My wife (age 34) and I (35) plan to build on and move to an acreage in 6-10 years. We have five children all at young ages and we currently enjoy the neighborhood life, but think long term we would enjoy an acreage to build our “forever home”.
We like the idea of owning the land for several years to groom in, plant what we’d like, and have several years to establish and make improvements while we continue to live in our current home.
We’re closing on the acreage in the middle of June and have been going back and forth on how to pay for it. Currently, the plan is to liquidate ETFs in our taxable account to pay cash, as it appears borrowing rates for “secondary non permanent residency” would be around 7-8%.
Our current investments have been averaging around 8-9% cumulatively over the last 7 years (found bogleheads forum in 2018 when I really started tracking porfolio). While averages would be in our favor to borrow the money, a safe 7-8% savings by paying cash seems like the safety of locking those savings in might be worth it.
A rough idea of our finances:
Current home financed at 3.25%
Value $600,000 conservative estimate
Balance $225,000
His
Roth IRA $55,000
Taxable account $1,092,000
401k $279,000
Advisor managed taxable account $80,000 (good friend/client of mine but haven’t added to this since 2018 and left balance with him)
Hers
Roth IRA 72,000
Cash in bank $140,000
The accounts above all combine for an asset allocation of:
44% s&p500 or total market index
15% us small cap value index
20% international markets
8% real estate
13% bond
The property we’re purchasing is $450,000 and I would conservatively expect roughly $70,000 we’ll have to spend to buy equipment needed to begin improvements totaling $520,000.
The plan is to use our cash on hand (leave a few months of expenses) and sell out of taxable the remaining amount to pay for the property in cash. My income (wife stays home) is roughly $400,000 annually. I realize that selling taxable will have capital gains to deal with next year. I have quite a bit of losses carried forward that will cover some of those gains.
I understand how to choose which lots to sell will create the least tax consequences.
My question is whether we should be considering financing some or all of the purchase? Or if paying cash and taking the safe 7-8% is the better idea? Lastly, do we take the value of this acreage and include it at all in our asset allocation (maybe consider this an alternative to bond or REIT?) or just consider it like a dwelling and exclude it from our asset allocation (which currently I do not include our dwelling in our asset allocation).
Thanks for any insight!!!
We like the idea of owning the land for several years to groom in, plant what we’d like, and have several years to establish and make improvements while we continue to live in our current home.
We’re closing on the acreage in the middle of June and have been going back and forth on how to pay for it. Currently, the plan is to liquidate ETFs in our taxable account to pay cash, as it appears borrowing rates for “secondary non permanent residency” would be around 7-8%.
Our current investments have been averaging around 8-9% cumulatively over the last 7 years (found bogleheads forum in 2018 when I really started tracking porfolio). While averages would be in our favor to borrow the money, a safe 7-8% savings by paying cash seems like the safety of locking those savings in might be worth it.
A rough idea of our finances:
Current home financed at 3.25%
Value $600,000 conservative estimate
Balance $225,000
His
Roth IRA $55,000
Taxable account $1,092,000
401k $279,000
Advisor managed taxable account $80,000 (good friend/client of mine but haven’t added to this since 2018 and left balance with him)
Hers
Roth IRA 72,000
Cash in bank $140,000
The accounts above all combine for an asset allocation of:
44% s&p500 or total market index
15% us small cap value index
20% international markets
8% real estate
13% bond
The property we’re purchasing is $450,000 and I would conservatively expect roughly $70,000 we’ll have to spend to buy equipment needed to begin improvements totaling $520,000.
The plan is to use our cash on hand (leave a few months of expenses) and sell out of taxable the remaining amount to pay for the property in cash. My income (wife stays home) is roughly $400,000 annually. I realize that selling taxable will have capital gains to deal with next year. I have quite a bit of losses carried forward that will cover some of those gains.
I understand how to choose which lots to sell will create the least tax consequences.
My question is whether we should be considering financing some or all of the purchase? Or if paying cash and taking the safe 7-8% is the better idea? Lastly, do we take the value of this acreage and include it at all in our asset allocation (maybe consider this an alternative to bond or REIT?) or just consider it like a dwelling and exclude it from our asset allocation (which currently I do not include our dwelling in our asset allocation).
Thanks for any insight!!!
Statistics: Posted by 3D12 — Thu May 09, 2024 12:48 pm