T-Minus 314 Days: Financial Analysis

We locked ourselves away in a cabin in the woods, free from distraction, so we could focus on searching for Florida houses. Our first call was with our Financial Advisor.

Our financial advisor told us the range of prices we could afford, however (of course) he recommended we stay closer to the bottom of the range. Depending on where you are in your life as you are reading this, the range might sound like a lot of money. But in terms of the Florida housing market? It really isn't. It means: in order to get what we want, we have to look further and further away from Orlando. Or, we need to compromise on what we want.

He explained that a house purchase in Florida is a good investment. It isn't as good as some other investments, but it is good. I think he said we could see a 6% rate of return on the house versus 8.5% return on a fairly conservative percentage. A percent here or there doesn't sound like much... but he showed us the impact of a percent. A single percent can mean the difference between struggling in retirement and living comfortably. 

The next challenge: how to get there? We have to sell the New York home and buy the Florida home and move. We might have to rent something in between, which we hope to avoid. Our financial advisor explained that the markets are going to be rocky during the next 12 months.Therefore, he is in favor of us borrowing against the 401K to make a down payment on the Florida House, then paying back the 401K when the New York house sells. 

We only have approximately 50% equity in our New York home. But when the house sells, we'll be sitting on a pile of cash. Should we put that money toward the Florida home loan? His answer: no. The house value is going increase (I think he said) 6%. The interest on the loan is at historic lows, 3 or 4%. The spread is about 2%. He suggested only putting down the minimal 20% and then investing the rest to pull 8.5% return. He showed us the numbers that we'll come out way ahead in the long run by investing the money from the New York House sale versus putting the money toward the Florida house. Again, just 1% can make the difference between a comfortable retirement and a struggling one, and a home within the recommended range has a mortgage is similar to what we are paying in New York (given the higher real estate taxes).

Now we have the long awaited answer! And we can get to work finding the home that fits us financially!