During my last Coffee Talk, I spoke about how one of my downfalls was my conservative nature when it comes to spending and investing. Given the stock market scares me and I already do most of my retirement there, I was looking for an outlet for the extra cash we’ve been saving. Between wanting to invest it somewhere and my husband’s desire to move to a better school district in a location that can someday accommodate Babci, we’ve officially embarked on operation “Live with Babci someday.”
Babci is 78 and we don’t want to be scrambling to look for another house if she needs to live with us out of necessity. Right now, she’s healthy and the market is low, so we’re officially house hunting in a leisurely manner. It’s nice that there is no urgent rush to move and we can take our time on the decision.
I only live about 3 hours from NYC, and just south of me is an area that is a very desirable spot for NYC second home buyers. In fact, it has been so since the industrial revolution and there are 100 year old mansions all over the place. (As an aside, if you’re ever in the Berkshires, you should tour The Mount, Edith Wharton’s Estate. It’s very cool). As a result, the area has been very expensive to live in, even for a modest sized home. A comparable house to the one I live in for this area is easily double to triple the value of mine because of the land, amenities and school system. The schools are amazing because there are loads of tax dollars coming in from second home people and not as many kids. As a comparison, my son’s school got infested by fleas 3 times this year from students bringing them in on their clothes. His school is ok, but there are a lot of disruptions that take away from learning and a ton less funding. It was managed swiftly so I didn’t have to send him to school wearing a flea collar but I feel for the teachers and administrators for having to deal with all this extra stuff that has nothing to do with their learning goals.
So, here it is. I’m taking a risk. We are actually house hunting in the very posh Southern Berkshire area. Even though I bought my current home way back in 2000, I will likely break even on it given what we put into it. The downside of being too frugal is that you miss opportunities. My house didn’t depreciate too much during the downturn, but on the flip side, it didn’t really appreciate in value either. It was very “safe.”
So, here’s the risk we’re about to embark on in preparation for our retirement. We are going to shop for a bargain in this area and it will likely mean going back into debt again (even with the home equity we have today). We can buy a pretty nice house in a different town with very little debt, or we can push our way out of the comfort zone a little and get a place in a primo location while prices are at all time lows. The upside potential is significant..I’m talking hundreds of thousands of dollars significant if we’re patient. So that’s going to be the new prong to our retirement strategy. Buy a fixer that we can’t over improve because of the neighborhood it’s in.
Being in Debt is Simple
If I am completely honest with myself, the other reason I like this plan is because it’s easy and I’m old fashioned like my mom. Homes are tangible investments and if the economy tanks you still have a place to live in. Plus, I really love the thrill of the hunt. It’s so much fun. It’s like yard-saling on a grand scale. Paying off debt is also totally brainless. It’s the simplest thing in the world if you have steady income. I hated the complexity of trying to figure out how to allocate funds to which investments and all that. House payments are like a fixed payment plan to your retirement. Also, paying interest even at 4% and change is still a negative enough deterrent to motivate me to pinch pennies more than I have been in the last year.
Wish us luck. Babci is supportive and is already praying on the god hotline for a good deal to show up. The first day we were out, she was trying to talk me out of it saying that we are going to waste our best years fixing up dumps. So I was like, but what if we enjoy fixing up dumps? But then the second day even she was high on a few places if we could get them at a lower price point.
So, what do you think? Am I a total sellout that can’t manage without being up to their eyeballs in debt, or do you think this is a shrewd investment move?