One night back in 2009 we were driving on I95 to visit family in New York. As we passed yet another cop sitting in the median I had an idea: what if I could mark a cop’s location on the GPS map and share it, in real-time, with the cars behind us? Imagine how valuable would it be to have this information as you drive? As you approached the police trap your GPS could flash a reminder to check the speed. Smartphones were becoming widespread so how hard would it be to get them all connected? I had no clue how to get that idea off the ground so I filed it under “someday” and forgot about it… A few years later I learned about Waze – an app that had this and other crowdsourcing features built-in. Google bought Waze for almost 1 billion dollars in 2013.
I’m sure you had this experience as well. You came up with something, didn’t do anything about it and then one day saw it implemented by someone else. There is a huge difference between an idea and its implementation. I consulted with a patent attorney once and he had lots of stories to share on the subject.
Financial freedom can be similar. You can’t just come up with a list of options and hope that it will all work out. You must take action.
I’ve been thinking and Excel-izing the Pura Vida 2020 plan since 2012 AKA the birth year of our son. We are now halfway through 2017 and Pura Vida 2020 is less than 3 years away!
Optional downsizing is a big part of the plan. I’ve been toying with this idea for a long time!
Over the last 10 months we made some moves meant to put theory into practice. I missed the boat on the billion-dollar app but I sure don’t plan on letting Pura Vida 2020 go unfulfilled!
Below is the original list of options along with an update on where we are with each one.
Option 1: Sell the big house and move into a rental condo that we own.
This was a front-runner while my wife and I were chatting on our drive up to the ski resort. We were both going to take the summer off, sell or rent our current house and go travel with our son. Upon return I was going to look into doing part-time IT gigs while my wife could take her time to figure out what she wants to do next. We were genuinely excited!
Then we returned and the reality set in. We couldn’t get past the same list of issues: too small, too dark, too many neighbors… It is tough to de-inflate your lifestyle so drastically. It’s much easier to not inflate it to begin with – which we failed to do. When you live in a 3,200 single family mansion it is hard to imagine going back to a 980 sq ft apartment sharing walls with 5 families.
And so…RIP Option 1.
Option 2: Sell the big house, keep the rental condo and buy a top or a bottom floor apartment in the same apartment complex.
In the second half of 2016 I walked the condo complex and identified 14 apartments that fit the criteria: top or ground floor with an extra room that expanded the living area to roughly 1,200 sq. ft. Then I went home and pulled up a tax record for each apartment. It turned out almost half were rentals which was clear from the owner’s mailing address.
I typed up a letter that explained the situation and asked if, by chance, the owner was thinking about selling the place. Why not sell it to us eliminating the hassle and the 6% in real estate commissions?
I mailed out the letters and waited to hear back.
Out of 14 owners I contacted only one wrote back. It happened to be the gentleman living above the unit we own.
This guy bought his condo at the height of the housing bubble and now wanted to get all that money back. That price would make his condo the most expensive one in the complex by about 10K. I was hoping to split the 6% realtor fee savings and pay about 3% under market so we were quite a ways apart.
No one else replied to my letter. I haven’t seen the right unit for sale in many years so Option 2 was dead in the water.
Option 3: Sell the big house and buy a smaller house in the same neighborhood.
As parents you meet new people all the time. We met a nice couple whose son went to the same daycare. We hit it off and started doing play dates and cookouts.
They had a boy and a baby girl and lived in a 3 bdr 2.5 bath 1,500 sq ft home on a street with smaller houses in our community. During the last two years they spent thousands on upgrades and the house looked great! Here is the outside:
Earlier this year the husband found a dream job in California. We were bummed to lose such a good couple and our son’s little friend. One night over a beer and half-joking I said they should just sell their house to us… We’ve long decided that we’d be perfectly comfortable in 1,500-2000 sq ft home. Their house was exactly half the size of our home.
Next day I called the husband and we had a sober conversation. We agreed on the price – about 10K under market. They threw in a ton of stuff that they didn’t feel like moving – TVs, couches, expensive curtains, brand new Weber grill… They liked the idea of a quick closing, no inspections, no staging/showing/repairing headaches and a flexible moving schedule. It was a win-win. We started the paperwork.
Our plan was to rent the house out until right around 2020. It was a perfect plan… until I called the HOA.
The HOA informed me that the bylaws did not allow renting out the house for the first 2 years. This was a new rule added after one investor started buying up houses and immediately turning them into rentals.
Well that’s not gonna work. Our friends put the house on the market and went under contract in 2 weeks.
RIP Option 3.
Option 4: Sell the big house and buy a smaller house in a different neighborhood closer to the city.
We spent months looking for a smaller 1960’s rancher in the older part of town. We’d go to an open house only to find out that there were multiple offers by the end of the day.
One time we showed up for an open house, knocked on the door, heard no answer and let ourselves in. We saw a nice Mac laptop on the kitchen table, a new iPhone and a bunch of grocery bags… Well, that’s weird. As we started walking through we heard voices… I called out “Helloooo” again and then saw a nice couple playing with their two kids in the backyard. My wife told me to get out of there!
Turns out the house went under contract the night before and they didn’t update the listing. The For Sale and the Open House signs were still up in the front yard. What the hell was the real estate agent doing?!
I didn’t want to buy anything in this crazy market. The area by the city is very bubbly and I refuse to compete with multiple offers, escalation clauses and all the other BS reminiscent of the mid-2000’s… It’s not like we have to move.
And then we found a For Sale By Owner house not far from our rental condo. It’s still closer to the city than our current home and it’s in a nice area with good schools, parks, grocery stores and things to do…
At 1,600 sq. ft and 3 bdr 3 bthr the house fit the bill. No HOA meant we could buy and rent it out as planned.
The house was listed at 249K. We made what we considered to be a strong offer of 240K. The seller would save the 3% buyer’s agent fee (we didn’t have one) so in reality our offer was just $1,500 under their asking price.
The sellers came down to a hard 247K.
We withdrew our offer. Option 4 was not meant to be.
Option 5: Sell the big house, buy a similar size house on the Outerbanks, NC and rent out part of the house for income.
We searched and couldn’t find exactly what we were looking for on the Outerbanks. Too big, too small, too expensive… Then we found a half-acre plot of land on the canal and thought – why not build a house that we want? We ran the numbers and it appeared to work with our roughly 450K budget.
The plot that we liked was listed at 169K which was too expensive considering we’d have to clear it, build out a bulkhead, install septic and then build a 2,500 or so home with a separate wing that we could rent out.
After going back and forth with the owner’s agent we finally settled on $126K. That’s actually a great deal in the area for a waterfront lot. We went under contract.
We were now in the due diligence period talking to 3 different builders. They all came back with plans that would put us over 500K including land to build a house that we wanted. We were not ready to commit that much money for a beach house. Especially since you know that if the original quote is around 500K, the final bill would most likely be much higher.
We can’t afford building a brand new house on the Outerbanks… If we wanted to go with this option we would need to look for an older home that would leave room in the budget for remodeling.
Option 6: Sell the big house and buy two houses on one plot in Costa Rica. Live in one house and rent out the other one to tourists.
Here is a place that has two separate houses in Samara Beach with an ocean view that you can buy today for 450K or less. First picture is a view from the first house looking over the second house and over the Pacific ocean.
There is a great school for our son in town. We could rent the second house to bring in income. Life is simple in Costa Rica so there are not a lot of expenses.
This is my favorite option but also the most drastic. We’d have to sell pretty much everything we own, learn a new language and move away from our families. We talked about this at length and it’s not something we are ready to do, at least not yet.
We are putting the Costa Rica plan on ice. We’d like to go and live there for a couple of months. Rent a small house in Samara Beach to see how it feels to live like a local.
Option 6 is still on the table.
Option 7: Keep the big house as a rental combined with one of the first 5 options.
Whatever happens we decided we don’t want to sell our current house. It’s paid off and we could rent it slightly under market and still come out ahead. Houses in this area are continuing to appreciate in price. We should be able to get some positive cash flow for a win-win. It’s easier to move out knowing that there is a backup plan if we end up changing our minds after trying that alternative lifestyle for a while.
Option 8: Enjoy the status quo.
By now it should be pretty clear that it’s no longer an option!
So there you have it… quite an eventful 10 months, wouldn’t you say? It may sound like we are just throwing darts to see what sticks but I’d like to think that there is a process here. Each move pushed us in the right direction. Who says you need to follow a straight line from A to B? It was fun to explore and learn from each option on the list.
The Best for Last
At the end of it all we did buy a house! I feel that we found something unique and we are excited about the future. I promise to write about it soon so stay tuned!