Ahhh I'm in an analysis panic!
I bought a nice lot... 0.88 acres, in a gorgeous upscale neighborhood. I bought house plans ($1500) and have been working with a contractor getting bids. He's done a lot of pre-work, including getting plans sent to the city and the neighborhood HOA, changing some designs of the house, etc. But no actual physical work. House bid is $820,000, including a $100,000 pool design, and that does not include the cost of the land ($150,000). So its $920,000 for everything. The 30 year note will be around $5600-$5700 per month. The total interest paid will be about $650,000, which makes the total cost of the house around $1,500,000. On my loan estimate it made a little note that said "in the first five years of ownership, you will have paid $245,000 in payments and have $65,000 equity."
Currently I owe $360,000 on my current house, which is on a 15 year note that is automatically paid bi-weekly ($1600) which puts it technically on a like 13.5 year schedule, and I pay extra, so it will be paid off even earlier. If I don't pay any early payments my total interest is about $140,000 which makes my total cost for this house about $500,000.
I try to be financially smart, but I still make a ton of mistakes and my spending is always out of control. I'm the guy that buys something for $1000, then sells it a month later for $100. I'm not trading a paperclip for a car on craigslist. So after getting all the financial estimates in I'm really feeling stressed. This is why:
1. Cash to close payment is $106,000 (10% plus closing). I invest most of my money so it took me a while to save this up. I feel like I finally have money to make a good financial move and it kills me to spend it all on the house downpayment.
2. While building the house, it will be interest only payments, which is still about $4000/month, on top of my current house note which is approx $3200/month, so thats $7200/month. I can afford this, but damn it feels stressful. And it definitely means drastically decreased savings while building. And I know while building there will be upgrades I want to make that will add extra tens of thousands of dollars to the house (better appliances, solid wood floors, etc.) And when I move out of my current house into the new house, I still have to sell my current house, and at that point I will be paying $5700/month for new house plus $3200/month for this house which would be $9000/month in mortgages.
3. With a new house comes new furniture and all sorts of other stuff. And I just re-did this house's furniture about six months ago and I was shocked at house quickly I blew $10,000 on furniture for just a few pieces. Add in a larger lot that needs landscaping and lawn maintenance, more house to keep clean, twice as many AC units that will need servicing, etc.
4. The difference between my current note and future note is $2500. That amount invested for 30 years at 6% is 2.3 million... That's lost money to retire on.
5. The total cost of just the mortgage for new house is $1,500,000, which is a million dollars more than the total cost of the mortgage for my current house. A million dollars. Thats so much time and work to pay that off.
6. My current financial plan is to be able to really just quit everything in about 13 years. My daughter is 6, I will not have more children. I pay child support which is a large amount, but that ends when she's 18. I also save for her college so she will have a full ride all taken care of. And my current house note ends in 13 years (or sooner). And I plan to cancel my disability insurance (about $750/month) when I have enough money in retirement. So at that time my monthly expenses go from like $11,000/month to like $1500/month or so. At that point I can *significantly* cut back at work and just do a few shifts per month to keep making enough money to live and not have to touch retirement money.
7. I have been dying to get into residential real estate. I firmly believe in buying income producing assets instead of liabilities (rich dad poor dad). I'm going today to look at a 4-plex apartment buliding that's listed for around $350,000 and each unit rents for around 875-1000. After 25% down can take in around $1600/month-ish, and when that shit's paid off significantly more, around $3000-$3200.
So I find myself at this precipice, where I can buy a house that will make me a financial slave for the rest of my life, or I could use the same money and make an investment that will help give me financial independence for the rest of my life. I think the decision is easy. It's hard to give up on building the house, because I really really want it, and while I can technically afford it, it just sounds miserable to be stuck with it. How bad is my contractor going to take this? How much $ should I offer him for "work done" to avoid a big mess?
