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#1 of 9 Old 09-06-2010, 04:48 PM - Thread Starter
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I have a financial situation I need to think through and am looking for other points of view....

We own a duplex. The owner's side is a little over 1500 sq. feet. It only has 2 bedrooms right now, which isn't enough for us. We do have a tentative plan for remodeling, which would give us an extra room. We'd end up with a somewhat smaller home for our family of 4 than is "the norm" (at least to most people). We'll eventually need to replace the windows (there are a lot) and the oil tank. Other than that, it's on a fantastic street, great neighbors, nice big back yard, etc. The rental side has never been vacant in the almost 5 years we've owned this place. The rental market where we live is extremely strong and has been for the last 20 or so years. Rent received pays more than half the current mortgage.

We have friends who are about to sell their house. We LOVE their house. Huge wooded lot, river view, nice sized home but not too big, just a fantastic place. Will eventually need a new roof (my husband would put on so it'd just be materials) and a new boiler. We'd also really want to add a studio apartment to the detached garage, which my husband could do so it'd cost materials only. The house is cosmetically beautiful, well made, and a great buy.

The housing market where we live is actually very positive and there are ZERO investment properties on it right now. We've heard from realtor friends that duplexes are hotly sought after right now so we'd likely have no problem selling.

These are all the points i've been considering and I think I can't see the forest through the trees right now.

1. Refinancing the duplex or buying the new home would mean financing about the same amount but with the duplex, we could do a 15 year mortgage and we'd have our renters paying almost half of it. The new property would mean a 30 year mortgage.
2. We would prefer to live in the new house - but we could stay in the duplex if it were remodeled.
3. We need to catch up on our retirement. Staying in the duplex would mean we could max out my deferred comp (putting 16,500K away per year) sooner. (We both have deferred benefit retirement plans so the deferred comp is our extra....)
4. It'd be hard to pay off the new home before I hope to retire in 20 years, but doable if we watch our money.
5. If we stay in the duplex, we'd have very little money worries. I know it's the best bet financially, but I can't get past wanting to live in the new home. I wonder if it's because it's already "done" - no work is needed cosmetically, while our place does need work.
6. I don't love the idea of having renters forever, but, I do want to have extra living space for either elderly parents or if our kids go to college here in town - keeping the duplex would mean by the time extra space was needed, we'd have it (and the house would be paid off).

In reading the above, it looks like I'm leaning towards staying in the duplex, but staying would mean we would need to put about $75,000 into it. Plus, the new home, the single family home, is so close to my ideal, it's hard to just say no. I've crunched the numbers and when all was said and done, the duplex will cost us (our share, not including what the renters contribute) about 500K after 15 years and be paid off, and the single family, about 610K after 22 years. I want to live in the single family, but I recognize how much finanicially smarter it would be to stay in the duplex. Maybe I just need someone to tell me to stop whining. Or maybe living in a beautiful home is worth the extra 110k.

any words of wisdom for me?
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#2 of 9 Old 09-06-2010, 06:34 PM
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The bottom line for me would be - can I afford it? We are a bit house poor because we chose not to buy a starter home but one that is up the rung a bit. It still needs some work but it's in better shape and larger than others we looked at.

We crunched the numbers and realized that we could make it work. For us it was worth it and we don't regret it except when we are feeling gloomy about not having a lot of disposable income.

I would do a complete budget for each scenario and look at how you'd have to live in order to buy the new place then decide if it is worth it.

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#3 of 9 Old 09-06-2010, 07:33 PM
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How about renting your part of duplex as well? This way you will probably even have a little extra on top of your mortgage, the duplex will be eventually paid off and yours and you get to live in a nice single family house.
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#4 of 9 Old 09-06-2010, 08:00 PM
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I was thinking what aek said, why dont you buy the single family and just rent your portion of the duplex? If the one half pays more than half the mortgage already, then renting the second half would put you ahead....

yep, that is what I would do

Single mom to 2 boys
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#5 of 9 Old 09-06-2010, 08:35 PM - Thread Starter
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Keeping both makes me so nervous. I hate to be on the hook for two mortgages - even though the rental market is strong, it still makes me nervous. It would be hard to have to pay our mortgage plus cover rent if we had too if something went vacant.

Last night, I was all about moving. The single family home is so awesome, walk in ready, we'd love living there....

Today, I'm all about finances. The house could be paid off almost entirely by the time the first heads off to college and well before I retire. Speaking of which, our retirement would be all set. We'd be able to go on all of those family vacations we talk about.
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#6 of 9 Old 09-06-2010, 08:36 PM
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I would do a three-way budget too, although I'm assuming you'd need the equity out of the duplex to buy the single.

But my question for you is - if it weren't your friend selling the home would you be 'on the market' for a single-family home? If not, I'm guessing it's not that you've been dreaming of one for a long time. So that might indicate one way to go.

~ Mum to Emily, March 12-16 2004, Noah, born Aug 2005, Liam, born January 2011, and wife to Carl since 1994. ~
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#7 of 9 Old 09-06-2010, 08:38 PM
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OP, I assume when you talk about putting a studio apartment on the property you might buy, you're talking about renting it out?

You need to check to see if you could legally do that? Is that property zoned for rental/multi-family residences?

Would hate for you to spend the money for the construction materials and then finding out you couldn't legally rent it out. And legally is always the way to go.

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#8 of 9 Old 09-06-2010, 10:31 PM - Thread Starter
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Thanks Tradd, that's good advice. It's on my list of things to find out. Zoning we're fine, but the way we'd like to build, I need to make sure we wouldn't encroach upon the setback. We actually probably wouldn't want to rent it out. I'd prefer NOT having renters, but we'd like to have extra living space for either of our parents if need be, or if our kids decide to go to school locally, it'd be nice to be able to offer them someplace to live that's separate from "home."

We definitely would need the equity from the duplex to buy the SF.

I'd really prefer to live in the SF, but I'd really prefer to be in the financial position we'd be in staying in the duplex.

I hate making decisions like this.
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#9 of 9 Old 09-06-2010, 11:18 PM
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Considering we are staring into the second dip of a double dip recession, I think I'd stay w/the safest and cheapest option. I hate living my life in a 'what if' scenario but my 'what if' outlook two years ago saved us from making a huge mistake when we moved.
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