To paraphrase the immortal Chico Escuela, “Housing has been berry, berry good to me.” In 2006, at the height of the real estate boom, Mrs. Groovy and I sold our one-bedroom, one-bath condo on Long Island for $340K. Since I bought that condo eight years earlier for $70K, and since Mrs. Groovy and I didn’t use it as a piggy bank (i.e., we didn’t refi to buy a Mercedes and season tickets to the Yankees), we walked away from the sale with a little over $250K.
Mrs. Groovy and I never considered ourselves real estate rock stars. We knew our windfall was more about luck than business savvy. The only reason we sold in 2006 was because that’s the year I became eligible for a more lucrative pension.* If I had to wait until 2007 or 2008 for that eligibility, we would have walked away with at least $100K less.
After we sold our condo, we relocated to Charlotte, North Carolina. And with $250K in our back pockets, we could “afford” a lot of house. But the idea of buying a 4,000 square foot McMansion in a gated community never crossed our minds. We knew that $250K was a tremendous gift, and we wanted to be good stewards of it. So rather than buy a look-at-me-I’m-awesome McMansion, we bought a modest home in a decent neighborhood for cash. For the first time in our lives we were completely debt free.
The decision to live modestly proved to be a tremendous strategy for building wealth. In less than ten years, Mrs. Groovy and I saved up enough money to become financially independent. And while Mrs. Groovy and I did a lot of things right to reach FI, we wouldn’t be FI right now if the real estate gods hadn’t smiled upon our dumpy little condo on Long Island.
“Okay,” you’re no doubt saying. “Housing has been ‘berry, berry’ good to you and Mrs. Groovy. Who cares? Where is this post going?”
Excellent question. I’m glad you asked.
Two important changes occurred during the past ten years. First, my side of the family relocated to North Carolina as well. But my parents, siblings, aunt, and cousins moved to the Raleigh area—three hours north of Charlotte. Mrs. Groovy and I prefer Charlotte to Raleigh. But we love our family, and my parents are getting up in age, so it makes sense for us to move closer to them. Second, our travel goals have changed. Mrs. Groovy and I still want to see all fifty states, but we also have a bug up our arses for Ecuador, Vietnam, and Australia. So I turned to Mrs. Groovy one day and said, “How about we downsize when we move to Raleigh and use the money we’ll save to finance our international travel?” Mrs. Groovy thought that was a splendid idea and the housing downsize challenge was born.
The first part of the challenge is to see how much our international travel goals will cost. I did some quick research using Kayak and Airbnb to see how much it would cost to get to our three chosen destinations and stay for a month. For Australia I also threw in the cost of round trip business class tickets. Mrs. Groovy and I would like to go Down Under in style if possible. I also factored in the cost of food, entertainment, sightseeing, car rentals, and contingencies. Here are the results.
|Country||Round Trip Airfare for Two||Airbnb Rental for a Month||Food, Entertainment, and Seightseeing||Car Rental and Gas||Total + 33% for Contingencies|
So if our future house in Raleigh costs $25K less than what our Charlotte house sells for, we’re set. But pulling that off won’t be so easy. First, Mrs. Groovy and I want our future house to sit on at least two acres of land. We love people, but we want to hear, see, and smell them on our terms. Two acres will provide a comfortable buffer. Second, Mrs. Groovy and I don’t want to live in a couple of shipping containers. Tiny houses are cool, but we’re too old to be living shoulder to shoulder 24/7 (Mrs. Groovy definitely needs her alone time). No, we’re looking to build a house in the 1,200-1,400 square foot range. And we want nice finishes (i.e., Hardieplank siding, hardwood floors, granite countertops, stainless steel appliances, tiled shower stalls, etc.). Building small and cheap strikes us as pointless. No challenge there. We want to build small (by today’s standards) but surround ourselves with quality.
Here, then, is our housing downsize challenge in a nutshell.
- Sell our Charlotte home next year for what we bought it for ($225K).
- Use the proceeds of the sale (roughly $210K) to build a house in the Raleigh, North Carolina, area.
- Build a small (1,200-1,400 sq. ft.) but quality house on at least two acres.
- If our future house costs $185K, our housing downside challenge will have succeeded and we can happily fulfill our international travel goals. We will, however, have to travel to Australia like the sorry people.
- If our future house costs less than $171K, we’ll get to travel to Australia in style (i.e., business class).
So what do you think groovy freedomists? Will our current house and future house be berry, berry good to us? Can we build a small house worthy of Architectural Digest and Dwell and still have money to travel the world? We’ll keep you posted. And if you know anyone with two acres to sell in the Raleigh area, please let us know.
* At 20 years of service, my government pension would be based on the numbers of years I worked times 2. If I had fewer than 20 years of service, it would be based on the number of years I worked times 1.5. So 20 years of service entitles me to a pension equal to 40% of my final average salary (20 x 2). Had I left my job with, say, 19 years of service, my pension would be equal to 28.5% of my final average salary (19 x 1.5).