Getting started- Plan B

MushCreek · #1 03/03/10, 06:17 PM

We're working on yet another plan to get our semi-retirement, semi-homestead going. A few years ago, we bought some acreage in rural SC to build on, and dabble in some homesteading. We had so much equity in our home, we could have a home built, and have a nice nest egg left over. As we waited for DS to finish college, we put money away, made plans, and read a lot on HT. Fast forward to today, when our house has lost probably half of it's value, and is still going down! In our part of FL, home prices dropped 10% just in the month of January. We still have a lot of equity, but it's tightened up a lot.

I've abandoned hope of simply writing checks and having a house built. I'd rather build it myself anyhow, and I have the skills and equipment. There are a lot of logisitics involved in trying to sell a house, build a house, move your stuff 600 miles, and pay the bills, though. We had planned to sell the house, and I'd pack up the tools and head to SC, while DW rents an apartment and keeps an income stream going. Luckily, she makes enough to support both of us!

Here's where the new plan comes in. We would keep the house (for now) and draw money out of our 401K to build the house. DW would have a place to live while I build, and we know the neighborhood is safe. No problems finding a rental that will take the pets. No hassles of trying to move everything several times, and trying to find a place to store it between moves. DW is just now eligible to start drawing from her 401K without penalty (although we would have to pay tax on it). Since I won't be earning an income, the tax hit will be a lot less than when we are both working. Once the new place was close enough to being finished, we would put the old house on the market, and DW could start applying for a job in SC. Being in the medical field, a job should be easy for her to get.

We are getting anxious, for a number of reasons. One, we ain't gettin' any younger, and want to enjoy the country life for a least a few years. Two, building materials and subcontractors are at a pretty low point right now, and if things get better, they'll go back up- a lot. And thirdly, the way the world is today, I'm becoming more and more survivalist in my thinking, and would like to be out in the country, and able to raise at least some of my own food should things get a lot worse. Here in the city, we are sitting ducks.

The only major flaw I see is if houses drop so low that we are upside down in our current mortgage. I haven't looked into 401K withdrawals yet to see all what is involved- that's next. Any thoughts?

ChristyACB · #2 03/03/10, 07:46 PM

The housing situation is surely one that has many of us worried. I'm in a similar situation as you, only without a DH or DW to rely on, so you do have that as a major bonus and I think your plan to leverage that is quite sound.

You're right that the risk for going upside down is there, but if you still have equity now even after the bottom has dropped out, I'd be tempted to sell as soon as you can and go with plan A.

You can always pick up a 5th wheel or a small tow along or even a pop up to house yourself and the animals on the acreage while you build. In some ways, that might be better. Thefts at building sites are way up in a lot of areas.

Good luck to you! What sort of building are you thinking? I'm still tossing between CMU, ICF and something like the DAC-ART system, though that one I wouldn't be able to do alone as much.

Helena · #3 03/03/10, 08:15 PM

I guess we have always been a bit impulsive in our homesteading life. But in today's market I would almost sell now and move together and let wife find her job now in SC. It seems as though your son is pretty much on his own now..so why not.?? Don't put your dreams on hold too long.. life has a way of getting away from us and possibly with the market and just life in general ..I'd get started on your dreams now.. Good Luck !!!

fordy · #4 03/03/10, 09:19 PM

..................Leave the 401k alone , borrow against the equity in your current home and build your retirement home that way . Plus , you can probably deduct the interest as an itemized deduction until you sell your current home ! , fordy

Callieslamb · #5 03/03/10, 10:20 PM

How well are homes selling in your area? What is the average time a home is on the market? Those answers would give me my direction.

In your situation, I might put the house on the market and as soon as it sells - get a camper to live in while building your new home. Or - makeshift a garage into a home until the house is built if you want to do the work yourself. then no worry about taking out equity that might not be there in six months and no messing with the 401K....

RVcook · #6 03/03/10, 10:46 PM

Things probably aren't going to get much better real estate wise for a long while in your neck of the woods so I have to agree with the other posters...try to get the house sold now, purchase a liveable trailer, pack your stuff and 'get outta Dodge' ASAP! The wife should have no problems finding employment and with your expenses low, you could start work on building your homestead right away.

IF things start to improve (and that's a BIG "if") as home prices start to rise, so do all the other things you will need to start your homestead. So basically, what you gain in sale price, you'll spend for materials and labor.

Don't put your dreams on hold for a 'What If...' scenario. Getting out of the city and becoming more self-sufficient is the only way to insure your family's future.

RVcook

farmgal · #7 03/03/10, 11:12 PM

The housing market is like the lotto, You have to be in it to win it. If you dont even have the house on the market, you have no chance. put it on for what you want for it. I had mine for sale for 6 years, I'd take it off in winters(NY) as too much snow and I'd do a little work on it to make it better. plus, taking it off the market every few months so it dont look like an "on the market forever" home, as that dont look good for the loan people. never leave it on for more than 6 months at a time.

Dont count on the market picking up. we busted, we wont pick up for 9 years. I didnt make this up. research it. get it on the market now. You should have been taking advantage of that tax credit thing. I had many lookers when they did the tax credit incentive compared to absolutely none...lol. the guy who bought my place said thats why he decided to buy. And believe me, my house is very very old. Its no spring chicken. old windows, cedar shake shingles rock foundation. etc

Not ony is the market going to continue to crash but over half the repo'd homes arent even on the market yet or the banks will flood themselves. soon there wont be any mortgages left to be given. so get yer house in the housing market lotto!!

Mine finally sold and I am on my way to my new mortgage free life!!

Dont wait. lifes too short!!!!

salmonslayer · #8 03/03/10, 11:32 PM

MushCreek, I just retired from the military (I am actually still on terminal leave) at the age of 50 and my wife is taking an early retirement from her job with the State in less than 2 months so we can follow our dream. Our house in Alaska lost some value but we just spent a couple months on a complete renovation and just accepted a full price offer on it so you never know what you may get.

Our equity and savings will give us a grub steak in fixing up our old farm in Missouri and our retirements will allow us to live modestly; for us even if I eventually found a job at LOWE'S or something making $500 a month it would be gravy. My wife has a pretty high state job and I could make good money up here but just like you, we dont feel things are going to get better anytime soon and we want to retreat to the country and enjoy it while we can.

Once you make the decision you will be amazed at the feeling;...you got many good suggestions here but if you can swing it; do the move with your DW right from the start. For my wife and I we are literally chucking almost everything...careers, most of our furnishings...etc. for the shared adventure and we are having a blast.

Now our families think we went off the deep end but thats part of the fun!!

ChristyACB · #9 03/04/10, 05:47 AM

Quote:

Originally Posted by salmonslayer

MushCreek, I just retired from the military (I am actually still on terminal leave) at the age of 50 and my wife is taking an early retirement from her job with the State in less than 2 months so we can follow our dream. Our house in Alaska lost some value but we just spent a couple months on a complete renovation and just accepted a full price offer on it so you never know what you may get.

Our equity and savings will give us a grub steak in fixing up our old farm in Missouri and our retirements will allow us to live modestly; for us even if I eventually found a job at LOWE'S or something making $500 a month it would be gravy. My wife has a pretty high state job and I could make good money up here but just like you, we dont feel things are going to get better anytime soon and we want to retreat to the country and enjoy it while we can.

Once you make the decision you will be amazed at the feeling;...you got many good suggestions here but if you can swing it; do the move with your DW right from the start. For my wife and I we are literally chucking almost everything...careers, most of our furnishings...etc. for the shared adventure and we are having a blast.

Now our families think we went off the deep end but thats part of the fun!!

Salmonslayer,

Don't mean to drift off of OP's topic but had to let you know...WOW!

I'm following your blog now. And I'm on the Retirement See Saw right now. Will I or Won't I? You know that stage where you haven't taken the plunge but you're really looking at what to do? Military also. I sure hope you'll keep your blog up and let those of us out there also seeing light at the end of the tunnel (after almost 24 years so far) get some encouragement from your progress.

Lyra · #10 03/04/10, 05:59 AM

Quote:

Originally Posted by farmgal

Dont count on the market picking up. we busted, we wont pick up for 9 years.

The housing market will probably never recover. The outlook for the future in real estate isn't so good. Prices inflated over 60% based on loans that people couldn't afford.

Tarheel · #11 03/04/10, 06:56 AM

Quote:

Originally Posted by fordy

..................Leave the 401k alone , borrow against the equity in your current home and build your retirement home that way . Plus , you can probably deduct the interest as an itemized deduction until you sell your current home ! , fordy

Agree with Fordy! Best solution.

blooba · #12 03/04/10, 07:11 AM

I would agree with others about putting the house up now for whatever you think its worth. With this bad winter up north for alot of people will want to go south (still not recover the housing bubble bust) You may just find some northern moron that will pay full price for it.

geo in mi · #13 03/04/10, 09:24 AM

Quote:

Originally Posted by MushCreek

The only major flaw I see is if houses drop so low that we are upside down in our current mortgage. I haven't looked into 401K withdrawals yet to see all what is involved- that's next. Any thoughts?

My opinion would be that you need to know the answers to those questions you just asked before you commit. That might require the advice of a professional. Usually, withdrawing from a 401K is not a wise practice.

cathleenc · #14 03/04/10, 09:30 AM

put the house on the market now - price it 15-20% less than equal comps so you sell NOW before it drops more - and move. You will feel freeer than you can imagine!

geo in mi · #15 03/04/10, 11:14 AM

Quote:

Originally Posted by blooba

You may just find some northern moron that will pay full price for it.

Note to self: SELF: If this fella wants to sell you a basket of apples, check the apples on the bottom first.........

MushCreek · #16 03/04/10, 11:29 AM

I had planned to put the houise on the market, but there are a number of logistical problems. Number one would be where to put our considerable amount of stuff. I'm afraid to leave it on our isolated property, even in a building unattended for very long. There's also the issue of where DW would live during all this if we did sell the house right away.

We aren't willing to take the risk (unless forced to) of having no definite income. Although my wife should be able to get a job in SC, during these economic times there have only been a couple openings a year. We could probably get by without the income, even for a year, but the insurance is vital at our age. One major illness without insurance would wipe us out.

I'm budgeting a year to get a modest house built. During that time, there are a lot of balls to keep juggling. The plan was to build a barn first, so we can move all of our stuff to the property, and so I will have a place to live during construction. But even with a good-sized crew, the barn will take at least a month, weather permitting. Since I can't take a month off of work (or even 2 weeks in a row), there is no way to get the barn built without either quitting my job, or hiring it out. Hiring it out makes it too expensive, so that's out. Once I quit my job, I need to move forward with the entire plan- build the barn, move our stuff, and build the house. I won't be able to wait around until the house sells. We have about half the cash we need to build the house without tapping into the 401K. I don't dare start the house without sufficient funds in hand, though. I suppose I could get started, and if the house doesn't sell, then resort to the 401K as a back-up.

I don't want to re-fi our current home. I'm not sure how much I could borrow against it in the current market, and if it goes upside down, then I can't afford to sell it with a big mortgage on it.

When we made our last move, 30 years ago, none of these things worried me. I didn't care about whether I could find a job, and we went without insurance for a while. I'm older now, though, and have been through some serious financial traumas. It's not like we would empty our 401K; probably 20% of it at the most. I think we could do it in a series of draws, so that at any point, if we sold the house and had the money, we wouldn't need to take any more out. It sure is complicated trying to work all of this out- luckily, we have options!

vahighlander · #17 03/04/10, 11:32 AM

Quote:

Originally Posted by fordy

..................Leave the 401k alone , borrow against the equity in your current home and build your retirement home that way . Plus , you can probably deduct the interest as an itemized deduction until you sell your current home ! , fordy

Use your 401K funds now....401Ks and IRAs are one of the biggest scams the gov't has ever laid on us....It was never even intended to be a comprehensive retirement vehicle...and was designed to cut pension costs for the corporate machine and pad the IRS....if you think our good old fed boys will lower taxes over the next couple decades then leave it alone....and let me sell you a bridge in brooklyn. Our gov't is leading us into uncharted times and - there's even an ground swell of gov't people posturing to nationalize your 401k- essentially to take it from you and give you a (GRA) guaranteed retirement annuity later. They will either steal it or tax the hell out of it it the future. Heres the criteria for leaving it alone:

1) If your comfortable with gambling- high stakes poker on wall street and don't mind them having complete control of your life savings (where something like Greece going bankrupt can impact you) otherwise your money will be earning 1 or 2% in a bank.
2) If you project taxes in America to trend down over the next 20 years. We as a country are almost insolvent- so you do the math on that one.
3) You don't care if the gov't scams you out of it altogether for a GRA in the future- some would say this is never going to happen- do your research- its a real threat and the gov't is eyeing our cheese.
4) If you think things are going to be great and america is going to be just swell and awesome!! Not.....

I actually just cashed in my IRA and a 401K to the tune of over 200K...Im paying the penalty and taxes and moving on-- paying off the balance on my 120 acre farm and timberland, bought my second mobile sawmill, stashing the bulk in my local community bank up in the mountains, built a cabin myself- now starting on the larger home and barn- paying cash. Because I believe these are the hard assets of the future with a better ROI for my LIFE- and no snot nosed investment banker is going to make the things vaporize based on a fear based market. Everyone needs to open their eyes to whats transpiring globally and understand - its never going to be like it was- and thats probably a good thing.

So I say- take that 401K and use it and your own intuition to take control of your life situation.....people who tell you to leave it alone have been brainwashed by preconceived notions and aren't waking up and smelling the coffee.....

Jan Doling · #18 03/04/10, 12:19 PM

Wait until the snow melts, then see if you can't get a part time job up yonder, live in a small camper, and start the homestead piecemeal...one project at a time. It should be done by the time your wife can join you.

MushCreek · #19 03/04/10, 12:32 PM

Actually- I've read about some of the proposals to 'help' us with our retirement accounts, and that's another reason we are considering using that money. I just didn't want to influence the conversation with what some would consider to be 'tinfoil' conspiracies. I DO believe the g'ment will somehow repurpose any money they can get their paws on.

salmonslayer · #20 03/04/10, 01:09 PM

Thanks Christy and I know exactly what your going through as well as the OP. I hemmed and hawed for a couple of years and then just took the plunge and once the decision was made it totally focused my energies and I actually feel better than I have in years.

I share some of your concerns MushCreek and my wife has a 401K from a previous career that we have considered just cashing out and taking the penalty; sort of like the old saying its better to have a bird in hand than two in the bush. Its a tough decision that we havent resolved yet.