2nd June 2007
The international buyer fell through…not entirely surprising.
We did end up with another offer on the house that we’ve accepted. They are using conventional financing and are pre-approved for the purchase amount. The inspection happens next week and the closing is set for June 15th.
To address Christopher Smith’s comments on my previous post… We’re freeing up about $115K in equity through the sale plus reducing our cash outflow by about $2,700 a month ($1,200 of which was adding to equity on the property.) Yes we’re raiding the piggy bank a bit. My wife purchased another mare at auction last week for $17K which can arguably be called an investment. We’ll be paying off the 0% credit card and horse purchase which will eat about $40K, leaving us with a bit over $100K in cash if you add the proceeds from the house and our current liquid savings. I’ll likely be buying my TV and we’ll be spending some cash on improvements to our property here (a pond, horse facilities etc…) The balance of the cash will be invested in short-term savings and migrated into tax managed funds over the course of the next three years using value averaging since I’m not all that excited about putting a big chunk of change into the market at these valuations. We’ll also leave a few month’s income set aside for emergencies.
We’re also going to bump my wife’s 401K contribution from 6% of her salary (capturing her employer’s 100% match up to that amount) to a level high enough to max her salary deferral at the $15,500 limit. I’ll also be maxing my solo 401K out this year, not sure what the total amount will be but if my earnings continue at their current rate, I’ll be able to defer a bit over $30K in income, maybe a bit more. So, we’ll have put away nearly $50K in pre-tax income this year if all goes well. I am also setting up an automatic withdrawl into an after-tax account earmarked for retirement of the money we have been spending to maintain the property in Michigan. This means we’ll be setting aside another $32K+ of after-tax income each year. Time to start thinking about how to structure those portfolios. This may end up being too aggressive but we’ll see.
If there is one thing we’ve learned from this transaction, the home you live in is not an investment. The appreciation on the house in Michigan was actually right around the inflation rate over the course of the ten years since my wife bought it. When you factor in the interest paid on the purchase and the money spent on taxes and maintenance it produced a significant negative return. Of course we’re selling into the worst market in those 10 years but we’re not able to pick the time we need to sell. We’re not expecting our home here in Illinois to appreciate while we’re here either. It’s where we live, and we’ll spend money to make it nicer, but we’re not looking to make a killing on it when we sell either. This is one of the reasons we purchased a lot less house than we could afford according to conventional wisdom (about half). It’s beautiful and we love it here, but it was relatively cheap.
Sorry (again) about the lack of posts… My business has really taken off and I’ve been swamped with work these past few months. While this is a good thing, it has taken time away from other aspects of my life, this site included.