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  • #16
    How much family lives in this area? If one kid decides to move someplace else would you be stuck there without anybody? Or are there multiple reasons for you to live in this particular area?

    Just make sure your reasoning is sound and that you are not looking at this it's a long pent up desire to buy nice things.

    The ongoing maintenance cost issue is real. Large houses can be very expensive. Not only taxes but the general upkeep is more in a larger nicer home.

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    • #17
      I'm not sure upkeep is a concern here, the place is smaller than the cheaper home but the location is expensive.

      I would do the math others recommended then buy it.

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      • #18
        I dont think this is crazy at all. This is what retirement is for after all.

        My only question is are you planning on paying cash or some kind of mortgage? A mortgage makes a lot of sense, it would allow you to keep even more money earning and growing in the future even while servicing this loan.

        I would look into a pledged asset line as well as some other ideas that will increase your flexibility.

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        • #19
          I will say that I would not mortgage this much, it adds unnecessary risk at this stage. A little bit to smooth out capital gains recognition for the purchase funds across multiple years is one thing but to invest in the market instead is not worth the risk to me.

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          • #20
            If you decide to do this, you may want to liquidate your taxable holdings soon, to avoid having the entire plan ruined by a market crash. Perhaps now and half in early '22. of course, figure in the capital gains taxes for the sale and consider only the after tax amount as available for buying the house.

            I don't think we would buy a house that expensive under any circumstances, not due to some % of networth concerns, but just a feeling that we can be happy in a less expensive location.

            Do think about your total costs in the expensive area, those could blow your budget.
            If your income, further liquidating of taxable accounts and spending down retirement accounts could support your lifestyle, with a generous margin for error, after buying the expensive house, then you can afford it.

            No reason not to take a mortgage. Interest rates are still low and you can pay off the mortgage when you want. Perhaps let you keep money in the market longer- some risk of losing if a crash means you don't have the cash to pay the loan. Careful planning should avoid that.
            Last edited by afan; 10-19-2021, 09:04 AM.

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            • #21
              Thanks. All great thoughts. If we do this, I had thought about taking out a mortgage for half. We are looking in an area where you do not get much space for all that money on a beach but it is all that we will need. While I hate debt, we can sit tight for the next 7-8 years with some income that is coming in while that sits in the market. I would never have dreamed of buying a home this expensive but our children live in this area and while we could spend much less to be inland, at some point you begin to think about taking advantage of all the years of savings and the good luck you have had in the market. Other than traveling, our expenses are very low and I am not too worried about the purchase but it goes against everything we did for so many years.

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              • #22
                Originally posted by Arkad View Post
                Thanks. All great thoughts. If we do this, I had thought about taking out a mortgage for half. We are looking in an area where you do not get much space for all that money on a beach but it is all that we will need. While I hate debt, we can sit tight for the next 7-8 years with some income that is coming in while that sits in the market. I would never have dreamed of buying a home this expensive but our children live in this area and while we could spend much less to be inland, at some point you begin to think about taking advantage of all the years of savings and the good luck you have had in the market. Other than traveling, our expenses are very low and I am not too worried about the purchase but it goes against everything we did for so many years.
                You will be fine obviously. Do you really need to live right on the ocean? Have you previously? We live middle us but relatives on CA coast were right on beach, then moved off some blocks, still a short walk. Unless you're a daily morning surfer etc

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                • #23
                  Originally posted by childay View Post
                  You will be fine obviously. Do you really need to live right on the ocean? Have you previously? We live middle us but relatives on CA coast were right on beach, then moved off some blocks, still a short walk. Unless you're a daily morning surfer etc

                  Certainly do not need to live on the beach but we if we are that close we may want to go for it. We have spent a few months trying it out and like it. It is something that will bring my wife a great deal of joy. I might need to learn how to surf to add more value to the move!

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                  • #24

                    1. You seem to be really good at investing your money. Why dramatically change asset allocation now?
                    2. Living next to the beach has other tradeoffs besides expensive real estate. Its crowded and being surrounded by neighbors who are >50% vrbo or seasonal is not that great long term. We moved to a HCOL coastal town a few year ago. First few years we were a block from the beach. It was great for the first couple of years but we stopped going after a while. The party life and crowds weren't our scene. Moved 10 minutes inland. The beach is always there when we want it. But now have peace and quiet and a real neighborhood.

                    Unless you know this is your forever home or you feel this is a worthwhile investment (which it may very well be), I'd consider renting a decent place near the beach for a bit and see if you like the lifestyle long term.

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                    • #25
                      Reading this post makes you kinda put things into perspective.

                      As others have pointed out if you put 5M towards a house and now left with 5M in investment and start taking out 4%, that’s 200k pretax. So maybe 160 to 180k post tax?

                      If you have to put 60 to 80k in property tax and up keep for a 5M house, that leaves you with maybe 100k in cash to live on?

                      Am I doing this right?

                      That’s not a lot of money left over to spend when you consider that you are a ‘decamillionaire ’. That’s like 8K a month. Doesn’t seem like a lot for again a ‘decamillionare’. It is all perspective but we couldn’t live on 8K a month right now, at least without cutting down on many things. And we live in a low cost of living area with no real debt except home.

                      I can see why some of my partners are still working in their 60s and taking call.

                      That said, if I had your money, I’d retire and not look back. :-)

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                      • #26
                        Originally posted by Shant View Post
                        I will say that I would not mortgage this much, it adds unnecessary risk at this stage. A little bit to smooth out capital gains recognition for the purchase funds across multiple years is one thing but to invest in the market instead is not worth the risk to me.
                        What risk?

                        As usual this board is highly over weighing theoretical risks and situations that are very very low probabilities and treating them as base case scenarios to advise your course of action with money.

                        A mortgage is a house backed by an asset. This sounds like California, there is essentially zero risk. In fact, if the market goes kaboom, you can literally just walk away from a house in cali and deficiency judgements are illegal.

                        It would be actually be absurd financially to pay more than 20% at todays tiny low rates, with the possibility of inflation finally here. A massive mortgage is about the best inflationary investment you can have.

                        Property taxes will be in the 20-30k/yr range, but this is the same for a 1M house in texas where everyone pretends is a good deal to live.

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                        • #27
                          This will sound crazy to many. I think you really need to “rent” for a minimum of 6 mo to a year. Classic case that you can do anything you want, not just everything.

                          Tons of people “downsize” to more expensive or cheaper locations and find the change to be less satisfying than expected for a variety of reasons.

                          The significant change is inflation in the lifestyle, assets needed for housing and to support the retirement. With $10m, you can live wherever you want, you just haven’t decided the value needed or desired. New ballgame, don’t blow a $5m decision and find $2.5 or $10m were the real values for maybe a 40 year retirement. First world problem for sure, but mistakes can be expensive and more importantly a PITA.
                          With a $10m pot, renting makes perfect sense first. Your old plan doesn’t count, unless you stay where you are. Only so much money to spend each year. All good choices, too bad you can’t do them all. You gotta live someplace.

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                          • #28
                            Originally posted by Arkad View Post

                            Recently early retiree (mid 50s). We never lived in a home that was greater than 1x of my gross income. Was looking to retire with a goal of 4-5 million but with some luck in the market and extra savings the last few years have ended up with 8+ figure account. We are looking to relocate near our children in a high cost of living area. We could find a home in the area that would be nice but not in our most desired area. We could go for less space (we are minimalists) with close views of the ocean and steps from the beach and close to the town center but that would mean putting 40-50% of our net worth into housing. While that would have seemed absurd in the past, the reality is that we would still have our original savings goal outside the home and at some point it seems irrelevant how much we have in the bank if we could live in a dream location after being such good savers for the next few decades compared to spending less and not taking full advantage of this area. Anyone else face this situation? Putting 50% of our net worth into our home seems a bit crazy but it is far different doing it with where we are now than it would have been with our original retirement goal.
                            Little quandary there. Assuming you have $10M.

                            1. If you go the full cash down foe the house and a 20% LTCG, you might need $6M to pay for that $5M house. That will leave you with $4M in investments and a $160K withdrawal to pay for house taxes, upkeep, essentials, travel etc. And hope that $4M does not have a 30%+ drop in market.

                            2. If you go for mortgage with 20% down you might have to only withdraw $1.2M and hope the remaining $9M will hold well and generate income to pay for all of above plus the big mortgage, even with today's low interest rates. This is a better deal.

                            3. My biggest concern is what happens when the honeymoon period with the house is over and you notice the negatives a year later. The upkeep. Salt erosion. Water pollution. Hurricanes, if in FL. Children suddenly move out. Anything can happen. I would rather rent for a year or more to make sure that right on the ocean is your cup of tea before plonking $6M on it. JMHO.



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                            • #29
                              Originally posted by Arkad View Post


                              Certainly do not need to live on the beach but we if we are that close we may want to go for it. We have spent a few months trying it out and like it. It is something that will bring my wife a great deal of joy. I might need to learn how to surf to add more value to the move!
                              The part that would worry me the most is not the financial aspects but being right on the beach in an era of progressive flooding. Just figure in the rapidly rising cost of flood insurance.

                              We have looked at a beach house and were too concerned with the effects of storm surge and flooding on the community, even if we were at a high enough elevation that our place was not washed away.

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                              • #30
                                What is the property tax on a 5M home in that area?

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