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!

t-Minus 315 Days: Locked Away In A Cabin In The Woods

 

Our original plans were to fly to Florida in August and search for Florida houses for our June 2021 move. COVID-19 spoiled those plans. Instead, we decided to do a 'virtual search' from 1200 miles away. The problem with doing a virtual search is that, like most people, our home life is crazy. Someone always needs something, pets, in laws, children, deliveries - it is impossible to get more than one uninterrupted hour to just focus on one thing. Our solution? Lock ourselves away in a cabin in the woods!

And that is exactly what we did. 2.5 hours away from home, deep in the forests of the Adirondacks, we borrowed a friend's camp an locked ourselves inside of it for three days. We lined up all of our computers for the search process. 

We even hung Florida themed shower curtains on the sliding glass doors to help us get in the mood and stay focused.

We started with a call with our Financial Expert to discuss how much we could afford for a house and various financial options to get us to Florida.

Next, we talked with both of our real-estate agents (we divided them up: one for the north west of Orlando, and the other for the west and south west of Orlando region). Of course, neither agent knows about the other, and the one that will win our business is the one that works the hardest for us.

We spent a day searching through all of the existing houses that are for sale, then we searched all of the new home builders.

The next several blog entries will describe our search. My hope is that by sharing our experience it will help others who hope to leave New York and/or hope to move to Florida.

 

T-Minus 319 Days: What We Want In A House

 While working with a real estate agent, she asked us to go through a bunch of houses and tell her what we liked and didn't like. From that, we created a list of the things we want in our Florida house.

• 
  Driveway large enough to hold 4 cars (side by side/front to back)
• Good walking score for the neighborhood (sidewalks around the community)
• Yard and landscaping is kept up
• An entry way. Don't have the front door spill into a room.
• At least 2 bedrooms and 2 bathrooms on second floor

• Master bedroom and an office downstairs
• Master bedroom at the back of the house on the 1st floor
• Master bedroom walk-in closet
• No door between pool and master bedroom. Door from pool to master bath would be OK
• No marble in the master bath

• Master bath stand up shower. A lot of counter space. An additional tub isn't important to us.

• Kitchen with breakfast nook and view of the pool area

• Open between the kitchen and living room

• Kitchen has either a peninsula or island that can be used with bar stools
• Pantry for the kitchen

• Pool privacy (bushes OK. No one looking down at us from ontop a hill)
• Good pool size (can't be small). Hot tub isn't important to us.
• Large deck that allows us to walk around all four sides of the pool

• Concrete pool deck (no pavers) 
• Screened in pool
• Lanai large enough for an outdoor kitchen & eating area under a roof 
• 
• Laundry is indoors (not in the garage)

These are 'nice to have'

• No neighbor backed up to us. Water or a field preferred 
• 3 car garage
• second floor living room
• Master bedroom has three windows that looks out at the pool
• Waterfall for the pool
• Tile floor in the common areas instead of hardwood or rug
• Palm tree in the front yard
• Two sinks in the master bath

T-Minus 321 Days: Housing Options

 We had another call with one of our real estate agents yesterday and reviewed the various kinds of housing.

RENTAL OPTIONS

APARTMENTS - Apartment rentals in the Orlando region can be tricky because the people renting are often the people who can't afford a house. These often leads to issues, so, apartments need a lot of research. Getting an apartment can be a challenge because they want you to have a job, security deposit, first month's rent, and sometimes multiple month's rent up front. If you are moving to Florida, you might not have a job or a lot of savings, so, this could be a challenge.

HOUSE RENTAL - While a house is more expensive than an apartment rental, this can be a great option. If you are moving to Florida and plan to purchase a house, there might be a gap between leaving your old house and going to the new one - that gap can be filled by renting a house for a few months. If you aren't sure what area to move to, you can rent for a while to see if you like the schools and the area. If you don't like the area, you can leave and try another house. Also, house rental lowers your risk versus home purchase. If a storm comes through or the house needs a repair, that becomes the responsibility of the management company.

PURCHASE OPTIONS

CONDO - This is like an apartment except you own it. You are allowed to change the inside, but the outside is maintained by the management company.

INVENTORY HOME - This is a new build that is completed except for some (or all) of the design decisions. You may get to decide on counters, faucets, flooring, and other items. Builders like to keep a few inventory homes in stock for people who can't wait for a new build. Of course, you might pay extra to avoid the wait.

MOVE-IN READY INVENTORY HOME - This is a new build that is completed and ready for you to move in immediately. All the design decisions have been made by a designer. This is a good idea if you need a house right away.Again, you might pay extra for a move-in ready home.

TRADITIONAL PURCHASE - This is a home on the market by a private seller, represented by a real estate agent

TO BE BUILT (NEW BUILD) - This is an empty field that will have a house built on it. It will take around 3 months to get the permits and 3 months to build. Due to the 2020 Pandemic things are backed up, so, it might actually take 8 months total. 

    Putting a house "on contract" means the purchase is contingent on selling you old house.  In Florida, new builds are probably the only on contract option (it is rare to get a contract option otherwise). However, the builder may require you to have your house on the market at the time of commitment. If you are committing 8 months in advance, that means your house has to be on the market for 8 months before you plan to move. If your house sells? You will need to rent somewhere (or move in with relatives) until the new house is ready. 

     I asked if I could over price my existing house to avoid it from selling until I was ready. The answer was: no. The house has to be priced appropriately for the market. 

NEIGHBORHOOD CONSIDERATIONS

GATED - Some communities are surrounded by a wall to reduce the amount of foot and road traffic through the neighborhood. Gates can reduce crime, but won't eliminate it. To enter the community, you must pass through a gate whereby the gate opens by a key, pass card, or remote control. The roads within a gated community are not owned by the town and must be maintained by the Home Owner Association (HOA) fees.

    When looking at Gated communities, you should consider where the home is in relation to the gate. Some gated communities are huge and it will take ten minutes to navigate the maze of streets just to get to a gate. Sometimes houses sit on a major artery for the community and will have a lot of traffic. Some houses back up to a wall with a loud busy road on the other side. All of these should be considered.

NO GATE - These are communities that do not have a physical restriction for entry. You'll want to make sure the community isn't used as a 'cut through' to get from one area of town to another because that will increase traffic. You should also look at the neighborhoods immediately adjacent to this community in terms of crime and poverty because that could impact an non-gated community. 

GATED WITH GUARD - This is just like a gated community except instead of having an automated gate there is a guard. The guard will sit in a shack. When they see you approach they will either recognize you or you'll have to show ID and then the guard will press a button that opens the gate. You'll need to notify the guard if you have guests coming to visit or else they won't be allowed through the gate. These tend to have a high Home Owner's Association (HOA) fee because the guards have to be paid.

GATED WITH PATROLS - This is like a Gated With Guard except in addition to a guard at the gate, a guard will occasionally patrol the neighborhood in a car or on foot. These tend to be rare and have very high HOA fees. 

COMMUNITY POOL - Many communities will include facilities such as a community pool, club house, play grounds, tennis courts, volleyball courts, golf courses, gyms, small movie theater, game room, activities calendar, or miniature golf. While these features are usually within gated communities, sometimes communities without gates will have facilities but require a key to access them. In one community near Champion's Gate, they described their club house as "a cruise ship on land". Club houses may have an attendant, gift shop, a bar, and sometimes a grill for ordering food. All of these community amenities add to the HOA fee.

WALKABILITY SCORE - Neighborhoods are scored with a walkability score. If you plan to go on walks, jogs, or bike rides around the neighborhood, you'll want to pay attention to this score. Some neighborhoods don't have sidewalks and are on busy roads. Others having nature trails or bike paths. If this is important to you, you'll want to pay attention to this score.

SHORT TERM RENTAL COMMUNITIES - Some communities were built for short term rentals and others built for permanent residents. Some have HOA agreements that prohibit short term rentals. And some neighborhoods are a mix of both (like a 25/75 split or a 50/50). A short term rental is when an individual (but more likely a company) purchases a house and provides it for rent on Home Away or AirBNB. The rentals are for a few days to several weeks.

    There are advantages and disadvantages to being in a rental community. The advantages: if you don't like your neighbor, they will be gone in a few days. The house often sits empty. The renters are usually at the parks and beaches during the day and only return in the evenings. And the property is maintained by a management company. The disadvantages: you don't get to know your neighbors. Renters tend to abuse their houses. Many renters think the neighborhood is like a hotel and everything (including your items) are included in their rental. And they like to party loudly until 4 am on the last night of their stay. Another disadvantage: when the economy goes bad, rental companies become less picky about who they rent to, which could result in some undesirable neighbors. During the Great Recession, for example, drug houses moved into the rental properties at Indian Creek. 

T-Minus 322 days: We have a lot to pack!

 We have 46 weeks left before we move. I thought it might be fun to ask "If we pack one room per week, could we get it all done?" I identified 35 areas of our house that need to be packed: garage, storage room, pantry, kitchen, hall closet, kids rooms, the kids closets, etc etc. If we pack one area per week we will only have 10 weeks to spare!

After identifying the 36 areas of our house, the next thing I did was list the rooms and then select the one room I thought should be done absolutely last. That was: The essential kitchen items. We have to eat and we have to cook. We don't need to have everything that is in our kitchen available right up to the last moments, but we do need some basic items. So, the essential kitchen items went into June 2021 to be packed last.

Then, I looked at the list again and pick the next item that should be last. Of course, that was the master bedroom. Sure, there might be some things we can pack along the way. But when I say "packed" I mean it is ready for someone to walk into the room, grab the items, and put them on a truck. My bedroom is going to be the last for that! So, the week before the kitchen gets done, we'll do the master bedroom.

I repeated this process, putting each location in order. The kitchen and bedrooms will be done last. The garage and the rooms in the basement will get done first. Everything else fits somewhere in between.

I can't imagine we'll stick to this schedule. But what this exercise showed how much work we have yet to do, and there really isn't a lot of time to waste. We work all week and have a lot of things going on - finding time every week to complete packing one area is going to be difficult. But that is pretty much the pace we'll need.

As I already mentioned, packing isn't just purging and spring cleaning. It is getting the area ready to be loaded onto a moving truck when the time comes. That means (in addition to purging and cleaning) boxing things, labeling items so we know where they are going, etc. It also means that for a while we might be living out of boxes for some of our non-essential items. But there is no way we can wait until the end and do all this work within a few weeks.

T-minus 329 day: $10K Closing Costs?

 I was watching one of The Dis shows that talks about moving to Florida. This particular show was about the hidden costs. One of the hidden costs was the closing c ghosts on a house.? They reported the closing costs could be $10-13K! 

I don’t remember what the closing costs were on our New York homes, and honestly, the costs were added to our mortgage to be paid across 30 years. But I can’t imagine the cost was that much!

According to the report, because Florida doesn’t have income tax, they have to make up money somewhere. And one of those places ours to tap into the lucrative real estate market with some of the most expensive closing costs in the nation.

The said that when you look at the cost of a house, add another $10k to cover the closing cost.

T-Minus 330 Days: Cleaning Totes

If you read this blog enough, you know we have around 250 totes. Most of the totes are stored in our basement in an area known as "Tub City" (see Tub City Tour).  Everything is carefully organized and inventoried. Tub City even has street names! Getting ready for Christmas? Grab the Red Totes on North Ave. Going camping? Get the Green Totes on West Ave. 

A significant portion of our purge effort has been to attack Tub City. As we clean out portions of Tub City, it makes room for other items from around the house to come to Tub City. We stage things in Tub City as we get ready to sell it on Market Place or the next yard sale. Several dozen tubs went to empty my mother's antiques at the antique store (which are now in the garage portion of Tub City).

I would like to report that we are whittling down Tub City - that it is getting smaller and smaller. I suppose it is, but it doesn't feel like it. North Ave has been cut in half, West Second Street is empty, and the Sump Pump Storage Room is about half empty, but the remaining areas remain mostly populated. My wife isn't very concerned about this... but I am! In 330 days, this place needs to be empty - all the way to the walls. And we are no where near that.

We spent part of this past weekend cleaning empty totes. We want to make sure that as we fill the totes with packing for Florida, the totes are clean. We set up an assembly line: one person scrubbing, another rinsing, one drying, and one putting stuff away. It felt like we were washing the kitchen dishes!

In the end, 50 of the totes were cleaned and ready for their next purpose. 50 done, 200 left to go!