MONTHLY Savings

Just read this over...some of you guys have strange ideas of savings.

Slope is on drugs.

Sly, I don't really believe you think paying principal on your home is savings. Come on.

 

In my neighborhood its same as cash at worst, 4% return on average, 8% return at best.

A reverse mortgage in retirement would give me just as steady checks as a pension.

Why shouldn't I consider it savings?

 

I see it both ways - but to anwer your question, I'd say the lack of liquidity. While you can live in your home, you can't eat it or use it to pay other expenses ( unless you incur debt - once again illustrating the illiquidity ).

I've been meaning to ask you about the building / dozing on your street. I'm really coming to the conclusion that my house - and nearly every other home on my street that is old - is a dozer. I think many that have had additions will not yield anything close to the costs of the additions.

Examples:

There are 2 'old' renovated homes for sale on my street right now. Both are asking over $1 million, neither are getting shit for activity. One has been up for coming up on a year.

Meanwhile, homes to doze go for $700-$750, and the $1.5 to $2 million homes on them sell fine. There is a home 2 doors down from me, in dire need of updating ( 90 some year old lady in it for 60+ years ) that sold for about $750 in a few days. They didn't doze it.

Another expample last year was a dozer going for $750, and an entire home going for $750 that wasn't dozed. The non-dozer was well maintained and backed up to the dozer property. It's like the house was worth zero.

I'm thinking the only way my home is NOT a dozer in 20 years is if I make it about 4500sf minimum, maybe over 5000 with guest house add. I think this would cost between $400-$500k to do it up to standards of the area. NOt only do I not want a home that big, I don't want to spend / borrow the money to build it, or live through the build. If I did a smaller scale add, I think I'd be dozed in 20 years, if not sooner, and I wouldn't get hardly any of the money back if i sold sooner. That money would be 'spent'.

I guess my question is if you're standing pat on your home, and not improving unless it's seen as a 'spend', with the McMansion sprouting up a coupla doors down.

The way I see it - every home that's not a McMansion on your road is worth about the same, regardless of work done in recent years.

I might change my tune if my next door neighbor - who started at $1.2 million and has reduced - can get over a million.

 

My house is a dozer regardless. The new house on my street went for $1.2M in days. The old lady next door to it can't hold out much longer and another million dollar house is gonna go up on her lot and keep creeping up toward us.

I'm fine with that, it keeps my lot value increasing. The way I see it, someone is going to pay me a little over 500K for mine, doze it, put 300-400K into a house and sell it for $1.1-1.2. Not a bad deal for the investor. We've talked about beating them to the punch and doing it ourselves.

We had 400K plans drawn up putting what we owe on the house at 650K and what it should be worth at a conservative $1M. That would almost double our equity.
As far as you, why do you care if your house is a dozer or not unless you NEED to make renovations? With 3 kids I guess I can see your concern.

 

Yeah - I figured as much. As far as my situation, NEED is very relative in my eyes. I don't NEED the stuff I already have. I would LIKE to add a master suite and do some bathroom stuff, but I won't do it if in 10 years my home would be worth the same as it would be if I didn't.

I remember 10-15 years ago when homes started getting dozed on Princeton and Hastings. ALL of those homes are now gone or to be dozed. I think the writing's on the wall for my street. They're building a 6000sf with a frikkin ELEVATOR and a live in garage suite ( more sf ) and it'll be $2 million. Most of the original homes on the street are 2000-3000sf.

 

Is that the one on the corner (Chelsea)?

 

Yep. And the progression of that is, IMO, indicative of the transitional nature of the street.

It was sold to some folks I knew about 4 years ago. They paid about $400 I think. It had been a rental and was trashed. They spent at least $100k fixing it up - adding no sf other than a little finished basement and didn't touch the bathrooms or kitchen. They did infrastructure - roof, electrical, new HVAC up and down, plumbing, painting, built a massive, ornate brick wall surrounding the property, landscaping, and built and poured an new driveway. May have done more. Rarely a day in the 2 years that they didn't have a truck in the drive.

They decided to sell - fickle wife. This was 2 years ago right now. Listed for $625 and sold in about an hour, literally, for asking. Buyer said they would move in and blow up - double the size.

It stayed empty for over a year, then dozed. All their upfitting - bulldozed. That mega wall? Trash. All of it.

They'd have been better not doing a damn thing to the house.......and the tentative nature in which it went from a potential 'addition' to a dozer is telling, IMO. Once that starts happening, it's a matter of time before ALL old homes are dozers, and therefore all worth the same as the other.

 

i took a stab while at my desk. we both have a money market account at our respective credit unions. she has a profit sharing deal at work. i got state retirement and a 401k. its close to 1000 a month total.

i recently found out that i could purchase a year towards my state retirement by using my 401k without penalty or repayment. my boss is gonna do it and now im considering heavily. this would enable me to retire in 3.5 years at the age of 51. does anyone see a downside to this option? i swear, it looks appealing to me.

 

Depends, are you going to actually retire or find a new job? Do your retirement benefits keep getting better the longer you work?

If you are going to actually retire this could significantly impact your future SS benefits as your would be averaging in zeros or substantially lower salaries for the 30 years your benefits are based on.

You also don't want to draw more than 4.5 of the principal of your nest egg in any given year in the early years of your retirement. That may drop significantly if you retire at 51 because your principal would have to last longer. I think the 4.5% figure is based on retiring around 65.

 

i do plan on continuing to work......somewhere, at something. maybe self employment or part time, damn i cant beleive this has crept up on me so quickly. my benefits wont change much. here's the thing. i'll be providied with about the same monthly income when you factor in 0 state tax and free medical insurance on me (provided by my employer, local municipality) until i reach medicare status. alot of the guys that have been here as long as, longer than me, are doing this.....firemen, police, office pogies, you name it. most are self employed now and making good money, some under the table, when you combine all of the above factors. you have brought to light some very important considerations. thanks for the input sly.