all of them, but had some very nice places to live, it really is not that big a deal.

pkcrafter
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Re: Frozen In Place - Buying a Home - Don't know what to do

Post by pkcrafter » Thu Sep 13, 2018 10:12 pm

Agcentral wrote:
Thu Sep 13, 2018 9:32 pm
Thanks btenny... I was hoping for a high level view on this without going into detail... that is, as a percentage of overall assets, if 20% for a home seemed reasonable to those with the smarts on this board.

Again, I am living within my means... expenses are less than revenue.
Agcentral, you now have 19 posts asking questions that are all related, but with all due respect, you really have not yet provided enough information to get much meaningful feedback. You mentioned a portfolio with 20% stock and that does not sound reasonable, but again, we don't really know. 20% equity is not enough to sustain the portfolio when considering inflation. Also don't know if you can really afford a home and have enough for maintenance and comfortable living. Other options are in the lines of active retirement communities.

While I agree that leaving an inheritance is a great idea, I do not think you should sacrifice the remainder of your life to maximize it. If you want a nice home and can afford it, buy it. The nicer it is, the more it will be worth to your children. Will the home be purchased in the trust? Do your children live in Fl? If not, have you considered living in an area closer to them?

What area of Fl are you considering? I ask that because we have members in Fl and they could provide helpful advice.

You might think about posting information in this format if you want more helpful feedback.

viewtopic.php?f=1&t=6212

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

SoAnyway
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Re: Frozen In Place - Buying a Home - Don't know what to do

Post by SoAnyway » Thu Sep 13, 2018 10:48 pm

pkcrafter wrote:
Thu Sep 13, 2018 10:12 pm
Agcentral wrote:
Thu Sep 13, 2018 9:32 pm
Thanks btenny... I was hoping for a high level view on this without going into detail... that is, as a percentage of overall assets, if 20% for a home seemed reasonable to those with the smarts on this board.

Again, I am living within my means... expenses are less than revenue.
Agcentral, you now have 19 posts asking questions that are all related, but with all due respect, you really have not yet provided enough information to get much meaningful feedback. You mentioned a portfolio with 20% stock and that does not sound reasonable, but again, we don't really know. 20% equity is not enough to sustain the portfolio when considering inflation. Also don't know if you can really afford a home and have enough for maintenance and comfortable living. Other options are in the lines of active retirement communities.....

You might think about posting information in this format if you want more helpful feedback.

viewtopic.php?f=1&t=6212

Paul
+1.
OP, your thread title has attracted attention to those with knowledge and who would love to help you. However, as Paul noted, most are asking for the info that will help them help you best. Please consider sharing the info in the format that Paul linked. There's no "magic rule of thumb" on home cost/value as a "percentage of overall assets" (as a "balance sheet" matter), even if to your credit your expenses are less than annual income (as an "income statement" matter). It all depends on the bigger picture.

FWIW, if indeed it is "VERY scary… mind blowing" to you to invest the amount of money required in the purchase of a residence - whether SFH, condo, townhome, whatever - then you should just keep renting.

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Watty
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Re: Frozen In Place - Buying a Home - Don't know what to do

Post by Watty » Thu Sep 13, 2018 10:58 pm

delamer wrote:
Thu Sep 13, 2018 9:50 pm
My suggestion is that you gift some money now to your kids rather then preserving it all for them as an inheritance. Money that you give them now for a house downpayment or to pay for their own or their kids’ educations will be appreciated more than what they get when you are gone.
The OP is only recently retired so he or she is likely somewhere around 65. It sounds like they are doing well but not fabulously wealthy so that may be too young to give lots of money to their kids since they could have decades of expenses ahead of them.

By far one of the best financial things you can do for kids is to make sure that they will not have to support you even if you have poor investing returns and live to be 100+ and live in a LTC for a while. I have know people that have had to financially support their parents and that can be rough since that often hits at the same time you have kids in college and are trying to save for your own retirement.
Agcentral wrote:
Thu Sep 13, 2018 9:17 pm
1.) Legacy is important to me (primary). My goal is to live within my means which is to spend no more than my monthly Social Security retirement benefit + a small pension.
That would be a lot more doable if you have a paid off house or condo, and the kids can sell the house when they inherit it.

If you have sound financial plans to be able to support yourself until you are exceptionally old then one thing to consider is that your life expectancy at 65 is somewhere in your mid 80s. This means that if you die when you are 85 that you will still have an ample net worth to leave your kids.

Unless you have special needs kids or something like that you might not need a lot of special financial planning for their inheritance since they will likely get a large one anyway just because you did not live long enough to spend all your money.

Nissanzx1
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Re: Frozen In Place - Buying a Home - Don't know what to do

Post by Nissanzx1 » Thu Sep 13, 2018 11:04 pm

Owning your own place stabilizes your housing costs for the long term. It's smart in most situations, especially if you plan to live there until the end.

Up to 20% should be fine. Watch out for awful, mismanaged HOA's. Buy something on the cheaper side in a nice neighborhood.

delamer
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Re: Frozen In Place - Buying a Home - Don't know what to do

Post by delamer » Thu Sep 13, 2018 11:10 pm

Watty wrote:
Thu Sep 13, 2018 10:58 pm
delamer wrote:
Thu Sep 13, 2018 9:50 pm
My suggestion is that you gift some money now to your kids rather then preserving it all for them as an inheritance. Money that you give them now for a house downpayment or to pay for their own or their kids’ educations will be appreciated more than what they get when you are gone.
The OP is only recently retired so he or she is likely somewhere around 65. It sounds like they are doing well but not fabulously wealthy so that may be too young to give lots of money to their kids since they could have decades of expenses ahead of them.

By far one of the best financial things you can do for kids is to make sure that they will not have to support you even if you have poor investing returns and live to be 100+ and live in a LTC for a while. I have know people that have had to financially support their parents and that can be rough since that often hits at the same time you have kids in college and are trying to save for your own retirement.
The OP said the s/he expects to live on a combination of a pension and Social Security income, so regular withdrawals from savings aren’t in the picture. But, obviously, s/he need to have some liquid assets for emergencies or potential long-term care expenses.

And I never suggested giving “lots of money to their kids.” I suggested that some assistance with a downpayment or a contribution to a 529 plan now is more beneficial than conserving everything for a future inheritance. A $10,000 gift for a downpayment to a young person might make the difference between buying and renting without compromising the OP’s future.

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