Personal Investment & Financial Planning Q`s/To build or not to build

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Hi Gregory

My husband, who is 63 retired in August 2012. I have continued to work from home and I'm 46 years old. Our initial plans were to travel and visit different areas to find a place to buy we both love. We went to Canada last summer and to travelled to Europe (he's dutch) and Seattle this summer.  He wants to live "on the water" somewhere. He loves Seattle but it's SO expensive. Last month, out of the blue he comes up with the following idea. Buy a piece of property on the gulf coast (We live about 40 north of Biloxi, ms. Build a duplex, rent out one side and we will live in the other side. I was stunned. 1) he has been adamant about not being a landlord and dealing with renters. 2) he has complained about the heat and humidity down here for the past 17 years and how he wants to move north. I asked him about these concerns. He says our duplex will be nice and we will get quality renters and he will only have to deal with one renter and during the summer we can travel north and rent our side of the duplex on airbnb or the like. I'm on board with this but I need someone (you!) to tell me that it's "okay" for us to drop the money.

Now onto our finances. Our home is paid for. My parents are 82 and 75 and live up the road from us and I want to keep our place until they're passed on. He is okay with that.

We have $920k in Vanguard. $530k is his 401k from work we haven't touched and don't plan to until he's 70 and has to. The remainder is an individual account in my name and my Roth and sep. We also have $120k invested in tax liens. This is "our" money. We don't have individual checking or savings accounts or credit cards. We are transparent about everything.

He has a 1938 BMW car that he's restoring that's worth $120k. He says he'll keep it for a few years and maybe sell it.

He draws $3500/month in pension (4500 before taxes and insurance) and $1366 in SS. Federal taxes are withheld from pension and SS. I'm a 50% benefit survivor and beneficiary on his pension.

My business is touch and go. So far this year I've made about $18k. It's pretty much our play money, trips, dining out, clothes, entertainment, etc.

We have no loans, no credit card debt and our children are grown and independent.

The property is listed at $99k. We want to put in an offer of $65k and hope to get it for $80k. The duplex will probably cost $200k to build. My two questions are 1) should we do it? 2) should we use the money in the individual account to buy and build or take out a mortgage? or 3) a combination of both?

Thanks for your time - Worrier

Answer
A few follow up questions:
What are typical properties listed for in the area where you're looking to build?  Are there other duplexes?  Is it within code to build a duplex and rent out one side?  Is the $200k cost estimate a "hard" number that you've had a builder provide?  What would the rental bring in monthly?  What are your current monthly expenses?  Would expenses change significantly upon moving (and before/after selling your current place)?  

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Gregory Ostrowski

Expertise

Expert in the field of personal finance, investing and retirement planning. Cannot respond to questions on specific investments, nor provide tax or legal advice.

Experience

CERTIFIED FINANCIAL PLANNER™ Practitioner & Chartered Retirement Planning Counselor™ 12 Years Experience and Partner of Scarborough Capital Management, a Registered Investment Advisory firm managing approximately $1.2 billion in retirement assets for individuals across the United States

Organizations
Building Traditions Society, Anne Arundel Medical Center Foundation, Current Saint Mary's Annapolis Alumni Association Board Member, Current AARP Lifetuner.org Financial Expert, Past LinedFA Advisory Board, Past

Publications
Wall Street Journal, Essence Magaine, What's UP Annapolis, The Capital, Reuters, Baltimore Business Journal, Washington Business Journal, Kiplingers, The Associated Press

Education/Credentials
BS, Villanova University FINRA Series 7 & 66 Life and Health Insurance License Holder CERTIFIED FINANCIAL PLANNER™ Practitioner Chartered Retirement Planning Counselor™

Awards and Honors
Top 40 Under 40 Registered Investment Advisors by WealthManagement.com Annapolis 40 Finest, Cystic Fibrosis Foundation, 2014 Five Star Financial Professional, Baltimore Magazine, 2013, 2014 The Capital's Readers Choice Best Financial Advisor, 2012, 2013

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