The Housing Downsize Challenge

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.

CountryRound Trip Airfare for TwoAirbnb Rental for a MonthFood, Entertainment, and SeightseeingCar Rental and GasTotal + 33% for Contingencies
Ecuador$1,556$803$1,500N/A$5,132
Vietnam$1,894$734$1,500N/A$5,490
Australia$2,526/$13,744$2.418$4,500$1,000$13,890/$28,810
Totals$5,976/$17,194$3,955$7,500$1,000$24,512/$39,432

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.

  1. Sell our Charlotte home next year for what we bought it for ($225K).
  2. Use the proceeds of the sale (roughly $210K) to build a house in the Raleigh, North Carolina, area.
  3. Build a small (1,200-1,400 sq. ft.) but quality house on at least two acres.
  4. 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.
  5. 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.

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* 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).

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19 Comments

  1. You have done some extensive research to make this happen. The real estate industry was on your side.

    I wish you luck with your dream. You will love Australia, to me it is unspoiled beauty.

    I have heard good things about Ecuador.

    • Mr. Groovy

      Hey, Michael. Thanks for stopping by. Providing we have a successful downsize challenge, we plan on visiting Ecuador in 2018. We’ve heard good things about Ecuador too. Apparently there’s a pretty strong expat community there. This should help us learn the ins and outs of Ecuadorian life fairly quickly. Australia should be awesome as well. I like your description of it as “unspoiled beauty.” The only thing that scares me about Australia is the flight. 25 hours of flying ain’t going to be fun. But who said the downsize challenge was going to be easy? Talk to you soon, my friend.

        • Mr. Groovy

          Hey, Michael. I’m with you. I don’t look forward to the 23 hours of flying. It’s going to be brutal. We flew to Italy a few years ago and the 9-hour flight was rough. Can’t imagine 23. I’m hoping sleeping pills or alcohol will dull the pain. As we near our Aussie adventure, Mrs. Groovy and I will definitely pick your brain. I’m sure you have plenty of tips and must-dos. Talk to you soon.

  2. My guess is that you will find great success in meeting your two goals, getting the future home you desire and having the means to travel extensively. You clearly have given it a tremendous amount of thought and most importantly, developed a comprehensive plan.

    A dream/goal is only the beginning … the development and execution of a plan brings it all to fruition.

    • Mr. Groovy

      Hey, James. Thank you for your kind words. And thank you for the encouragement. I love the way you summed up any challenge: “A dream/goal is only the beginning…the development and execution of a plan brings it all to fruition.” I’m definitely going to use that quote in the future (with an appropriate shout out to you, of course). And I’m very excited about the challenge. Mrs. Groovy thinks we can do it with a 1,400 square foot home. I think that’s too ambitious. I think we’ll have to go smaller (1,000-1,100 square feet). We’ll see. The plot thickens. Talk to you soon.

  3. I think when life gives you a break you should use it wisely and it looks like you did with your Long Island condo. I hear you on tiny houses. I couldn’t live in one. I’m living in a tiny college apartment right now while trying to finish my bachelor’s degree and I could never do this long-term. I would also like to buy land in the future just because I like space. Its very peaceful out in the country… =)

    • Mr. Groovy

      Hey, Jaime. We were definitely humbled by our condo sale. My biggest fear was that we would use our windfall foolishly. Two things definitely helped us, though. Mrs. Groovy and I aren’t materialistic by nature. I’ve never been a car guy, and she’s never been a jewelry, shoes, and clothes gal. We also, thanks to Dave Ramsey, discovered the perils of debt before we sold our condo. And I agree with you wholeheartedly about tiny houses. I think they’re fascinating. And kudos to anyone who has the psychological temperament to handle one. Mrs. Groovy and I just need a little more space. Our Long Island condo was 600 square feet. That worked, but it was pushing it. When we first moved down to Charlotte, we had a two-bedroom 900 square foot condo. That was fine. So as long as our future home is at least 900 square feet, we’re good. And the peacefulness of the country appeals to us too. Mrs. Groovy is even considering getting some chickens once we complete the downsize challenge. Thanks for sharing, Jaime. And hang in there with your apartment. There will be more space in your future soon enough.

  4. I love this post! Real estate and housing has been berry good, because you both have been very smart with your money. I definitely think keeping your eye on the prize of traveling and seeing how it really is within reach should absolutely underscore what an awesome decision you made. Keep us posted!

    • Mr. Groovy

      Hey, Penny. Will do. Mrs. Groovy is determined to build a 1,400 square foot house. I don’t think we can go that big and still achieve our travel goals. I hope Mrs. Groovy is right. I will give her this, though. She is willing to do unconventional things to lower our building costs. For instance, she came across a homebuilder featured in Southern Living who did his ceilings with corrugated metal. It saved this homebuilder a lot of money and looked great (if you’re into that industrial chic look, that is). She’s also open to things such as concrete floors and no upper cabinets in the kitchen. So we’re going to give it the college try. Thanks for the encouragement.

  5. Wow — nice work with the lucky housing market timing! Good luck making the numbers work on your new home and sale of your current home. Though, as a person who flies constantly and knows the value of an upgrade, I say save your money on the tickets to Australia. Instead of investing $11,000 extra in about a day of flying, invest $11 in some sleeping pills that will zonk you out for the flights, and spend the $10,989 in something you’ll get more enjoyment out of. 🙂

    • Mr. Groovy

      Hey, ONL. Yes, we were extremely lucky. The one-bedroom units in our building went down to about $190K in 2009. They started coming back to the $230-240K range when Sandy hit. Our unit was on the first floor and every first-floor unit got totally destroyed. If we stayed on Long Island, we’d be a lot poorer and probably homeless. And Mrs. Groovy totally agrees with you about foregoing the business class seats to Australia. She said with your sleeping pill idea and a few extra days tacked on to the trip to aid our recovery time, we should be able to manage. Thanks for stopping by. And thanks for the sleeping pill idea. It makes total sense.

  6. The Long Island sale was golden. I think you could get it done for $150, depending how far from the city you build.

    In 2006, I was getting desperate to buy a house. Some how, it didn’t work out, I waited until September 2007, the price drop some. Had I waited for another 9months to 2 years, I could have gotten some serious deals.

    Regardless, my house has been an income generating triplex. Everybody has to travel their journey.

    Best of luck!

    • Mr. Groovy

      Hey, Vivivianne. Thanks for stopping by. Yes, we totally lucked out with our Long Island condo. I don’t suppose I’ll see anything like that again in my lifetime. We bought our current home early in 2008. Things were still pretty good in Charlotte back then. Our housing market didn’t crash until after the Lehman Brothers bankruptcy. Mrs. Groovy and I plan on putting our house on the market next year. I doubt we’ll get what we paid for it. But that’s the way things go with real estate. It’s a fickle beast. Thanks for the kind words. And nice job on your triplex.

  7. We downsized a few years ago from a 3,800 sq ft waterfront house to a 2,100 sq ft townhouse —- and haven’t had a single regret. The TH is totally paid off, no more yard work, no more exterior maintenance, and if we want to travel we just lock the doors and go. Downsizing has been great for us – hope it is for you too!

    • Mr. Groovy

      I love it, Brad. Townhouses are a great option. Like you said, no yard work, no exterior maintenance, and when you travel, you just lock the doors. How awesome is that! I’ve floated idea of a townhouse past Mrs. Groovy, but she vetoed it. She grew up in apartments and is steadfast against sharing walls with neighbors again. But she has agreed to a small house (1200-1400 sq. ft.). So we’ll definitely find ourselves in a smaller home next year. Thanks for stopping by.

  8. You’ll have a fabulous time! I agree that I’d rather have an extra $10K than a business class flight, even if you stay an extra day and to get over your jet lag. I’m not a good plane/train sleeper but have found that wearing sunglasses helps since I don’t like being totally blinded by a sleep mask, and these earplugs are the BEST. http://amzn.to/29Bgldo . They also come in a pink women’s version that is a little smaller and more comfortable for me.

    • Hey, Julie. Australia and Vietnam are our dream vacations, but we’re really not looking forward to 24 hours on a plane. But with sunglasses (didn’t think of that), earplugs (didn’t think of that also), and alcohol (I thought of that), we should muddle by. Thanks for stopping by. And thanks for the great tips. I really appreciate it.

  9. Coincidentally, I just posted on a related topic. We live in a 1,400 sq ft home along with our twin toddlers. Life is grand when you realize all the benefits of living in a smaller home. Having our kids share a bedroom isn’t the slightest inconvenience for them – it’s all they’ve known, and they’ll appreciate the many fun travels we’ll be able to afford in return.

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