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Posted: 10/15/2008 3:11:46 PM EDT
[Last Edit: 10/15/2008 3:13:04 PM EDT by MikeK5117]
So the wife and I have been looking for a retirement/BOL spot for a while. Finally found a place, about an hour from a major city, very rural and far enough off the main roads to be pretty hard to find unless you know it is there (aka locals). About 50 acres, small lake, bit of woods and the rest scruffy pasture. Has about a 25 yr old home that has recently been a full-time home but will need a good bit of work to keep it that way. Plus has large barn. Farmland surrounds the place so wildlife (deer, turkey) should be abundant.

Our options are to buy this place (cash) and keep paying the mortgage on our current home until time to retire and move there full time. Or, other option is to use the $$ to pretty much pay off the current home and then finance (if we can with the current economy) this BOL or another when we find one.

We are leaning to buy this one in cash and keep the current mortgage that is at a good rate and affordable as long as we keep working.

Any words of wisdom?
Link Posted: 10/15/2008 3:30:41 PM EDT
[Last Edit: 10/15/2008 3:34:12 PM EDT by Sniperbait]
IMHO do nothing right now.  Wait to see what the economy looks like in six months.  If you both still have your jobs, great.  By then the price of the new land will have dropped substantially with the economy.

If you don't still have your jobs.  You will wish you had your cash to pay off your home.

"Any words of wisdom?"  Two things to think about....
1.  Debt is a free-mans worst enemy.

2.  When you owe $600k to a bank and they foreclose you laugh at them.  When you owe $30k they laugh at you.
Link Posted: 10/15/2008 3:33:31 PM EDT
I would do as you are suggesting, pay for the BOL and keep your current mortgage. If the world comes crashing down you would have a paid for place to live. In todays enviroment you may or maynot get financing.
Link Posted: 10/15/2008 5:13:58 PM EDT

Originally Posted By Sniperbait:
IMHO do nothing right now.  Wait to see what the economy looks like in six months.  If you both still have your jobs, great.  By then the price of the new land will have dropped substantially with the economy.

If you don't still have your jobs.  You will wish you had your cash to pay off your home.

"Any words of wisdom?"  Two things to think about....
1.  Debt is a free-mans worst enemy.

2.  When you owe $600k to a bank and they foreclose you laugh at them.  When you owe $30k they laugh at you.


+1
Link Posted: 10/15/2008 7:36:15 PM EDT
[Last Edit: 10/15/2008 7:37:47 PM EDT by MikeK5117]
height=8
Originally Posted By Sniperbait:
2.  When you owe $600k to a bank and they foreclose you laugh at them.  When you owe $30k they laugh at you.


Can't completely agree with this. It boils down to equity. If you owe $600K on a million dollar house vs $30K on a $430K house then you are losing $400K no matter how you look at it. Of course you are losing a much greater percentage in the second example but you'd be in pretty bad straights if you let them take it at that stage of the payout.
Link Posted: 10/16/2008 1:44:14 AM EDT

I would do as you are suggesting, pay for the BOL and keep your current mortgage. If the world comes crashing down you would have a paid for place to live. In todays enviroment you may or maynot get financing.


This
Link Posted: 10/16/2008 2:54:02 AM EDT
How close are you to retirement?  If you are close then I'd finance the new place and pay off the current house.  That way when you move, you are not locked into a sales price on your current home by your mortgage.  You can drop the price to whatever you want to be competitive.  Then when that house sells, you use the proceeds to pay off the new place.  It also depends on what you owe on your current home as well.

Brett
Link Posted: 10/16/2008 3:51:31 AM EDT
pay for your current place and finance the BOL.  here's the reason.  if the economy goes really bad, you lose your jobs and are stuck filing bankruptcy, then you can protect all* of the equity in your main home, but not your BOL.  in other words, in the bankruptcy, if you own your main home and have the BOL financed, then you can protect the equity in your main home and likely be able to keep the BOL if it's mortgaged w/ little equity - b/c there's no equity in it there's no motivation for the bankruptcy court to take it.  conversely, if you own your BOL and owe on the main home, you will still keep all the equity in your main house, but you will lose your BOL - the bankruptcy trustee will take title and sale it.  

*check w/ an attorney in your state, b/c the amount of equity you can protect varies.  

if you pay off your main house, then your debt to income ration should be really low and if your credit is good you should be able to get a loan.  another option is to see if the current owner of the BOL can carry the note either for 5, 10 or 15 years, whichever works for you depending on your retirement plan.
Link Posted: 10/16/2008 8:27:39 AM EDT
Thanks for all the good advice. We have decided to try an offer on the BOL. It is approaching a foreclosure situation and we are hoping a low cash offer may fly. If so, it won't tap our cash reserves by nearly as much as paying out our existing mortgage so we will have our retirement/BOL in hand and still $$ available if SHTF personally or otherwise. I work in a pretty grass-roots industry so the world would have to be in pretty sad shape before my job or at least my industry would be affected to where I was permanently out of work. Between my wife and I we still have at least 15 years or so before we want to sell the current home and fully retire so lots of time for paying down existing mortgage and taking advantage of the (hopefully someday) return to upswing in the real estate market.
Link Posted: 10/16/2008 8:51:27 AM EDT

Originally Posted By MikeK5117:
Thanks for all the good advice. We have decided to try an offer on the BOL. It is approaching a foreclosure situation and we are hoping a low cash offer may fly. If so, it won't tap our cash reserves by nearly as much as paying out our existing mortgage so we will have our retirement/BOL in hand and still $$ available if SHTF personally or otherwise. I work in a pretty grass-roots industry so the world would have to be in pretty sad shape before my job or at least my industry would be affected to where I was permanently out of work. Between my wife and I we still have at least 15 years or so before we want to sell the current home and fully retire so lots of time for paying down existing mortgage and taking advantage of the (hopefully someday) return to upswing in the real estate market.




If you can find someone who you trust to rent it, then you can have them pay the mortgage on the new place.  You have quite a few years to go till you retire so I'd look into maximizing your income.  If you come up with a good person, offer them a very low rent.  That way, you are benefiting them and they won't want to move for a long time.  The income will help pay the morgage (but probably not all of it) and you will have a trustworthy person who maintains the house.  Also, see about renting out the pasture to a local cattle farmer.  

Link Posted: 10/16/2008 9:45:18 AM EDT
Tough call without knowing what rate you qualify for vs have, etc.  But generally - whatever you do dont leave yourself with a pile of debt and no cash.  You have done well to have a bunch of liquidity, keep that.   also dont forget that if you buy a second home and do not live in it, the interest is not deductible.  
Link Posted: 10/16/2008 9:55:52 AM EDT
[Last Edit: 10/16/2008 9:56:45 AM EDT by hardwarz]

Originally Posted By Sniperbait:
IMHO do nothing right now.  Wait to see what the economy looks like in six months.  If you both still have your jobs, great.  By then the price of the new land will have dropped substantially with the economy.

If you don't still have your jobs. You will wish you had your cash to pay off your home.


It could be though the other way too.

Say they bought the place with cash.  If they loose their jobs, they lose their current house then the BOL becomes the primary location to live that is already paid off!

Hardwarz
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