I have always wanted to purchase a beck home to eventually retire in. As I sit on the beach today in my friend's beach house the urge to finally purchase one is over whelming.My questions are around:How much down payment should I really put down?How much debt should I really take on?Is it ok to save for the down payment in the form of stock?I currently have a mortgage and $10,0000 left in student loans.What other questions should I be asking?I really really want a beach house!
Wow - So many good questions, all of which have no simple answer.You say you've "always wanted to purchase a beck home to eventually retire in."How far away from retirement are you? Does this mean you'd buy it now and rent it, expecting to move into it at retirement? What is a "beck home"?For someone to help answer your questions, more info about your current [& future] financial situation needs be considered.Not the least of which is, How much monthly free cash flow do you have? [e.g., mortgage + student loans + living expenses + other debts + cushion, minus income]The following is a link that was given on the Personal Finances/Buying or Selling a Home MF Board. It may help get you started. As another poster stated on that Board, "Can you do this for a fixed term loan with P&I totaling 30% or less of your net take-home pay after other debts are deducted? If not, don't buy." http://www.mortgage-investments.com/resources/spreadsheet-do... If you really, really want a beach house!, then you should go for it. Do your homework, the due diligence; see what it's gonna take for you to have your dream, then go about putting things in place to make it happen.
Thank you Cottonfield,I will dig a bit deeper and continue my research. I hope to be only 15 years away from retiring. However, I still have 25 until social security kicks in.BTW a beck home is the best kind of all. It is also known as a typo. :). The 30% rule is a good guideline and I will use that as a baseline.
Hi Charmaine,How much down payment should I really put down?As little as you can qualify to get away with. Down payment cash in real estate equity is functionally dead money; Its not going to give you any returns/savings, and if its critically needed it is illiquid and expensive to re-access (if accessible at all.)Find out what loan programs you qualify for with the least amount allowed down, and calculate your buying budget upwards from those program parameters.How much debt should I really take on?As much as (and no more than) your reliably safe income can cover, and your established reserves are sufficient enough to cover a time lapse of payments.SO... putting the previous two questions together;1) as little down as possible,2) as low of payments as possible (as long of amortization as possible,)3) determine the loan amount relative to the constraints of yoru discretionaly cashflows and reserves... not the other way around.Is it ok to save for the down payment in the form of stock?Sure... but it exposes you to volatility which is a 2-edged sword. The stocks may do great and get you your beach home sooner, or they may do lousy & the only sound of waves you'll hear is the toilet flushing of your down payment money.What other questions should I be asking?There are many different kinds of beach communities... some are basically longterm residential communities like you'd basically find anywhere, but some are substantially vacation rental communities. If you are shopping to buy as a permanent long term resident, be sure to suss out what the majority of the rest of the occupants are as well. Being a long-term resident in a vacation renter community is not the kiss of death... but it puts an entirely different flavor to the community and your neighborhood experience... so make sure you are sure you'll feel good about your experience 5-20 years into the process.Luck!Dave DonhoffLeverage Planner(San Diego (La Jolla & Mission Beach) bum for 9 years... and likely to return, like a grunion!)
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