Dream home but no liquidity of 1mil investment

[CordMcNally]

jz wrote:

“Living in a barn”—- Never. No amount of white wash could eliminate the wafts of manure from those timbers. And neither the corn crib, the milk house, the machine shed, nor the chicken coop. Build a HOUSE.

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You haven't seen some of these barns these days. Smell isn't an issue.

[G]

Barn for as long as you and family can stay happy. (You are farrrr away from any kid caring about the space, altho not vice versa)

--says guy who thinks a basecamp tent with enough room to stand is a luxury of luxuries

[OldSoul]

I would build onto the barn for $25-100K. It will keep your options open. Building a $1M dream home that you will have difficulty selling, in case you need to move, is a really really bad idea. Your future earnings will be tied up paying the mortgage, making it an even greater stretch to purchase another home elsewhere. Let's say management of the hospital implodes and the new management wants to cut back on ED expenses. Your group dissolves or you're forced to take a significant pay cut, because they threaten to bring in a different group from out of state. God forbid, you get a divorce.

Don't get me wrong. I am an optimist and a dreamer. In my mid-50's, surgical sub-specialist married for almost 30 years to another MD, in the same house for 20 years. However, having been in private and academic practice for over 20 years, I've seen too many colleagues in situations where the best intentioned plans disappear in a puff of smoke.

Build that house when you have enough leeway for a contingency plan. The land will still be there in 5-8 years.

 

[Anne]

I don't think this is so much a financial question as a family dynamics question.

You can afford it and still be FI soon enough.

As I understand it, your parents live on the property in their own house, you have a sister as well who doesn't live there?  And I am guessing your sister and you will inherit the property when your parents pass?  Sorry if these assumptions are wrong.  This is a long term decision and so you have to look at all the things that could go...not according to plan...over the long term and see how you would react and how your family would react and if you would be ok with that.  Off the top of my head:

1.  Are parents on board with being "childcare".  A lot of grandparents want grandchildren nearby but don't necessarily want to be a primary childcare source.  Some think they do until it actually happens.  Granted, the barn would make a great space for a live in nanny/au pair.  Would everyone be down with that arrangement or would you be resentful that grandma/grandpa aren't doing it when they could and you are paying extra?

2.  On the flip side, mom and dad might be thinking, "it's great that RosieQ and fam are settling here, we are going to save so much $$$$ on long term care!!!  Seriously, if mom or dad suffers a major health setback and need a lot of assistance, often the closest child is expected to be the caregiver/doctor's appointment companion/general coordinator by default.  And sometimes when the closest child is busy, that expectation can fall to the spouse. Is everyone ok with that...or alternatively can clear boundaries be set without hard feelings?

3.  Ok, a real downer...you die unexpectedly.  Is your wife going to want to stay there longterm with your kids?  What if a couple years down the line she is ready to move on but is not allowed to sell and bad blood develops between your family and her?

4.  Another downer...parents pass and you and sister don't see eye to eye on handling the property.  The thing that makes most sense for your sister makes less sense for you financially. Do you compromise and take a hit for your sister or do you risk harming that relationship?

I could go on and on but that's enough to illustrate the point.  I know you said your family relationships are excellent but it wouldn't be the first time in the history of the planet that money got in the way of family relationships.  It sounds like a great opportunity but I would just think through some of these types of scenarios and make sure everyone is on the same page, willing to put relationships ahead of finances when necessary, and able to deal with the fallout when someone doesnt do that in the future despite thinking that they always will now.

[Tim]

Anne pointed out several items that can go wrong. How old are your parents? Actually, that has nothing to do with it.
You are sinking a lot into your dream house without an exit plan. You need “approval” to sell. From what you described, not sure even after the parents passed would you ever be able to sell. If you are comfortable spending $1mm in improvements and donating it to the family land holdings, feel free.
You have the “free land” combined with a “nice house with a great location”, it’s gonna add value for sure. Just don’t know if it will go to your wife or child if you have one. Wills change and so do peoples ideas about who should get what passed down in the family.
Keep your personal finances separate from “communal “
property. If an agreement specified an exit, you have a choice. The answer maybe never.

[Kamban]

RosieQ wrote:

design a dream home on another section of the property which could be built for around 950k-1million. With permits and delays to construction this would still take 2-3 years to complete even though the design is ready. It’s 2100 sf, high end materials, amazing view etc. E

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I am amazed that a 2100 sq feet home in California without land costs $1M to build, even accounting for expensive materials. I thought that high cost of the houses was due to the expensive land.

Here you can build the same house with high end materials for 350-400K, land not included.

 

 

[Hank]

Kamban wrote:

I thought that cost of the expense of the houses was due to the land.

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A big chunk of the cost of new housing in California is permitting and regulatory compliance.

A buddy of mine has a good sized lot in an inland location that is hotter and less desirable than I would like, but still in a coastal county.  He wants to build a second house on the land he already owns (where he currently occupies an older home).  So far the state, county, city, and various cats and dogs have hit him up for over $100K in permitting, inspections, environmental impact studies, and various other forms of paper costs.

I agree that we should design a structurally sound building and make sure the construction is done according to building codes.  That said, you can buy a lot, basement, walls, roof, plumbing and electric in Detroit or Cleveland for $30-50K.  $100K worth of paperwork is patently absurd.  These aren't load-bearing building permits!

P.S.  The same politicians and local officials want to raise taxes on the productive in order to provide subsidies for more "affordable housing".  Getting the permitting and inspection racket under control would go a long way to make new structures and developments more affordable, within the constraints of very expensive land and relatively costly labor.

[q-school]

Kamban wrote:

RosieQ wrote:

design a dream home on another section of the property which could be built for around 950k-1million. With permits and delays to construction this would still take 2-3 years to complete even though the design is ready. It’s 2100 sf, high end materials, amazing view etc. E 

Click to expand…

I am amazed that a 2100 sq feet home in California without land costs $1M to build, even accounting for expensive materials. I thought that cost of the expense of the houses was due to the land.

Here you can build the same house with high end materials for 350-400K, land not included.

 

 

Click to expand...

Are you sure your dream house is 2100 square feet?  It might be your dream house right now, but add a couple kids and as your tastes change it may not be your dream house forever.  And you are kind of locked in.

[RosieQ]

q-school wrote:

Kamban wrote:

RosieQ wrote:

design a dream home on another section of the property which could be built for around 950k-1million. With permits and delays to construction this would still take 2-3 years to complete even though the design is ready. It’s 2100 sf, high end materials, amazing view etc. E 

Click to expand…

I am amazed that a 2100 sq feet home in California without land costs $1M to build, even accounting for expensive materials. I thought that cost of the expense of the houses was due to the land.

Here you can build the same house with high end materials for 350-400K, land not included.

 

 

Click to expand…

Are you sure your dream house is 2100 square feet?  It might be your dream house right now, but add a couple kids and as your tastes change it may not be your dream house forever.  And you are kind of locked in.

Click to expand...

Some excellent points raised here. Money is one aspect, but family dynamics with an uncertain future will certainly play a role. And the 2100 sf may seem a little small to some but I think we could make it work. Keep in mind we will still have the 800 sf barn apartment as well as guest rooms in a 4000 sf house my parents live in all available for guests or angsty teenagers who want to get away from the house. It does seem crazy that costs would be so high on a $/sf. A portion of that increase in the 15% general contractors fee and their more expensive subcontractors. Shopping around and doing our own general contractor work I suspect we could get costs into the 700k+ range.

[Tim]

“So far the state, county, city, and various cats and dogs have hit him up for over $100K in permitting, inspections, environmental impact studies, and various other forms of paper costs.”

Can’t your buddy just call it a big tent? That seems to work with zero restrictions. You don’t even need to own the land. Just seen a lot of stuff on the news.

[trebizond]

I would not go with the 2nd option by any means, i.e. building a house on the property that you then can't sell or split off. Besides which 2100 sf is not going to keep you happy for long if you have multiple children, want to entertain guests, etc. You would make a huge financial and emotional investment and then would have to run everything (e.g. building a pool, driveway, etc.) by your parents. So really it's down to going out and buying a new house elsewhere (king of your castle and what not), or staying with the barn (the practical, but temporary option).

Personally, I would stay with the current barn option and aggressively save down a ton of money for the time when you do decide to go out and buy a house elsewhere. There are many advantages, namely proximity to family and work and the ability to save up a ton, and it's a decent amount of space for a couple even with 1 child. There is the advantage of childcare with your parents, which is amazing. But, again, with time you are going to want to be master of your own home and not have to seek approval from your parents for every little thing... With your current savings rate, in just a few years you could purchase a new house/property with cash.

One disadvantage I see are yes if one of your parents becomes sick it may fall on the two of you to provide significant help with eldercare. It sounds like your parents are financially well off, so probably they would be able to afford an in house nurse should their care require that, but short of that you guys might have to take on a lot of caregiving, appointments, etc. Which is not unreasonable, but should be an expectation.

The other huge disadvantage I see is that the longer you are in the barn, and more importantly if you end up building a house on the property where you make significant building investments (the 2100 sf option), the higher the likelihood of your relationship with your sister and her family deteriorating. My parents don't have much in the way of property/inheritance, and what little they do have they (i.e. my mom, my dad is incapacitated - see the part about eldercare) have made very clear will be split 50:50. I'm sure the fact that we never had much (to argue over) is one of the reasons my friendship with my sister is so good. That was not the case with my father and his brother (the latter who was given the entire considerable inheritance by the maternal family) and it was a cause of bitter enmity between them. I'm sure your parents have considered these things and how they might wish to some day pass on this property. Any (perceived) advantage you have with respect to your sister when it comes to this property because you built a house on it, etc. is not going to go unnoticed and will provoke feelings of unfairness and ill treatment on her part. So tread carefully.

[Dont_know_mind]

I’m not sure if I understand the property.
Did you say it was over 1000 acres (400ha) ?

I doubt it is priceless although your parents (and you) may feel it is and therein lies the problem.

If it is a large property, why can’t they subdivide it and sell you a portion ?

I would not want to build a house on my parents land or vice versa without giving them a title. This may potentially eventually cause problems with your wife.

The legal landowner is whoever has title of the property. Building a house on someone else’s land just opens a can of worms. Where are the boundaries ? If someone trips over in your building, then who will they sue, probably both of you. What will happen if you have souring relations with your family ? You will have a house on property that isn’t yours and your status may change to alleged squatter. It would be surprising if your wife did not have an issue with this. Maybe she doesn’t and it will be ok.

Agree that 1M is an inflated build price.

[Kamban]

I am not trying to be mean, but practical.

I take it that your parents own the barn. If you renovate it with your money and later it comes time for inheritance how will that be valued and divided. Valuation in the future minus your renovation costs to be divided between you and your sister. Current valuation + renovation costs, and when future valuation occurs, there is appreciation of your renovation costs. Living in a 800 sq foot house becomes old after some time.

Now you are adding complexity by building a 2100 sq foot home on the same land. How will you value that portion of the land now, the house now after being built ( easiest option since it is construction costs), land value in future, your 2100 sq foot home value in future, and separate the value of the land from the home. Your sister or her spouse or her family might value the land more and house less and you might think otherwise. Building now means a future messy situation, unless you have it all sorted out now. The best option would be to divide the land, buy that parcel from your parents at the market price and build on it and live in it.

In the future when the parents depart this earth and leave their remaining property to both of you,  you can then have it valuated and buy out your sister's share while selling your 2100 sq foot home and move into a bigger home. But what happens if she wants the 4000 sq foot home. You might have to agree to sell it if you also want to live in it, or suck it up and continue living in the 2100 sq feet home.

I recently had friend's mother pass away and her 4 children were having heated discussions in the mortuary about the valuation and division of her property while the mom's body lay in front of them awaiting final rites. It got so nasty that they could not even agree on Indian or secular final ceremony before the body was to be cremated, and the son walked out. Division of money and assets can bring out the inner nastiness just lurking under the skin.

 

[Tim]

From purely a need viewpoint, a little shuffling of accommodations would make logical sense.

•Mom & Dad have a great 4K sqft house.
•You and your spouse have really done a great job on that barn.
•When you have that kid, you “need” space to expand compared to dear old Mom & Dad.
• Swap living accommodations, I certainly won’t impact your sister.
•If that’s unsatisfying, simply demand (kidding) the your parents build the new house or let your sister provide 1/2 of the funding.

None of these are outrageous, it’s just everyone has preferences that grow stronger when it comes down to money.
• At some point, someone will decide it’s time to sell. Two individuals NEVER reach that conclusion at the same time. Things get ugly when one doesn’t capitulate.

[Jack_Sparrow]

We are part owners of a 4 million+ family farm. Had a cousin who built his mansion on the farm. We are in a real LCOL area. So he built a 4500 SF house on the property for 450k. (Originally price tag was conservatively estimated at 380k). He has a motor thats 100 MPH all the time, but even he was worn down by the process of building the mega house, so doing it before kids has the benefit of time/stress management.

It was all good, its a huge farm. We all didn't complain. Three years later though, we found out there was some oil deposits on the farm, with the most suitable location for drilling about 1500 feet from his house. So as you can imagine there was some tension when everyone was on board to start drilling except for our cousin who didn't want a well field right next door. This was a unique situation, but just from my perspective.. there is always going to be some type of tension, jealousy, disagreements when it comes to family over something of the sort especially when you live that close. Not saying pros don't out weigh the cons but just make sure your "ok" with a little drama here and there.