a good real estate trade

[ochotona]

My wife brought me in to see a model home in late May, and we both liked one of the inventory homes the builder had on the market. But the concern was that, at age 64, a mortgage and higher property taxes would scuttle our retirement. So here is how we solved that problem:

The new house would cause these cash flow changes:

a mortgage payment for the first time since 2012 (our prior home was paid for)
higher property taxes
our total spend on HOA fees, water & sewer, trash, landscaping would go down
our energy spend would go down because it’s a very high efficiency home
homeowners, flood, umbrella insurance would be less in the new home
we had an {unknown amount} needed for AC replacement for the old house (two systems, up and downstairs) - that budget item vanished, there is a ten year warranty on the new system
we budgeted $25k for the roof on that old house - that budget item vanished
we budgeted $50k for upgrades on the old house - that budget item vanished
someday we’d sell the house for at least 2/3 more than our old house would’ve sold for, which made late retirement cashflow better (a bigger house to eat)

Builders are highly motivated to sell. Our mortgage is 2.99% year 1, 3.99% year 2, 4.99% year 3, 5.49% years 4-30, all bought-down by the builder. Market rates are about 6.75% now. All of that nice financing came on top of about $60,000 in cash price cuts. Basically, the price cuts and mortgage buy-down reduced the house price by about 20%.

But, we still had a shortfall. So how did we solve it? I went to our retirement planners (Fidelity and Flexible Retirement Planner) and extended my retirement date out to my 65th birthday. That fixed it. Same retirement budget, and I’d really just have to work a few months longer. The kicker is I can bike to work along the Terry Hershey Trail in Houston from our new place… so going to the office is much more fun than slogging through freeway traffic. And by car? Now a 7 minute commute vs 45 minutes previously. I’m pretty sure the extra months will fly by.

We had the luxury of being able to close on the new home without needing to sell the old one, because the old one was mortgage-free. But we still needed to sell it fast. How did that work out?

I have been paying attention to the softening housing market, especially in Southern markets. Florida, Nashville, Atlanta, North Carolina, Austin are worse, but Houston isn’t booming. The sell side realtor had our home appraised, and we decided to price it EXACTLY at the appraised value, we weren’t going to get greedy about how much we felt “entitled” to. We observed that similar priced houses in our neighborhood were run-down, old, and ugly compared to ours, and ultimately ours sold quickly. We had problems; we had a corporate buyer who made unreasonable demands and they withdrew (we refused their demands). Then our actual buyer had financing delays… the closing had to be delayed twice. But we got it done, and 22 days after we closed on the new house, we closed on the old house. It was great to see the wire transfer arrive at Schwab. Whew! What a relief. We sold significantly ABOVE our worst-case scenario, in other words… our mortgage loan amount on the new house ended up being too large. Oh well… it’s like a cash-out refi at 2.99%. Not a bad thing.

This is our forever home. It’s in a gated community, better restaurants and shopping than our old place, the swimming pool has a vacation resort feel to it, it’s walkable and bikeable, it actually has a bus line which goes in front of our complex which goes to a major mall and hospital and then to Downtown Houston, all of this is important for people getting older. There is no lawn to mow; I sold our old lawnmower.

All in all… this was a really successful trade. We got incentives from the builder, but didn’t get killed on the sale, and we got into the place we need to be until such time as we need to go into assisted living; hopefully not for a long time.

[Xan]

Well done, ocho!

[yankees60]

Happy for you and your wife. You put in the proper analysis and you won!

[boglerdude]

> corporate buyer

In a burb?
https://old.reddit.com/r/conspiracy/com ... illed_and/