Are we getting the horse a bit back of the cart, here, possibly? Have you bought your house yet? I assume not, in that you don't have mortgage set up, it appears. I'm not familiar with the housing situation generally, and certainly not with what's going on in your area, but the housing situation in many parts of the U.S. is in a real mess. Many bought several years ago, with small equity, and paying something like 1.5% interest directly at the time, but the actual amount being charged was much higher, say, 6% ...with the extra being added to the principal owing! The contract specifying that the rates were to be renegotiated after a certain number of years. When the amount that the mortgagees actually needed to pay became apparent on renegotiation ... the people couldn't pay it. So the house went on the market. Along with thousands of others in the same boat. Those (what many of us would call "spurious") mortgages were peddled over wide areas. Including to a Canadian bank in which I've held shares for 41 years, during which time share price advanced from $4.20 to about $106. and change, last May. Unfortunately, it seems that my bank had also backed an insurance company that had underwritten many of those lousy mortgages. As you know, North American stock markets are down a substantial amount during the last few months - but nothing like more than 40%! You can understand my feeling that I'd more or less like to use those guys who dreamed up that shady way of doing business as targets at a shooting range? The speed at which the Fed began freeing up money when this problem surfaced a while ago, and has moved on it again since, including today, in concert with the Canadian central bank, and some European ones the same, leads me to think that there's a lot more trouble yet to appear in the housing crisis in the U.S. Remember the Savings and Loan crisis of something like 30 years ago? Some are opining that this may turn out to be worse. If I were you, and it's at all convenient, I think that I'd be sitting on my money for a while. By the time house prices get down about as low as they may be about to go ... ... perhaps you'll have had the opportunity to have saved most of that $30,000. shortage, especially if you go into fairly heavy-duty savings mode in the meantime ... ... in which case - perhaps your problem may well have disappeared. Maybe more than disappeared ... for possibly the house you want may have had its price dropped by that $30,000. ... possibly more? And you may well have more than the "extra" $30,000. on hand ... ... Hey! maybe you can have enough extra down payment to be able to avoid mortgage insurance! The loss in value of that stock of mine since last May is about half of the amount that you're short. But I've held it for 41 years, so I guess I'm more or less too much attached to it to sell it now (and this is not the time to sell it, in any case - might be time to buy more). Just some food for thought. My daughter's wanting to buy housing in the Phoenix area. I've been suggesting to her for months that she keep her money in her jeans for a while. She made an offer last year, there was $5,000. difference, with neither stubbornly willing to spring for the diff. Within a few months, after she returned to her former location in Toronto ... ... she told me that a re-valuation of the premises had come in ... ... at $20,000. lower. Now she's back in Scottsdale, keeping her eye on the situation. Maybe even both eyes, on occasion? Sitting on her money ... still (I hope). I hope that you're having a great old week, at your "house" - (wherever that may be, at the moment!). ole joyful P.S. I'm not as upset as it sounds - when dealing with much of business in general, and the stock market, in particular, if one were to sweat the small stuff (or take a short-term view) ... ... one would have one's fingernails chewed down to bleeding, a good share of the time. Closing on age 80, very thankful to be enjoying good health, with only a small portion of needed health care payable directly, and fairly sure that I have sufficient assets to carry me through the remaining days of life ... ... with some residue for charities and offspring ... ... I'm a happy man! o j P.P.S. For many families, buying their home is the largest contract that they ever make. I strongly suggest that you make it your business to investigate the current housing crisis in the U.S. thoroughly, up, down and sideways, during the coming months, including prospects in your area. There may be a hurricane approaching. o j

Sorry it took me awhile to respond, thanks for all the comments Chelone I have lots of relatives who have a great retirement doing what you are doing. MIL struggled to put the kids through college on a teachers salary and now in retirement is rolling in it. Keep it up I have no problem mortgaging or not mortgaging my own house. Our real estate taxes are high, probably more than many mortgages, so even if you got rid of a mortgage you are still paying 1k a month in taxes. In the above example, I probably would do option 4, if I really had a 5% mortgage I would not pay it off and probably stick part of the money in a CD paying 5.5 or whatever rate I could get above 5! To pay it off really would be leaving money on the table if you could SAFELY get more than that. I agree that Universal life is seldom a good deal and I would only do that if I thought from an insurance point of view it was a better deal than term for some reason. Otherwise I think its just a scam. The problem I had with the post that started this, if you have a mortgage at 5% and now have some extra cash, great, do not park it in your house because you really can get more at the bank. However the advisor was suggesting pulling money out (does not matter REF or HELO) just so you have it in your hands instead of it sitting dead in your house. Thats a great idea but if I am borrowing at 6% and can only SAFELY invest at 5% who is going to pay the spread? Also what about the 10k in closing costs I paid to pull the equity out? Worse what if I do follow a hot stock tip that ends up not so hot?! People are tempted when they have acess to so much cash (I think I could manage but who knows). Dave claims its an issue of safety to have too much equity without owning it outright. The HELO that was suggested would actually be one way to safeguard the eequity. Do not tap it unless you really need it, the perfect storm scenrio that Dave mentioned where people cannot tap the equity and lost their house even though they have lots of equity Thanks for the compliment Celtic, I just could not figure out how to adress the shortfall in an owner occupied property. Ia lso agree with you about the rental increase issue, 6% annally is impossible, office leases around here have a 3% increase, sometimes less. CMarlin I love your examples and you have given me things to think about. My DH thinks I am the most risk averse person on the planet so I doubt we will be competing for property (especially from NY!). In running your numbers why even invest the 500k? If your debt service at 6.7% is about 116k and your income is 144k, even assuming taxes are 20k why tie up so much? Do the lenders require this? Is it to give yourself a perfect storm cushion? Why not put aside 100k in an interest bearing acount instead and maybe put down 100k so you can cover incidentals with the rental income? I have no idea how this works. What is an SFR? Also do you buy rentals locally? You mentioned you research the areas which assumes you go outisde of your local area, do you go out of state? Just curious. What about I have Two real estate stories I think about that stop me from following your lead, I guess if prices really do drop in a mini crash maybe I will rethink it. Although there are still lots of people like me who know a bunch of people who recently got rich on real estate so we wonder if we could do the same and I always wonder about things everybody is doing, someone has to lose money doing it. Not saying you CMarlin I actually think your plan is sound except for the 6% but I assume even at 1 or 3% you will still make money (although how does that play into local tax increase, here they have been increasing taxes up to 6% PER YEAR based on the rapid increas in value of these properties). How many apartments do you feel you need to own when starting out to truly spread the risk so to speak? Also of the 144k, what percentage is overhead unrelated to taxes and mortgage. What are those expenses? Here are the stories that stop me. In 1986 a wealthy physician I know (not well) decided to invest in real estate out of state in Boston. With the 1987 crasg the condo market went belly up and they could not sell these in the late 80s. He and several others were general partners. One of his relatives who got him into this ended up losing her law licsence over this! They tried to sue him and he almost lost everything outside of this (had a large home etc) fortunately most of his assets were in his wifes name anyway for liability reasons relating to his medical speciality, so they dropped the suit when they realized this. This same guy started trading stock on margin out of his retirement account in the late 90s, his account at one point was up to 42 million! Needless to say he is still working after that market crash and he is now near retirement age My father was approached by his accountant in 1975 who was running a tax shelter. He and his partners were buying a building near Lincoln Center in NYC. At the time the neighborhood was a bad and they paid 1m for a 40 story building plus garage (400 per car per month) and retail stores in the lobby (now a Chase Bank, a drugstore and a McDonalds). Dads share would have been 100k but back then he did not have it and even if he did, well I get my risk averse thing from him! For some reason I remember telling him to invest but who listens to a 12 year old and again they really did not have that kind of money to throw out with 3 kids. In 1987 (yes at the absolute height of the market) I bought a last remaining sponser apartment in, you guessed it, that building for more than double what 10% of a 200 unit building would have cost 12 years earlier! This was a fluke dad did not realize it until he saw the purchase contract. They ended up selling the apartments back to the tenants for 10m in 1985! They kept the master leases on the garage and the McDonalds so I am sure that funded someone's retirement. The irony is this was sold as a tax shelter, it was not supposed to even make money! Dad has no regrets (well other than that 4th child they never had!LOL) he says that for every successful deal he was offered, there were 20 that failed and he would have lost his investment I know this is way too much information but its what makes me leary about real estate as an investment. I actually just want a bigger house for me and my household, I do not care if its paid off or not as long as I am not awake nights worrying about how I can pay the mortgage. Still trying to figure out how to get there Its funny I flip flop on the do it yourself investing. I hate being told what to do and need to understand it before I can commit. I also hate mutual funds as a general rule excpet for the ones that are based on indexes. I sort of get frustrated with magazines like money that seem to try to make everyone feel like they need to be in mutual funds and not just one, but a portfolio of them,. Are they secretly owned by a constortium of mutual fund. Also I wonder what an investment advisor can tell me? Its like my theory on stock brokers, if they were so great at picking stocks why would they need me to make money. No offense intended to any investment advisors. I do think an individual investor can beat the market average (or not!) even if they do not have access tp all the inside information because they have flexibility that a mutual fund running 1B does not. Then there are days when I look at my house which is basically decorated but the reality is that it lacks the fine tuning a decorator could give it but I hate the idea of living with something someone else has chosen for me(I tend to return gifts too). Its sort of like that with investing, I am not comfortable with the loss of control but I do not have the time and energy to follow this all the time

All the "what's nice" talk is really besides the point. The OP is building new and wants to maximize the appraisal in a crazy market. The ONLY winning strategy is to save whatever money they were going to spend on these improvements and hold that cash until they close on their permanent mortgage. The cash will be MUCH more valuable than a barn or pond at that point. It is SOOOOOOO much easier to close a deal by plunking down $50,000 in cash vs trying to argue about the worth of a barn. Once the appraisal is over and the mortgage process is complete, then the OP can start with any additions. At that point, if you are cash flowing any improvements, you should just order them in terms of what you value the most.

We don't have credit cards. this is the situation. we have a house now that has a balence of $47K. The house comps have it going for $75K. Of course, I know you can not count on getting what you think you will get, especially when you need it. The house we are looking has an asking price of $89K. My realtor hasn't done a whole lot of research yet, but she said that is a bit high for the area. I was looking at the real estate data for my city today (san antonio) and although sales are a little bit down, houses are still appreciating. Days on the market are still a little longer, but not drastically. Price per square foot has gone up, not much, but its gone up. so, we don't have much in savings, so we would need the equity from our present house to put down on the new house. I'm obviously not working with high numbers here. the average house here is $147K. Still way affordable compared to a whole lot of cities. What I'm trying to do here is get an idea, just knock it around, about what my options are and what anyone thinks of the situation. I value the advice I receive here and I really enjoy reading everyone's posts!