Second in a series of woulda shoulda couldas. Picks up where the last post left off.
Two Story vs. One Story
To get the large square footage we sought, he had to opt for a two story home. This is fine assuming youth and health. Stairs are problematic. They present a constant hazard to infants and toddlers early in parenthood (not to mention primary school kids who insist on wearing socks on hardwood as they race downstairs). Just when your kids are old enough to stop worrying you, aging parents visit with bum knees or on anticoagluants that make stairs hazardous all over again.
We mitigated the two story issue as it pertains to us by choosing a home where our bedroom and living spaces (kitchen, etc) are on the entry level, so an injury would still allow us to inhabit the important parts of the house with relative ease. But I still watch my parents like a hawk each time they descend the stairs.
My current disillusionment can be partially attributed to recency bias. I just watched someone I love become a widow in an enormous home with constantly erupting maintenance issues. Pending adjacent construction may mean that the optimal time to sell is within the coming year.
I worry about the ability to handle change deteriorating over time. As with many couples, a significant degree of codependence had occurred, and the loss of one half of the couple has disrupted a longstanding distribution of labor. More than just logistics, couples tend to specialize in what they do best, and over 50 years this transforms into one person handling all the home maintenance. When that person passes, their counterpart has to take on a job they've no idea how to perform. Out of town kids mean no shoulder to lean on.
Emotionally, there's a chance she could be ready within the year. Logistically, it's unlikely. She has thousands of square feet of possessions to sort through, and bristles when we mention professional decluttering and downsizing services.
Memories and stuff lie deeply entangled on every shelf and in every closet. The task is so overwhelming that it seems preferable to ignore it. Downsizing means looking through things. There are too many things. Downsizing means choosing what stays and what goes. Her husband became a prolific artist after retirement, and his art takes up significant space, so rather than accepting a need to part with some his creations, why not just ignore it?
Home Selling Fantasies
We love our area. This morning I went bodyboarding at a local break in perfect sunshine with glassy conditions, and as I sit here I'm enjoying a cup of coffee with the Pacific breeze at my back.
I'm all for a buy and hold strategy in a community you love, but that's different than endorsing holding onto a too big home for the long haul. Lots of folks here like it so much that they only depart horizontally and under duress (by casket or ambulance). They come for the schools, as we did, and then they stay forever. Still, California's high cost of living means a significant part of our equity is tied up in the house.
By net worth numbers alone, conservatively assuming our home is worth only what we paid for it 9 years ago, we're at 32 X desired annual expenses. Yet if I look at invested assets excluding our home, we're at 24 X. That's still enough to meet the FI requirements of the 4% rule, but it underscores how a ridiculous third of our equity is tied up in our home. Passive Income MD wrote about this conundrum last year, and Physician On Fire teased several of us about it . In California, many of us reach FI as soon as we decide to move. You really can check out any time you like, but few ever leave.
All of which leads me to my recent preoccupation: home selling fantasy scenarios. There are three potential scenes I like to play out. Option one is the spontaneous conversion, where my wife has a sudden, inexplicable change of heart and we jointly decide to right-size to a smaller completely paid off home in the same community, freeing up additional equity we use to eliminate our mortgage in a single lethal blow. Our kids never change schools. The smaller house means we no longer need help to clean, I become a halfway decent cook and jump into my stay at home dad role. My wife and I leave medicine, pursue our second act passion careers, and ride unicorns into a rainbow sunset.
Option two, the reality-based and most likely scenario, is that I continue to work until we are empty nesters sticking with my glide path, which has eliminated burnout (but not nightshift dread and next day grumpiness). We wait until our nest empties and rent out the house for a year, with the hope that I can persuade my wife to sell (assuming a decent market) and either down size or become renters spending 6-9 months locally and 3-6 months abroad in our next phase of location independent work. It's 5 years later, but we leave medicine and exclusively pursue our second act passion careers.
Option three is a variant of option two, identical up until the nest empties. We then purchase two adjacent townhomes in a walkable beach city nearby, living in one townhome and cash-flowing the unit next door as an airbnb property. When our children or guests visit, we block out those dates, maximizing cash flow on empty rooms. When we travel for 3-6 months, we airbnb our unit as well with a property management service to continue earning while we employ geographic arbitrage to our advantage.
All these fantasies are about taking equity out of our home and using the freed up cash as a buffer. It's equal parts anxiety regarding my nest egg as I reduce my medical career (and corresponding income) and genuine regret that I didn't optimize such a large expense.
We Should Have Bought Less House
When we first moved in, we were looking at dining room tables when a friend of my wife's came to visit. We showed him the elongated models we were looking at that could seat 12 at our fantasy future dinner parties, figuring he'd been a homeowner several years longer and could offer his counsel. He told us we needed to be looking at smaller tables. His words: "95% of the time it will be just the four of you at dinner, so it makes no sense to spend a lot more for a table suited to the 5% events."
At that point we'd already bought a house that could accommodate the 5% events. Had we wanted a forever home, a smaller single story place would have sufficed.
Our home checks all our other important boxes. It flows well, required minimal updating, and had low landscaping costs thanks to strategically placed fruit trees. Our kids get a great public school education, and we love the neighborhood and the proximity to the Pacific.
The larger size is the home's Achilles heel. It means high maintenance costs, recurring cleaning help costs, and a lot of space sitting idle. A master, a bedroom for each kid plus a shared office/guest room would have more than met our needs 95% of the time, and the money we'd have saved could have been used to put up any visiting friends or relatives who required more than the guest bedroom up in a nicer than average hotel nearby.
Caveat emptor (buyer beware).
Financial Literacy for The Newly Minted Physician