Paying Cash For Your House?

[Magic Marker Minis]

If you had the money, would you pay cash for your house/farm? I'll soon be in the position to (possibly) buy my own house/land/farm. I'm 61 and my rationale is this:

1) No monthly mortgage payment and no more $1,000 (or more) monthly rent.

2) If possible, and I've found some places that do, have solar and wind energy to eliminate most, if not all, of my utilities.

3) I would generate on-farm income to take care of everything else. i.e.

-- Raise bees and sell honey

-- Raise heirloom vegetables (best selling varieties in the area I settle into) to sell

-- Sell milk shares (goats milk)

-- Sell eggs

-- Sell goats for meat (by crossing our dairy goats with a Boer buckling) and selling the offspring

4) We have plans to move back to Colorado and last year in March, Colorado passed the "Colorado Cottage Foods Act" Senate Bill 48. This bill allows you sell from the farm a great variety of home processed foods: spices, teas, dehydrated fruits & veggies, nuts, seeds, honey, jams, jellies, preserves, fruit butter, baked goods, including candy, and farm fresh eggs (250 dozen PER MONTH). Home producers can earn up to $5,000 net, per year, per ELIGIBLE PRODUCT.

Colorado also is "CSA Friendly" so the aforementioned milk shares, as well as fresh produce.

The best thing about the whole Cottage Foods Act is there is nothing on the list that I cannot do if I so desire.

I also plan to re-establish my soap making business, using the fresh goats milk from my own goats.

I'm pretty sure I'd be able to make enough money per month using most if not all of the above methods of income production to take care of yearly taxes, monthly feed bill (Minis, goats, poultry, dogs, cats as well as human), gas for vehicles, non-food items, keep a vet care fund in the bank, human 'vet bills,' etc.

I'm currently working on a Business Plan to cover "income" and "out-go." Still lots of ideas boiling in my head and I keep a notebook handy for jotting down ideas... I don't plan on leaping into anything. I intend to think this thing through before doing anything silly.

Would appreciate any comments or ideas from everyone...

Kari

 

[MountainWoman]

Absolutely. Doesn't matter if the interest is deductible, it's still interest and then you always have the wonderful feeling of knowing your house is paid for should anything happen to your life situation. it's especially important for those who are older. And also by paying cash for your house, it's a great way to not buy more house than you can afford which lots of people tend to do with loans. (This is assuming you are careful with your money and not just running up credit card bills, etc. with the money you'd be using on your house.)

Just an aside, I wouldn't count on any income from your business for a while. It's really difficult to get those businesses going and establish a clientele which means you have to be able to support yourself and your business for a while. The soap market is especially competitive and everyone is making soap these days. Just head over to Etsy to get an idea.

That's not to be discouraging because I'm doing what you are doing but I've learned from experience, it takes a while to get established.

So for all you've written, I wouldn't saddle yourself with a mortgage on top of your other plans.

Best of luck with all your plans!!!

 

[dixie_belle]

We retired three years ago and moved from Texas to Kentucky. We did this for a couple of reasons. 1) It's too dang hot in Texas. 2) We wanted more land for the horses. 3) The cost of living is much less in Kentucky.

Since our home in Texas was so much more expensive than what we purchased here, we arrived with cash. Which we promptly used to 1) build a huge pole barn, 2) pay off our mortgage 3) purchase and install a bank of solar panels.

We now have 17 acres (paid for) with a really nice pole barn house (which was already on site), a huge pole barn up close to the house and another one down in the pasture used for hay storage. All our vehicles are paid for. Our house is paid for. Haven't had a utiltiy bill in two years.

Our largest expenditure is health insurance. You gotta have it. Hubby is only 62 so not nearly old enough for medicare and I've got much longer than that (because I'm such a young thing, you understand LOL).

But it sure is a blessing to know that no matter what, my home is mine for as long as I want. I can live here and not worry about a mortgage payment or a huge utility bill.

Now, sooner or later one of our cars will probably die, although our little Kia just keeps on a running (sorta like the energizer bunny), so I am hopeful it won't be any time soon. But when that happens we will purchase another inexpensive, gas friendly car.

Some people tell me I'm so lucky. But I gotta tell you, it's been a lifetime of saving. I make no bones about it. I'm cheap. I have always been cheap. I think I have saved money from the day I was born. When other of my friends were blowing money on fancy houses, fancy cars, fancy clothes, etc. I was living modestly, driving a Toyota Corolla and wearing clothes from Target and Wal Mart. (My kids hated me as they wanted the "designer" stuff like their friends) But, in the end, it was a wise choice. And now I don't have to work (for pay anyway....I work really hard here on the farm), I have a paid for lifestyle.

So, if you're asking......pay for EVERYTHING. Pretty much if you can't pay cash for something, then examine really carefully if you really need it.

OK, I'm getting off my soapbox now.

 

[Magic Marker Minis]

Thank you for your replies.... I had a good, warm, fuzzy feeling that buying the house outright would be the wisest choice. I did some research on the Internet and it appeared to be the best way to go...

MountainWoman... Yes, you're right about building clientele... I plan on setting aside money for that reason. For instance, if we end up not getting to Colorado until late summer/early fall, I won't be able to establish beehives until next spring or a garden. I can plant garlic and some cold-weather vegetables, however, to get a start this year.

Dixie... Thank you for your insight as well... Health insurance can be very important... However, when the trailer flipped a year and a half ago, I didn't have health insurance. Neither did my roommates nor my daughter. We ended up going to the emergency room for care. Toni (who you all have been conversing with) was trapped under the stove and was in the hospital 4 or 5 days. The hospital knew we didn't have insurance and treated us anyway (they had to, of course). They still billed us and when we went into the office and told them everything that had happened, they ended up writing everything off. (Which is why I'm a very, very big supporter of Universal Healthcare.)

I'm very frugal, too. I'd rather clothing be given to me (even if it is shabby, or 'not my color') than buy clothes... I shop in thrift stores for clothes and other items a lot. Only after I've exhausted that avenue do I go to Dollar Store, Wal-Mart, etc... <g> I've never been compelled to keep up with the Jones... I also will not buy the latest fad or gimmick. I'm considering one of the 'pad' computer thingys (lol!) and will probably buy the Google version which is $300 cheaper than the Apple I-Pad...

I also have the same philosophy... Pay cash or do without... Has a familiar ring to it as my grandmother used to say "Make do, or do without." I have no debt... no credit cards, no car loan... I only have overhead... rent, utilities, Internet (or does that count as a 'utility?' <g>) and satellite tv (which I could do without, but my roommate/business partner can't). Variables, of course, include gasoline, food, non-food items, etc.

We've been selling goat kids off and on during the year. Just sold four kids and have four more to sell. Luckily, we have Nigerians so we're able to sell them at any time of the year since they come into heat every month. If we get more Nigerian does and keep some of the ones from this breeding, we can build the herd a little more and have more consistent kid crops. We also have regular sized goats which are seasonal breeders. If you cross Nigerians with standards, you get the "Mini Goat." There is a good chance that you can get a mid-sized goat (Mini LaMancha, Mini Nubian, Mini Alpine) that will also come into heat each month and get a larger amount of milk, consistently. And, they are registerable with the Miniature Dairy Goat Association.

Other things in my favor...

I have an extensive marketing/sales background. The soap would be what is called "Value-Added" in Marketing terms. When a customer comes into buy vegetables, meat, eggs, etc. they will likely buy an item like soap (think 'impulse buy') which is made on the farm. Especially if it came from one of 'their' goats in the Farm Share Program. Other value added items would be jams & jellies (if I have the fruit), dehydrated veggies, baked goods, etc.

I have a wide range of interests and a fertile imagination to come up with ways to sell into niche markets. I have an established Facebook page with friends and family who know what I'm about to do. I'll be able to network through there and Linkedin. I'm a 4H leader in this area and will probably continue that where I end up. 4-H kids are always looking for animals... We just sold 2 Nigerian does to a 4-H'er.

I have a rule of thumb... When an animal sells, we buy feed and supplies to feed the animals we have left... Works pretty good that way.

It's going to be a 'long row to hoe' but in the end it will be very well worth it... Very soul-satisifying. And even if it is 'work' it's work I choose instead of having it 'thrust upon me' in the form of an office job...

Thank you!

Kari

 

[MountainWoman]

I wonder if it's a generational thing and would be interested to hear from younger people on the board because I feel the same way about being frugal.

Kari, one thing I wanted to add is to check your insurance. If you have people coming on to the property, you might need a different kind of liability policy.

Don't know if you're interested in cheese making but artisan cheeses sell quickly here and for very high prices.

I'm still learning all this self sufficient living at my senior age and I'm having a blast doing it.

Here's to following your dreams!

 

[Flying minis]

Absolutely! My husband and I live on his family's homestead, the land was given to him by his father.. . BUT the house was no good, had to be torn down. So he bought a cheap 1974 single wide trailer (this was in 1997, when we were dating) that he didn't have to get a loan on. Lived in the trailer. As he saved money, he bought an old 1890 farmhouse in ok condition, had a basement built, and moved the farmhouse on. Still no loan. We worked together (we were married in 2001) to gut the farmhouse and completly redo it, while living in the trailer. Spent 5 years in that little trailer with 2 dogs and 3 kids (all boys). Moved into the house in 2006, everything we had done we had paid cash for. House wasn't completely done, but now is, and still have no mortgage. Did the same when building our barns / sheds, etc.

Here's the only problem - which at retirement age is probably not an issue, but at our ages (early / mid thirties when we started this little endeavor)- having no mortgage is a real problem if you are trying to establish credit. When I was going to buy my new horse trailer, I wanted a 90 day note until I could free up some investment money - interest rate was HORRIBLE because I was a "ghost". I had no credit. I took a loan out for 1/2 the trailer cost just so I could build some credit history. The big problem I see is that if you want to live debt free, that's great, but if you are ever in need of credit, you are then going to pay through the nose to get it : ( We still live mainly debt free, we save up for and pay off all big purchases when we buy them.

 

[Magic Marker Minis]

Yes, thanks for reminding me about liability insurance... I'll be checking into homeowner's insurance and see what that entails. Also, in Colorado, you have to post signs on your property that explains the liability limits.

I've been making cheese for years! lol! I have plans to make some Artisan Cheeses and see where that goes.

Credit isn't an issue... I've had credit cards in the past... Even paid them off over and over again. But, guess what? Credit card companies don't like you paying them off! I was in the process of making double payments over 4 years ago in preparation of paying them off and getting rid of them, but, all of a sudden they started raising my interest rates. I called to talk to them about this... They gave me excuse after excuse. Finally, I couldn't make the double payments, then, I started falling behind. I called again to find out what was going on, but no compromise and no resolutions... I finally told them they were backing me into a corner and I would be forced to declare bankruptcy... Still wouldn't negotiate... so I finally said 'screw em' and filed bankruptcy. I swore then I wouldn't get any more credit cards and would only pay cash for anything I needed... So far, it's been working.

If, and that's a big IF, I ever need to set up credit again, there are ways to take out small loans and get them paid off quickly so I can re-establish my credit rating... But, I can't think of any reason to do so... In fact, someone I worked with said I should stop driving my truck to work (gas guzzler) and get a a car (with a loan). I looked at him as if he were spouting Greek. I paid cash for the truck, another truck, and two trailers this past two years. I've since sold the truck and trailer (only needed them to move from Missouri to Arizona).

Kari

 

[Riverrose28]

On the insurance issue, look for an agent that will sell you commercial farm insurance, it will save you big bucks, will cover your home and the people that come to buy from you. You will also need another insurance though to cover out buildings and equipment, but you should be able to get it bundled. We were spending a small fortune on home owners, an umbrella, farm ins. and still weren't totally covered till be bundled it all into this commercial farm ins.

I love your ideas!

 

[susanne]

Kari,

We bought our 4 acres outright, using the profit from the sale of our city house -- we had the great fortune to buy a place we loved before prices sky-rocketed, then sold right before the bubble burst at double our purchase price.

A financial adviser would recommend not doing this, as we lost the tax advantages of a mortgage, but NOTHING beats the peace of mind we have being free of the banks and mortgage sharks.

We are not off-grid, but we avoid many of the expenses others consider necessary or incur without thinking, which allows us to save for those things that are truly important to us.

Always remain true to your heart and live your life accordingly. What others do or think is of no importance.

 

[Marsha Cassada]

We paid off our home a couple of years ago. We paid for the property with profit from our home sale, but we had a loan to build the house. We did alot of the work ourselves, so it took several years. I know loan rates are so cheap now; it's tempting to borrow and keep one's capital. We are glad ours is paid off. We are in an area where real estate values stay very stable; we consider our place a good investment for our children. Better than unstable dollars in a bank.

We constructed our home to harmonize with our location. I wanted it to look as though it had always been there, and to disappear into its location. People still don't understand why we didn't build a "Dallas" show house. We even held the roof shingles up to the mountain to see which color "disappeared". Our simple home took more thought than a cookie-cutter house would have, but we were able to build it economically.

I think people who have skills can always make things work. Good luck with all your exciting ideas!

 

[Magic Marker Minis]

Thanks everyone for your input! It helps when others validate your ideas. I, too, don't understand the 'bigger the house the better' thing... or building on the side of a mountain standing out like a sore thumb... I've said that I don't want anyone to even know there's a house on my place AND they need GPS and a map to get there... lol! Of course, if I want customers I guess they need to know where I am... <g>

Kari

 

[AngC]

I've read on the internet about all kinds of reasons why you should keep a mortgage to get the tax deduction. I don't know; maybe we're in the wrong tax bracket, but interest is interest is interest and maybe my math is off, but interest costs me money. Unfortunately we still have a mortgage (been here less than 3 years) but every single extra penny I get goes on the mortgage. Unless, you have other bills (with higher interest rates) it just doesn't make sense to me. I'd pay cash if it were me.

 

[Jill]

I have not read through all the thread.

My advice is to balance the fact that --- as it stands now and long has -- the mortgage interest deduction is about the best game in town for MOST households. That may change, but hopefully it will not. The American Dream is worth perserving IMO.

Familiarize yourself with the "safe money places" and the earning potential they hold if it's a sitatuation where you want to decide do I pay cash, or do I find a SAFE place to bank the equity.

>>> The property appreciates the same regardless of if there is a mortgage or not, and if you want to compare return for dollars....... then simply do the math.

 

[Bess Kelly]

Well -- some input from one who as been there, is there, wants to be there (maybe)........

Spent years and years paying bills on time, owning houses, apartment buildings, businesses, etc. Three homes, one a farm with mini horses, donkeys and Boer & Nubian goats.....in the 90's things were ROLLING!! Life was VERY good..over 20 yrs of wonderful horse shows, farm life, condo life, etc. Hubby passed away, most assets passed to his kids. I bought smaller farm, built new house......all cash. Then, one day, found I had "no credit". Yep, banks like you better if you owe -- past credit seemed to be "too old" to count much. Had to re-establish. Geesh! Don't "need" anything for which you do not have the cash -- if it's big item you may need before you can save enough you may need credit.

Fast forward.....still single and have mom here with heart issues & early Altzhimers. Tough in many ways and I'm an only child.

Finding the need to do more from home I, too, have begun researching things that I could do from here to further support self & animals needs using the farm resources as a base. For me it includes many of the things you have mentioned (oh, I have 36 minis to contribute "free fertilizer" for farming) and re-establishing a goat herd. I have a small flock of chickens which I could increase in numbers if that proved to be popular. In neighborhood, not needed. In my state you cannot sell unpasteurized milk (except for pet use) and many farms has gone with the herd shares to surcomvent that -- most are cow herds. Have downloaded a few of the contracts for reference. Researched some co-op, CSA and local farm markets. CSA isn't real popular here and I really don't want a lot of people coming to the farm. The markets often require a stringent schedule (great for the sellers! Not so for those just starting up, at first) as well as a fee from all sales each wk, in addition to a small fee for the seasonal reservation of a "spot". Each market is different, so depending on their popularity and establishment, terms differ.

These would be things -- outlets -- you may want to search out in area you select. As another mentions, insurance is huge -- include coverage for products grown/sold. You may even want to consider making the "operation" a separate corporation to limit personal liability. Talk with an attorney about this avenue.

I find there is a renewed interest in a more "naturally grown" food source and the benefits of less chemicals and processing. However, unless you live where there is a need for someone to provide this (small farms vs large corp AND a sizeable community who needs and wants to buy from your small farm) you will need to be very creative OR find close outlets, such as farm markets, shops, etc. One of the things I have been looking into, luffa veg sponges, would work great with your soaps! In fact, I'm actually looking into the soap making for this purpose. Suggestions, sites, instructions would be welcome!! email me.

For me -- at 67 and very active -- I'm thinking long term so growth can be steady but slower (I do have adequate inome now).

My concern is to promote my own working income for long term -- as I am not sure how long I will need be the sole caregiver. Since corp America is not fond of hiring the "oldies" I still want to supplement my nice SS ck and investment income & PT work. Hey, I plan to be at least 105 before I check out! And I've promised my old horses a retirement (which they are enjoying!) Might add, my daughter and gr dtr live in another house on the farm, so I can have help if the projects balloon.

I say "go for it" but with open eyes as to pros/cons.........which you appear to be doing!!

 

[sfmini]

The answer is, it depends. Would you be better off financially to have the tax write offs, and would the money earn more value in investments rather than in a home? Once your home is paid off, it is costing you money, as the value of the home may not grow as much as the money would have if invested.

Lesson as taught to me by my Dad, an accountant.

It might be worth talking to an investment counselor.

 

[MountainWoman]

Some really wise advice here and we are all at different stages in my life. How I perceived mortgages when I was younger and working is very different from the stage of life I'm in now and for me, nothing will ever take the place of knowing my home belongs to me. Don't care if the money would make more interest income in investments or the tax deduction. Stuff happens, people use those investments for other things even though they say they won't then some catastrophe happens and they lose their home. I've seen this happen to so many people and these are people I know who have lost their homes in the past few years and are still continuing to do so and these were not people who were over extended. They just happened on hard times. They had mortgages and the bank wants the house back and now they are in a world of pain. Breaks my heart for them.

I guess it goes from growing up with parents who lived through the Great Depression and shared stories of just how hard it was and really the only material thing I care about is having a permanent roof over my head.

To each their own but as a soon to be senior, I'd rather be mortgage free. Now all I have to worry about are sky rocketing property taxes which is why I'm saying goodbye to Vermont very shortly. Anyone want to buy a farm?

Bess Kelly, if you start making loofah sponges, message me! Sounds fantastic.

 

[AngC]

I have not read through all the thread.

My advice is to balance the fact that --- as it stands now and long has -- the mortgage interest deduction is about the best game in town for MOST households. That may change, but hopefully it will not. The American Dream is worth perserving IMO.

Familiarize yourself with the "safe money places" and the earning potential they hold if it's a sitatuation where you want to decide do I pay cash, or do I find a SAFE place to bank the equity.

>>> The property appreciates the same regardless of if there is a mortgage or not, and if you want to compare return for dollars....... then simply do the math.

What a lovely dream... to have your property appreciate in value. Ours has been de-preciating its heart out.