Paying off CDD's (Country Club, Venice, Laurel: for sale, real estate, how much)

[beach43ofus]

We bought a new home that has a small annual CDD bond of $1,000/yr.. It's a 30 yr Bond, so $30,000 if we pay it each yr for the next 30 yrs. Or, we could pay it all off today for $14,000.

The break even point is 14 years. So, if we stayed in this home for 14 years or longer, we would save money by paying it off today. If we pay it all off today, and then decide to sell this home within the next 14 years, we'd lose money.

If we sold early, our home would have an advantage over other homes for sale in our neighborhood since our CDD costs would be ~85% less than any other homes that are for sale since our Bond was paid off, and only the minor maintenance portion of our CDD would remain. Advantage us. All else being equal, we might even be able to get a slightly higher selling price since our Bond was paid off, so the property taxes shown on the real estate web sites and on our MLS listing would be much less than other comparable listings.

The home is in a Real Estate Trust in case that matters. We're debt free (aside from this Bond) and $14,000 is not a huge amount of cash to us.

I want to stroke the check and kill the Bond portion of the CDD. My wife and best friend both disagree.

We love our new home & community, and are currently planning to stay in this home for at least 8 years. What actually happens is partially due to things beyond our control. We're middle aged and healthy, but we won't be Middle aged and healthy forever.

Are there other factors I should be taking into account?

[bbronston]

Just my opinion but I think you are placing far more importance in the minds of buyers that a bond has been paid off than it deserves. ALL things being equal (and that never happens), sure...a buyer will choose a house that has a paid off bond over one that doesn’t but I have never seen a buying decision made on that basis. I don’t know about your CDD but usually the bond portion is the smaller side of the payment.

I wouldn’t say don’t do it but don’t expect that doing it will guarantee the benefits you envision down the road.

[twinkletwinkle22]

Most buyers will have no idea that a home has a CDD or not... until the annual bill arrives. You are not giving yourself any advantage to buyers. And it is very unlikely you will stay another 14 years, therefore your money went out the window for those later years.

You would do better to invest that money in a Vanguard blended mutual fund of 60% stocks/40% bonds and use that fund every year to pay your annual CDD. I'll bet you make a lot more money that way and by putting the $14,000 aside you can sleep well knowing it's covered in case of whatever happening.

[beach43ofus]

Originally Posted by bbronston

Just my opinion but I think you are placing far more importance in the minds of buyers that a bond has been paid off than it deserves. ALL things being equal (and that never happens), sure...a buyer will choose a house that has a paid off bond over one that doesn’t but I have never seen a buying decision made on that basis. I don’t know about your CDD but usually the bond portion is the smaller side of the payment.

I wouldn’t say don’t do it but don’t expect that doing it will guarantee the benefits you envision down the road.

Thanks for the info!

We must have an odd one because the maintenance portion is peanuts, maybe 15% of the Bond portion. the maintenance side of it can (and probably will) go up through the years.

[beach43ofus]

Originally Posted by twinkletwinkle22

Most buyers will have no idea that a home has a CDD or not... until the annual bill arrives. You are not giving yourself any advantage to buyers. And it is very unlikely you will stay another 14 years, therefore your money went out the window for those later years.

You would do better to invest that money in a Vanguard blended mutual fund of 60% stocks/40% bonds and use that fund every year to pay your annual CDD. I'll bet you make a lot more money that way and by putting the $14,000 aside you can sleep well knowing it's covered in case of whatever happening.

Thx for your thoughts!

The CDD gets added into the property taxes, so while a prospective buyer may not see the CDD line item, unless they ask for it, when they look at the property tax total paid in the Real Estate web site property history, they'll see it burried in that total amount shown.

This jumped out at me while I was home shopping this area on the Internet from up in Atlanta 3 years ago. The Venetian Golf & Country Club off Laurel Road looked nice to me on the web, even though I was trying to avoid a golf course community, until I started looking at the property taxes on the homes in there. They were crazy high. So high, I emailed the Venice Mayor and City Council asking about it. They explained the CDD's to me at that time, and that community has really high ones. So, the CDD did get noticed by me, and I did pass up on that community because of it. The golf course was the 2nd reason. Take a look at a few of the homes in there and what they are paying for property taxes+CDD's...it's astounding. I some some over $10,000/year. I think one was over $12,000/yr. No thanks!

[bbronston]

Originally Posted by Gulf coast jon

Sorry if it offends, but I think you are the epitome of what's wrong with America.

If your actions help you keep your wife, well OK.....

IF? Let me help you out here. It’s offensive to be described as being “the epitome of what’s wrong with America” and for such a ridiculous reason! How is paying off a debt what’s wrong with America? Here’s some more help...paying off one’s debts is not something to be considered as wrong.

[FireStation46]

Pay the grand as the bill comes due and invest the $14K

[beach43ofus]

Originally Posted by FireStation46

Pay the grand as the bill comes due and invest the $14K

Yeah, I think that's the route we'll take. I was badly outnumbered in my opinion to pay it all off lump sum by quite a few people whose opinion's I value, and some of them were right here on this forum, so thx for the help to those who replied, including you

I've had the Clark Howard & Dave Ramsay debt-free compulsion for 20+ years, and while it has served me well, it's not an absolute. This is our only debt, so I'll just learn to live with it. I'll take comfort in the fact that I can pay it off at any time w/o missing the money.

Now, I just need to figure out where to invest the $14,000.

[beach43ofus]

Originally Posted by Gulf coast jon

Sorry if it offends, but I think you are the epitome of what's wrong with America.

If your actions help you keep your wife, well OK.....

No offense taken whatsoever because your words have no meaning to me. I'm a very compassionate and sympathetic person, so I'll be praying for you to turn things around in your life, and find love and healing in your heart.

Now, back to the topic of whether or not to pay off the CDD, but I've pretty much made up my mind (with the help of my fellow C-D Forum pals) to just plow the $14,000 in with the rest of our after-tax fun-money portfolio. We're planning on using some of the gains from that portfolio to take one of Mike Huckabee's guided tours to Israel. That will be more memorable than paying off the CDD.

[motordavid]

Interesting thread...I am considering paying our CDD bond off on our EscapeWinter house.
The 'gains' on investing the ~ $13,000 are paltry, esp over the time frame, and not sure how much fun or spending any of us currently in our 70s will be having in a decade and a half to two decades.

I tend to feel that if/when I leave the planet and if my CEO wants to sell our winter house, that 'reduced cost' of taxes and CDD would be slightly appealing to prospective buyer, esp if similar house in our community had not done so.

And, the payoff dough is not going to make us miss lunch or really notice. And, I like the no debt angle too...
GL, mD