Thinking about moving to St. Augustine from NJ (Jacksonville: insurance, mortgage)

[gjkoenig]

Hello,

My wife and I are thinking about moving to St. Augustine from NJ in about 4 years. I inherited the house from my Mom, which we were living in at the time of her passing that included a reverse mortgage we had to pay off. We were not in the financial shape or family situation back in 2010 to sell and move, so we became stuck with our own mortgage that won't be paid off until I am around 76, which would be impossible to do financially. Staying is impossible, where we have no choice to take the equity and get the hell away from paying the high property taxes and downsizing into a SFH as opposed to our current 2-family with an additional mother-daughter unit, costing over $14k/yr in property taxes, $2k/yr heating oil, etc. We are tired and fed up with NJ - have nothing left over after paying the mortgage, sick of the cold, summer is barely 3 months, really bad roads, increase in traffic (I know as I have lived here all my life), rude people, and the list goes on.

We have a fair amount equity in our current house and would be looking to purchase a SFH outright for about $200k when the time comes (2 kids half-way through college), which should leave us with ~$100k for moving expenses, new furniture, savings. I am currently 54 and working as a QA Manager and would be looking for work in a similar role while living there. My hope is to be able to save and contribute more into my 401k from the benefit of having no mortgage and lower property taxes. We have almost no retirement savings as we have tapped that well dry a couple of times trying to keep the house - long story.

I concluded that it is time we start looking to the future and ending this nightmare. I have been doing a lot of soul searching lately and can say that the logistics of moving is quite overwhelming in addition to the thought of retiring, as we would be more vulnerable financially once I can't work full time.

I guess we could throw a dart at the map of the US to go somewhere, but we both love the St. Augustine area and have been there many times through the years. Our former tenants actually moved there a few years ago and are very happy. We worry if S.A. would be the best choice, as I need to be close to an area to get a job (Jacksonville area), but yet be comfortable/affordable enough to eventually retire. There are many positives to S.A. as we love the water/beach, tourist areas, reasonable proximity to Disney, warm weather. I guess I need to be convinced not to move to FL - I did recently order a Florida Move book to explore the cons. We would definitely explore the S.A. area before deciding, but have no desire to be anywhere but FL.

Does this all sound like a recipe for disaster? I would hope that owning a house outright would just leave us with the normal expenses (property taxes, electricity, water, insurance, pest control) but I just don't know what that would cost. I would appreciate any tips, suggestions to aid in our search.

[minna_reid]

I don't see why this is a recipe for disaster, but if you are looking for work, you may want to make some headway with that before you arrive. Also St Augustine is not really a reasonable commute to most anywhere in Jacksonville, especially with traffic.

[ShakenStirred]

Originally Posted by gjkoenig

Hello,

My wife and I are thinking about moving to St. Augustine from NJ in about 4 years. I inherited the house from my Mom, which we were living in at the time of her passing that included a reverse mortgage we had to pay off. We were not in the financial shape or family situation back in 2010 to sell and move, so we became stuck with our own mortgage that won't be paid off until I am around 76, which would be impossible to do financially. Staying is impossible, where we have no choice to take the equity and get the hell away from paying the high property taxes and downsizing into a SFH as opposed to our current 2-family with an additional mother-daughter unit, costing over $14k/yr in property taxes, $2k/yr heating oil, etc. We are tired and fed up with NJ - have nothing left over after paying the mortgage, sick of the cold, summer is barely 3 months, really bad roads, increase in traffic (I know as I have lived here all my life), rude people, and the list goes on.

We have a fair amount equity in our current house and would be looking to purchase a SFH outright for about $200k when the time comes (2 kids half-way through college), which should leave us with ~$100k for moving expenses, new furniture, savings. I am currently 54 and working as a QA Manager and would be looking for work in a similar role while living there. My hope is to be able to save and contribute more into my 401k from the benefit of having no mortgage and lower property taxes. We have almost no retirement savings as we have tapped that well dry a couple of times trying to keep the house - long story.

I concluded that it is time we start looking to the future and ending this nightmare. I have been doing a lot of soul searching lately and can say that the logistics of moving is quite overwhelming in addition to the thought of retiring, as we would be more vulnerable financially once I can't work full time.

I guess we could throw a dart at the map of the US to go somewhere, but we both love the St. Augustine area and have been there many times through the years. Our former tenants actually moved there a few years ago and are very happy. We worry if S.A. would be the best choice, as I need to be close to an area to get a job (Jacksonville area), but yet be comfortable/affordable enough to eventually retire. There are many positives to S.A. as we love the water/beach, tourist areas, reasonable proximity to Disney, warm weather. I guess I need to be convinced not to move to FL - I did recently order a Florida Move book to explore the cons. We would definitely explore the S.A. area before deciding, but have no desire to be anywhere but FL.

Does this all sound like a recipe for disaster? I would hope that owning a house outright would just leave us with the normal expenses (property taxes, electricity, water, insurance, pest control) but I just don't know what that would cost. I would appreciate any tips, suggestions to aid in our search.

I'm going to give you some advice I wish somebody would have given me about 7 years ago that my ego probably would have prevented me from taking, lol.

Do NOT, I repeat, DO NOT, pay cash outright for your home. Interest rates are way too low to do that right now. I hesitate to divulge too much personal info for obvious reasons, but my specifics will give you some definite food for thought....

I bought a lot at the beach for $320k. I paid cash. I built a home on that lot for $280k. I thought I was a big shot paying cash for all that, plus my vehicles and my previous home...all cash. I was STUPID!! Try to follow me here:

Interest rates are only around 3% right now on a mortgage. You can easily make a safe 6-8% on investments in dividend paying preferred stocks. As it stands, I don't really play it that safe, and my portfolio yields around 13.5%, but I don't recommend that unless you can afford to lose it. I'm very risk tolerant. I have all kinds of other high yield investments (MLP's, REITs, CLO's, etc.) that are in the upper range of 15 to 20%+ yields. However, a 6.5% return can be safely and comfortably had, and there are some investments that pay you monthly dividends, not just quarterly or annually.

So here I sit, on a beautiful piece of property with a beautiful home, with no cash flow coming in from all that money I put out for it. The classic "house rich cash poor" situation. What I should have done is put down the minimum possible, and invest the rest to generate passive income for myself and my family. Once I realized this, I decided to fix it, and go to the bank and take out a big fat mortgage so I could invest at a higher rate and make money off the money. Well guess what? My credit score was in the 400's because I had no credit at all! They wouldn't loan my one red cent. I remember getting all worked up and yelling at the President of the bank, "You mean because I've been responsible all my life, have a very sizable investment portfolio and paid all my bills off in cash, don't owe anybody anything and I'm getting penalized for it?!!!"

His answer: "Yes."

I got up and walked out. I was fuming. But, it was my own fault, and it was an eye opening lesson. Since then my #1 financial goal was to build a credit score, and I am 4 measly points away from an excellent rating, which is very hard to achieve without a mortgage. Once I have it, I'm going back to the bank (maybe not the same one, lol), taking out as much money as they will possibly loan me, and I'm going to invest 2/3 of it into monthly paying preferred dividend stocks, and the other 1/3 I'm going to use to make improvements to the home. The investments will be more than enough to make the mortgage payment, with extra left over each month (adding to my cash flow), and I'll have a nice house and yard to boot!

Borrow at 3%, invest the difference at around 6-8%, and make money off the banks money. It's called leverage, and it's how the wealthy people get wealthier! It's also how broke people eventually get wealthy, it just take more time.

And oh yeah, start a Roth IRA asap! At your age you can contribute $7k per year for you, and open another for your wife (spousal IRA), where you can contribute another $7k. This will be tax free withdrawals for you when you retire, and the money can be accessed after you've owned the account for 5 years. Also, no minimal withdrawals at a certain age, and you can leave it to your kids as well.

I hope some of this info helps you in some small way.

SS