Now what? (Opened a can of worms)

[catherine]

So, as some of you know, here is my situation:

Drowning in debt (I'm embarrassed to say how much)
Have about $100k equity in my home in NJ
BIL lives next door in paid-for house left jointly between him and DH (market value about 350k)
This is a GREAT place for a family, but very expensive. We've raised our family here.
I've always SAID I'd be more than willing to leave, but I'm tied down (oops--Freudian slip--I originally typed "died down") by my DH and DBIL who are much more resistant to change



So, that is all changing. DBIL is very frustrated by the cost of home-ownership even though the house is paid for and we don't charge him rent (he has a menial job).

DH is finally getting it that we are HOUSE POOR until our debt is paid, and he also finally understands that the kids aren't interested in the house (I tell him, you can't just keep a house as a souvenir like a charm on a charm bracelet)

We are actually IN CONVERSATION about moving!!!! Kind of calls my bluff on my own emotional attachments to this house.

So, here's what we kind of are thinking:

Somehow joining our resources seems to be in the best financial interest for all. Multi-family, guest cottage--even two very small condos side by side might work (although DH has always been against condo living)

DBIL has always wanted to live on a beach or near a beach in a nice climate. Doesn't have to be Florida--it can be simply milder, like NC/SC/GA.

We all feel it would be best for AH and I/DBIL to have some separation--our own living quarters/kitchen.

I, no matter what, want to spend half the year in the NE. My family is here, my roots are here, and I love this part of the country.

So, even though I said I would NEVER move to Florida and be a snowbird, that might make the most financial sense. My brother and SIL, who I love and who I'd love spending more time with, have a small condo in Palm Beach. So I'm thinking, get two very small condos near my brother. BIL gets his beach, DH gets his dock, I get my brother. I'm thinking Boynton Beach which is 20 minutes from Palm Beach but a heck of a lot cheaper.

Another option is to live in a more temperate residential area (think Research Triangle Park/Raleigh/Savannah/Charlotte) and get a nice single family house with fenced in yard for our dogs, and we can either buy a house with an in-law suite, or get a house with easy expansion possibilities.

If I were to choose all by myself, I'd get a small place in Ocean Grove, NJ. DH could be convinced to do that, but not BIL, who thinks NJ is too cold, and we need his share to buy a house there, as it's not cheap to purchase on the Jersey Shore. Of course, we could just split up the proceeds of his house and he can do his thing and we can do ours, but from a purely financial standpoint it's better to pool our resources.

Or we just stay and tough it out at our current address. At the end of the day, I am very comfortable here--20 minutes from one son, and a car ride (albeit a long one) to my other kids. But it comes down to, do I want to spend my life energy in the twilight of my life for this house?

Any thoughts, from a simple living perspective??? My head is spinning.

[Tammy]

I would never pool resources with anyone ... It's asking for all kinds of trouble later on.

[ApatheticNoMore]

And no thoughts of moving to Vermont? Isn't that where some of your kids are? (or am I mis-remembering?) And you kind of want to move there anyway? Don't know if 100k will get you a place there, but a smaller mortgage than NJ right?

[iris lilies]

I'm glad you may be able to break the gridlock of this New Jersey house. The cost of your real estate taxes must be astronomical and that's just money down the drain. If you move to a southern state, your taxes will be low and you would recover at least the cost of your own health insurance, if not the cost of your entire health insurance package.

I don't accept the premise that you need your BIL's money. You really need to look at that analytically. My responses below do not consider your BIL in the mix. He is a grown up man, he can make his own decisions.

Your #1 job now is to retire the debt. Get. Out. Of Debt. I don't know how much you are paying into serving your debt, but it's got to be a chunk. You could be putting that amount away in savings.

But now is the time to put your money where your mouth is, as you've said.You've mentioned that you would be happy living in a Tumbleweed house, well--do it. Metaphorically. Take the simplest route to your housing that is humanly possible, and to me that means renting in a low Cost of living area. That is NOT new Jersey. And hey, it's not buying a beach house either. Christ on a cracker, don't you think all of us here would like a house on a beach!!???? (by the way, buying a Tumbleweed house is just one more example of spending money foolishly, don't do it.)

In your position I would do these steps in this order:

1) sell all real estate, the "stuff" in it, and maybe even 1 car--put toward the debt
2) rent a SIMPLE place until the debt is complete paid off. Throw all of you money toward debt--no eating out. No handing money to children, no new business ventures that require cash outlay & etc. Would that be 2 years? Then
3) rent 2 more years while saving cash to buy a simple house--you should have $50,000 - $150,000 saved by then
4) buy simple house (financing some of it) at a cost of no more than $150,000, continue to work for 2 more years, saving nest egg
5) retire, or if you can stand it, work a year or 2 to build up cash reserves--this is the home stretch so you can do nothing, can do part time, can go whole hog--it's up to you

This is not about where you or your husband "want" to live it's about what the two of you can afford.

You are both creative people, it seems to me, so exercise your "creative" muscles. Any fool can throw money at a solution, but it takes brains and creativity to find the low cost/no cost options.

I realize that you have dogs, so renting may not be easy. And I asusme that you would find a market where renting is cheaper than buying, that's not always the case. Somewhere in this timeline you and your husband both can take Medicare, so that will ease your health insurance bills and will free up money to put into the cash pot.

[iris lilies]

While I wouldn't spend a cent more than $1,000 monthly for rent, this place is damned posh for under $1500/monthly and it accepts dogs, and wouldn't the doggies love it! Gads, it's pretty, with a patio overlooking the river. Now I want ot move there.

http://burlington.craigslist.org/apa/4630307413.html

[catherine]

Thanks, all!

Thanks, IL, for the step-by-step for me. Actually, if we cashed out on both houses, I would be debt-free, so that cuts off two years right there.

And I LOVE the Winooski place! Winooski is becoming more up-and-coming because Burlington is kind of expensive now. But Winooski is turning into a nice industrial-funky-cool town now, kind of like parts of Portland.

The reason I was dragging my BIL in on this was that if we cashed in and lived together, we could liquidate all debt and pay for a house in cash. But I understand the point about going in with people on stuff.

We'll see what happens. iris lilies, you could EASILY be Dave Ramsey's sidekick. I love Dave Ramsey because he's so no-nonsense, and so are you. I love it.

[sweetana3]

Read http://www.frugalqueen.co.uk/. She had high consumer credit card and overdraft debt and a big house. They got the message that this was not the life they wanted and you can read just what they did to pay it all off. She now lives in a small townhouse in a Cornish town and really enjoys debt free living. Her blog has tabs for getting debt free and then daily posts on frugal but interesting living ideas.

[razz]

Extended family and finances never, never mix!!!!! Hard experience speaking so cash out and give DBIL his half and your and your DH plan your life wherever you finally jointly choose. As another poster has said, let DBIL live his own life.

[JaneV2.0]

Finances aren't exactly my strong suit, but I agree you and your husband need to find the best place for you. That will probably be challenging enough without unduly worrying about your BIL. I must stifle a giggle thinking about "downtown Winooski" (that bustling metropolis), but I have to admit the visuals are convincing.

[Tammy]

I like the idea about renting. It keeps your options open while figuring things out. As soon as you retire things will shift again.

[iris lilies]

Well OP, you've got a huge advantage over many people because you can earn a living while living anywhere. So if you can sell you house(s) and pay off debt, it's a no-brainer to do so. But part 2 has got to be to stay out of debt, to save money. Curbing the spending is key.

Good luck.

[larknm]

I perked up most at the idea of living in the cheaper town near your brother and his wife because you love them and would love to spend more time with them. That counts for so much to me.

[Teacher Terry]

The advice you have been given is good. The only thing I would do different is I would buy a small house or condo. As a pet person myself it is quite difficult to rent with pets. But I would either pay cash or have a very small payment. It sounds like you have a great opportunity to change your circumstances given all your home equity. I also would figure out what you bring in each month, your expenses and trim as needed.

[ToomuchStuff]

Let's say you sold your house and forced the sale of the other to get your equity out (or made your BIL get a mortgage and buy you out), that gives you $275,000. Figure if you paid all your debt, how much would you have left?
Where could you buy a house in that price range, and work (whatever fields your in)? How far from family?

Also, did I read a Freudian slip, or are you made at your husband? You go from using DH, to AH and I read it with two s's, after the A.

[catherine]

Well OP, you've got a huge advantage over many people because you can earn a living while living anywhere. So if you can sell you house(s) and pay off debt, it's a no-brainer to do so. But part 2 has got to be to stay out of debt, to save money. Curbing the spending is key.

Good luck.

Thanks! You're right, of course. It does seem like a no-brainer.

In my defense, 75% of the debt is directly because of the recession and the untimely manner in which we bought the house next door for MIL, leaving us with two houses and a big mortgage which we PLANNED on getting rid of immediately after they moved (you know what they say, man plans and God laughs).

I had a choice along the way to just let the house with the mortgage go to foreclosure, but instead I didn't want to blow my credit so I paid the $3000 every month (we did rent the house out for a couple of years, which covered about 80% of the mortgage), thinking that eventually the housing market would rebound. That $3000 was money that should have gone to Uncle Sam. I thought that once the house sold, and we made the money back it could all go to paying the taxes I was not paying.

We finally cried uncle last year, and when we got the only offer we got at $390,000 we took it. We wound up with a check for $4000. No money to pay the tax man. Yesterday I did the really stupid thing of just checking its market value on Zillow for the fun of it. No fun. Since the spring of 2013, the market value has gone from $380k to 530k. I wanted to cry.

The other 25% of the debt is student loan debt I pledged for my daughter and DH business debt he can no longer pay because he has no income.

My car is 7 years old and paid for. I haven't bought a stitch of clothing all year. I've gotten one haircut at a cheap chain salon. I don't eat meat. I don't buy furniture. I'm patching sheets. I wash my hair using the little bottles of shampoo I get from hotels on business trips. Believe me, my debt is not from shopping at malls.

We do go out to eat twice a month at a BYOB restaurant and the bill is $31 for two (this is our splurge). My discretionary spending is one cheap bottle of wine a week from TJ and a subscription to Ancestry.com. I've stopped giving money to kids. My past sins were all about giving money away to family members (not just kids, but in-laws, brothers, and husband) when I shouldn't have--I'll admit it. I probably shouldn't have upgraded the kitchen last year, but I did so thinking that if we got the point where we now are (considering selling), I wouldn't have the same experience I had with MILs house where the feedback from potential buyers was that they had to do too much to it--it was too old-fashioned. I do think that upgrade increased the value of the house at least by the amount of money we put into it ($11k).

Anyway, got to move forward and not look back. Like Scarlett said, "If I look back, I'll go crazy. Tomorrow is another day."

TooMuchStuff, if I paid my debt with the equity from both houses, I'd have probably about $90-100k left.

[rosarugosa]

Catherine: I agree that a house on the beach is not the wisest course, but if you do decide to go in that direction, please do some careful research into flood zones and HO insurance costs. They recently revised the flood zones in our area, and we're hearing of drastic insurance cost increases. DH knows of someone whose HO insurance is going up by $2000 per month - crazy!

[catherine]

Catherine: I agree that a house on the beach is not the wisest course, but if you do decide to go in that direction, please do some careful research into flood zones and HO insurance costs. They recently revised the flood zones in our area, and we're hearing of drastic insurance cost increases. DH knows of someone whose HO insurance is going up by $2000 per month - crazy!

Thanks, rosa, while living on the beach at some point in my life is not out of the question, it is high unlikely I'll do that by buying. I did enjoy renting in the off-season--that's the cheapest say to do it. Anyway, first things first--and you raise a great point about homeowner's insurance in flood zones. I hadn't thought about that.

[iris lilies]

OP, it does sound as though you've got spending under control, so that's great!

[rodeosweetheart]

"TooMuchStuff, if I paid my debt with the equity from both houses, I'd have probably about $90-100k left. "

Then I would sell both houses, disconnect my fortunes from those of my DBIL, as this was part of the problem in the first place.

I would NOT look at buying property with him--I would seek to get out of situation I am currently in with him.

As to DH, I would consider, after we got rid of both houses, where I wanted relationship to go in future. I would seek to be out from under both houses, sad as it would make me to leave the family house. But it sounds like maybe you are emotionally ready to do that, for very solid financial reasons?.

Sorry if this sounds mean in any way. I just think you cannot go on trying to make these decisions for 3 people when 2 of them are not holding up their end? Obviously, YMMV!
And yes, HO insurance on an island is horrible--ours was supposed to go up to 5000, but that was annually, but it was more than we could afford. But you don't have to live on a beach to go to the beach--am a big fan of real estate in both FL and SC. If you feel happy at the thought of Boyton Beach, I would consider that. Don't know about affordability of Ocean Grove.

But don't you have to keep working for all this to work? Would Vermont be better for that? Airfare to NY is terribly pricey from SC, GA, and probably quite pricey from FL when you cannot plan it far in advance.

[pinkytoe]

Hmmm...I don't know your neck of the woods at all so hard to advise on that part. When I ponder moving, I think the most "sensible" thing to do is get rid of a lot of stuff and rent in a more affordable locale where you think you want to end up. Perhaps any monies should not be invested in a house at all but split in half and each party go their separate way. You could then invest that money until such time as you have saved enough to buy again if you decide to settle down in one spot. I may have missed this in the story, but does your DH work and if so, how would a move affect his emplyment? I have certianly made my share of money mistakes but one thing I have learned is not to do business with family or friends.

[Teacher Terry]

It sounds like you are being as frugal as you can be & don't give up the very few things you do as minor splurges-you need these for your sanity. It does sound that you need to sell the house & get rid of the debt. WE made a few bad moves with real estate ourselves in the past & it was not fun to dig out of. Also many unexpected things can happen that can devastate you financially & huge medical bills are one. I wish you the best of luck:))

[ToomuchStuff]

Owing the tax man, I would be selling both houses and making sure that is all paid off. They could be used as the excuse, since they could force it anyway.

[citrine]

New Jersey is just expensive! The cheaper places are awful, congested, and scary! I am glad that you are looking into leaving NJ....our plan to escape is in the next 3-4 years to New Mexico :) My husband and I came up with a list of our must haves and then broke it down from there....NE is too cold, South is too humid, Forget the midlands, and California...Texas makes me nervous...left us with NM! I also agree that you need to cut all financial ties with BIL...work with your husband to create the retirement life that the two of you want...not for the kids or the BIL. Also, 11K for a kitchen remodel in NJ is awesome and you will definitely recoup that in the sale of the house :)