[Renting now, should we purchase a condo?]

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schachtw
Posts: 118
Joined: Mon Jul 06, 2015 6:15 pm

[Renting now, should we purchase a condo?]

Post by schachtw » Sun Apr 14, 2019 9:12 am

[Moved into a new thread from: UPDATE: How much can I spend on a house? --admin LadyGeek]
FoolMeOnce wrote:
Sun Apr 14, 2019 8:03 am
blackburnian wrote:
Sat Apr 13, 2019 10:58 pm
UPDATE
I am the OP, still house-hunting. I have found a condo I like now and am wondering (again) if it is too expensive. My numbers have changed a little from when I first posted, so I am updating. The condo is $635,000. I would pay cash (prefer not to have a mortgage). (Large carryover losses means no capital gains to raise cash.) Should I buy this place, or is it too expensive?

Here are updated stats:

Taxable: $1,950,000, AA 50/50
Savings acct: $220,000 (waiting to be put into house)
Retirement (403b and Roth): $350,000

Age: 61, single, no children, currently renting
Income: $78,000 (putting max into 403b and Roth IRA, so withdrawing some from taxable for living expenses)
Work until: 65
Budget: $71,000/yr (includes estimated monthly costs for new condo; includes Roth contribution, so will be reduced after 65; includes some other expenses that mean spending is more than income)
TIAA annuity: start at 65, expect ~ $16,000/yr
Take SS at: 70, expect ~ $24,000/yr

I figure between ages 61 and 65 I need to withdraw about $40,000/yr for expenses; between 65 and 70, $47,000 per year, and after age 70, about $23,000/yr.
Let's say price of condo plus costs, moving, etc. comes to $660,000. I would have roughly $1.5 million left in taxable, plus about $150,000 in Roth IRA. Is that enough?
It looks like you'll be withdrawing less than $40k between 61-65. That's what you are taking from taxable, but then putting a significant amount back into 403b and Roth accounts, right? That's a wash for portfolio withdrawals (actually a plus for the tax treatment).

If I am right, you are probably withdrawing a fraction of a percent from your portfolio now, and then looking at a 2.8% withdrawal rate for five years followed by a 1.4% rate. That leaves room even for poor returns in the near term. I think you'll be fine.
Very timely thread for me and my wife. We are currently renting but also looking at purchasing a condo.

We are looking in the 600K range. HOA fees in the area range from 400-750/month; property taxes typically range about 2.25% of purchase price (~12-15K/year). We would apply for a mortgage, and not touch VG accounts.

Metrics as of 4/14/19:
Current monthly rent 2800.00
MARCUS MM account 200K - to be used for down payment
Both 68
Taxable: 3.2 MM (85% equity, 15% tax exempt bonds)
IRAS: 2.1 MM (100% bonds)
SS/pension: ~ 7K per month
Estimated monthly budget: 15K

Should be set our sights higher, lower, continue to rent?Any thoughts or input is appreciated.

FoolMeOnce
Posts: 585
Joined: Mon Apr 24, 2017 11:16 am

Re: How much can I spend on a house? Addendum

Post by FoolMeOnce » Sun Apr 14, 2019 10:03 am

schachtw wrote:
Sun Apr 14, 2019 9:12 am
FoolMeOnce wrote:
Sun Apr 14, 2019 8:03 am
blackburnian wrote:
Sat Apr 13, 2019 10:58 pm
UPDATE
I am the OP, still house-hunting. I have found a condo I like now and am wondering (again) if it is too expensive. My numbers have changed a little from when I first posted, so I am updating. The condo is $635,000. I would pay cash (prefer not to have a mortgage). (Large carryover losses means no capital gains to raise cash.) Should I buy this place, or is it too expensive?

Here are updated stats:

Taxable: $1,950,000, AA 50/50
Savings acct: $220,000 (waiting to be put into house)
Retirement (403b and Roth): $350,000

Age: 61, single, no children, currently renting
Income: $78,000 (putting max into 403b and Roth IRA, so withdrawing some from taxable for living expenses)
Work until: 65
Budget: $71,000/yr (includes estimated monthly costs for new condo; includes Roth contribution, so will be reduced after 65; includes some other expenses that mean spending is more than income)
TIAA annuity: start at 65, expect ~ $16,000/yr
Take SS at: 70, expect ~ $24,000/yr

I figure between ages 61 and 65 I need to withdraw about $40,000/yr for expenses; between 65 and 70, $47,000 per year, and after age 70, about $23,000/yr.
Let's say price of condo plus costs, moving, etc. comes to $660,000. I would have roughly $1.5 million left in taxable, plus about $150,000 in Roth IRA. Is that enough?
It looks like you'll be withdrawing less than $40k between 61-65. That's what you are taking from taxable, but then putting a significant amount back into 403b and Roth accounts, right? That's a wash for portfolio withdrawals (actually a plus for the tax treatment).

If I am right, you are probably withdrawing a fraction of a percent from your portfolio now, and then looking at a 2.8% withdrawal rate for five years followed by a 1.4% rate. That leaves room even for poor returns in the near term. I think you'll be fine.
Very timely thread for me and my wife. We are currently renting but also looking at purchasing a condo.

We are looking in the 600K range. HOA fees in the area range from 400-750/month; property taxes typically range about 2.25% of purchase price (~12-15K/year). We would apply for a mortgage, and not touch VG accounts.

Metrics as of 4/14/19:
Current monthly rent 2800.00
MARCUS MM account 200K - to be used for down payment
Both 68
Taxable: 3.2 MM (85% equity, 15% tax exempt bonds)
IRAS: 2.1 MM (100% bonds)
SS/pension: ~ 7K per month
Estimated monthly budget: 15K

Should be set our sights higher, lower, continue to rent?Any thoughts or input is appreciated.
Perhaps start a new thread to get advice rather than posting here.

furnace
Posts: 297
Joined: Tue Oct 20, 2015 3:38 pm

Re: How much can I spend on a house? Addendum

Post by furnace » Sun Apr 14, 2019 10:41 am

schachtw wrote:
Sun Apr 14, 2019 9:12 am
Very timely thread for me and my wife. We are currently renting but also looking at purchasing a condo.

We are looking in the 600K range. HOA fees in the area range from 400-750/month; property taxes typically range about 2.25% of purchase price (~12-15K/year). We would apply for a mortgage, and not touch VG accounts.

Metrics as of 4/14/19:
Current monthly rent 2800.00
MARCUS MM account 200K - to be used for down payment
Both 68
Taxable: 3.2 MM (85% equity, 15% tax exempt bonds)
IRAS: 2.1 MM (100% bonds)
SS/pension: ~ 7K per month
Estimated monthly budget: 15K

Should be set our sights higher, lower, continue to rent?Any thoughts or input is appreciated.
You can pay cash for your $600 condo with ease, and I like your asset allocation. At 85% equity, you are showing fearlessness and will be handsomely rewarded when you check back in 10 years :greedy

edit: I missed that you have 100% in bonds in your IRAs. If you have such a big bond holding, why not just take money out of your bond portfolio and pay cash for the condo, instead of taking out a mortgage? It's not like your bonds are earning more than 4% post-tax, are they?

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