by We’d like to share some exciting news about an unusual goal we met a while ago.
The Nuestra Casa funds are being put to use. We are moving! Again!
Yes, you read that correctly. We are purchasing a home and relocating to a different state.
After much deliberation, we’ve decided to relocate to Florida as our next home state. We’re bringing our money to Florida! 🙂
Gulf Coast, here we come!
If you’ve been following our recent posts, you’ve probably noticed that we’ve been heading in that direction. For the past two years, we’ve spent extended periods of time in Florida.
During our most recent trip, however, we discovered an area that we really liked, with lots of greenery, recreational activities, trails, beaches, and close proximity to Grandma!
We discovered that walking the streets of a community you’re considering moving to is an excellent way to become acquainted with it, so we did a lot of it.
We walked, went to parks, beaches, and playgrounds, met some people, and imagined ourselves living there.
So, when it came time to decide whether or not to buy this house, the decision was fairly straightforward.
Change in plans
We were supposed to go to Florida by November to hibernate for the winter and continue looking for homes. There has, however, been a change in plans.
Instead of arriving in Florida, renting apartments until April or until we find a house to buy, and then having to move, we considered finding our home online and moving right in.
Also, buying sooner makes sense because we are no longer planning to sell our current home and instead intend to rent it.
And there she was!
We found a house in our desired neighborhood that had most of the features we desired.
Since we couldn’t attend in person, my mother-in-law agreed to film it.
Within hours of seeing the house, we made an offer!
After some back-and-forth, the buyers accepted our offer with a closing date of October 5th.
The purchase price?
We came in under budget by $100! Unbelievable coincidence?
Or were the positive forces aligning to help us achieve our goals?
The timeline worked well for us because we plan to move in October and begin renting out our current property on November 1st.
Selling versus renting the property
Our first objective was to sell the rental property.
Then, during the first five years of early retirement, use that money to cover about 2.5 years of spending.
As early retirees, the first five years are critical. We can’t access the retirement funds without incurring penalties because we are under the age of 59-1/2, unless we use the 72 (T) rule.
We decided to rent out the property instead of selling it earlier this year.
This property generates very healthy returns, which are more difficult to replicate with equities.
Furthermore, selling a real estate asset to invest in the stock market contradicts one of our current long-term goals: we want to increase the tangible assets in our portfolio.
As we enjoy our retirement, we’re concentrating on gradually converting our stocks and bonds investments into tangible investments that aren’t just numbers on a computer.
Renting the property provides a short-term cash shortage
Not selling the rental property can be a problem or an opportunity. This means we’d be short on cash to cover some living expenses while our Roth IRA conversion is completed.
Remember, this money was supposed to cover two and a half years of spending out of a five-year budget.
We get more out of our investment by renting, but we’re constrained because we can’t easily access the equity without the assistance of a bank.
As a result, we considered two options:
a) Secure a loan for the rental property
b) take out a mortgage on our new home to make up for the lost funds from not selling the rental property.
Aah, an option never considered: getting a job! ? “No way, José.”
A mortgage on a rental property is essentially a refinance on an investment property, so it is more expensive.
We looked into it, and the interest rate was about 2-3% higher than a regular mortgage on a first home.
Furthermore, because of the current mortgage payment deferrals program, refinancing incurs additional fees.
Our choice
We chose to mortgage 50% of the new home’s purchase price while leaving the equity in the rental property alone.
With a 3% interest rate and the potential for large profits from the rental property, why wouldn’t we?
The net income from the rental property should cover our new mortgage, insurance, and property taxes.
We’re applying for an asset-based or asset-depletion loan. It is not your typical job income (W2) loan. This is the kind of mortgage that early retirees without a W2 can obtain.
After we make the purchase, we’ll explain how the process went.
On your mark, get set, go!
We have about 45 days before we close on the property, and the deadline is quickly approaching. We’re pushing the pedal to the metal because we have a lot to do and want to see friends and family before the summer ends.
We’re selling as much of our belongings as we can, especially the bulky items that we’re willing to part with to get a smaller moving truck.
Also, we’re still deciding on whether I’ll drive a truck there or just outsource the entire job.
I think I’d be comfortable driving a smaller truck to Florida if we could get rid of items like our bedroom set, main couch, TV stand, and a few other fragile items.
We have a long way to go before we can relax on our lanai, but we’re eager to get there.
But never without losing sight of the fact that the journey is just as important as the destination.
This out-of-state move is unlike previous ones in many ways. A significant difference is that we have more time to complete tasks without the distraction of a full-time job. Our 9-5 is spent preparing for the move until we move. 🙂
