Real Estate Switching Costs

Real estate has had a good run since 2010.

It can be tempting to cash in profits.

Financial Case Study

My neighbor is just about at the point where he can net $1,000,000 dollars on the sale of his house. He’s retired and this represents a very substantial sum for him. One million dollars is also kind of a magic number emotionally as he never expected to be a millionaire.

For him to net $1,000,000 he will need to sell his place for about $1,067,500 gross.

He bought the house many years ago so, even after his primary residence exclusion, he’s going to have a tax bill of $70,000.

There will be other costs (moving, cleaning, etc…) adding up to $2,500.

So his certain costs today are $67,500 + $70,000 + $2,500 => $140,000

Putting this into his personal context…

Having paid off his mortgage by the time he retired, he has the ability to live on $1,500 per month. So he’s looking at a certain bill that’s worth 7 3/4 years’ living expenses.

He’s also a young retiree, with parents still alive.

So he might be living another 30+ years.

Key Questions

How might the switch make things better? Whatever they are… they are uncertain benefits to be weighed against certain financial costs.

How will surplus cash be invested? Given the choice between prime residential real estate and an investment account… most retirees prefer the hidden volatility of real estate.

Do I want to leave my community? When I left Christchurch (NZ), I left behind a fantastic group of people. Community has a far stronger association with a meaningful life than cash in a bank account.

Certain types of people make new friends easily. I’m not one of those people! What type of person are you?

What Can Go Wrong

Bull Markets — Assume that you can only “move out of town” once. In our case, we lack the financial resources to repurchase our existing real estate at current market prices. If we sell, and prices rise, then we will be priced out of the market.

Neutral Markets — Real estate is expensive to transact. In the example above, the vendor is paying 13% of gross proceeds in commissions, taxes and expenses. In any new purchase I assume that I “lose” (on paper) 10% of the gross purchase value at completion. In other words, I am going to need a 10% market increase to get my money back.

Bear Markets — Can I afford to be locked into this market for many years? Vacation markets, cities reliant on a single industry (oil and gas) and secondary locations… buyers can be locked in for five plus years. Am I OK with that risk?

The Good Enough Portfolio

There’s a lot to be said for an attitude that an existing position is “good enough.”

Each time I make a choice, change or modification it’s an opportunity for expense and error.

 

Default Emotions – parents dancing with anger

A mother shares a story about her struggle with hate. Specifically, she is troubled by the thought that she hates parenting and, possibly, her preschooler.

She’s not alone.

Living with someone from birth to high-school graduation, I expect to feel every emotional state.

Hate, anger and rage are powerful, and unpredictable, emotions. In Boulder County, they are socially taboo when directed at children.

Therefore, as a parent, you’re likely to remember when you feel these emotions around children.

You are feeling everything.

You are remembering hate.

What’s your default emotional state?

Thinking about the five people closest to me. We default to…

  • Tears (flight)
  • Confrontation (fight)
  • Fear (flight)
  • Emotional shutdown (flight)
  • Anger (fight)

Within a preschooler, I can see all of the above within a ten-minute span!

Combine a rainbow of powerful emotions… with a lack of sleep… it’s easy to drop into my default emotional state.

In my case, I tend to pause and address later, when the energy has left the situation.

Take stock of your consumption of external emotions.

  • Media
  • Situations
  • Peers

How do the above make me feel?

Replace the negative with self-care.

  • Are you sure?
  • Are you sure you are feeling hate?
  • Are you sure your child is the reason for the emotion?

Frustration at my lack of skill can feel like anger.

How do skilled teachers feel about my child?

Negative emotions (hate, anger, rage) indicate a need to up-skill for the essential and out-source the non-essential.

Your mommy-guilt might be leaving you tapped out.

Being tapped out means your children, and your marriage, never see your best self.

Tapped out is a tough way to spend a decade.

 

It wasn’t enough

When I follow my own advice, life is better.

At the back of my mind, especially with kids, I have a desire for life to be “easy.”

My desire makes me chuckle because my “easy days” are often boring.

Based on eight years of parenting… easy is not going to happen so focusing on “better” is a smarter option.

From time to time my appetites come up with ideas to make my life _even_ better.

  • These ideas might be small — five beers, two burgers, large fries and couple desserts
  • They might be large — a vacation property with a cost of ownership that doubles my core cost of living
  • Many fall in between — clothes, vacations, sports equipment, alcoholic beverages, risk-seeking friends

These desires pop up as an emotion associated with pleasure, excitement or release.

Certain choices, situations and people are associated with bad outcomes.

Despite an association with pleasure, excitement or release… many of my desires are highly-likely to lead me to bad outcomes.

To tame my appetites, I pause and consider the last time I gave into that specific appetite…

I ask myself…

Was it enough?

It was never enough. Not even close!

I remember always wanting more, even while I was getting what I wanted.

My desires are frequent, but my specific desires are fleeting.

They come and they go.

If it wasn’t enough then maybe I should find a better way to live….

…and that’s the system that I’ve been sharing.

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What’s your system?

Is it working?

Too Tired To Change

2017-02-07-08-11-04Picking up from last year

What one thing, if it happened, would change everything?

  • Keep it simple
  • Do it daily
  • Set a low bar for success
  • Stretch your limits when overall stress is low

As a coach, I used the above with regards to athletics => better nutrition, sleep and emotional control. Sort those components THEN crank specific stress.

The challenges facing a new parent

  • life stress never feels low
  • we start with no skills
  • we have unreasonable expectations

If you’re facing challenges in your family life then I’d encourage you to acknowledge the above.

Being honest about my limits makes it easier to improve and cope with the inevitable errors.

If I pay attention to my errors, they are most often associated with being tired. You may find this in all areas of your life (emotional control, food choice, substance abuse). You might also have other triggers (hunger, anger, loneliness).

I really like being tired. Fatigue settles my mind and helps me fall asleep.

The trouble comes when I make a big unforced parenting error before bed!

Errors can haunt my consciousness for days.

So this post is about fatigue and change. However, if you look deeper, it is about how I am choosing to invest my emotional energy towards success.

Our values are reflected in where we are willing to make an effort. My values are greatly influenced by peers, environment and media inputs.

So doing a better job at home meant letting go of areas, peers and situations where I used to compete.

Who sees my best self?

2016-12-12-15-26-09Another component of the price I pay is to whom I direct my best self.

The answer cuts through all the BS I tell myself.

What do my kids actually see?

What does my spouse actually experience?

2016-12-14-10-43-23When I was trying to win an Ironman, my coaches and training partners saw my best self. These people were essential to my success and we had a great time doing what it took to improve.

Not coincidentally, I met my wife while training. During the summer of 2004, the only place you could find my best self was training for triathlon.

With the birth of my first child, success was frustrating remote. My internal life was frazzled, angry and exhausted. If I opted out then I would strain my marriage.

So I asked for help and studied experienced preschool teachers.

I paid attention to what was required to present my best self to my kids, and my spouse. [the list I shared]

I paid attention to the conditions present when I fell short (noise, conflict, hunger, fatigue).

Noise and conflict are inevitable with young kids. However, there are many opportunities to get support and stretch my emotional limits gradually.

2016-12-07-06-56-12Like the rest of this series – it makes more sense when we invert the advice.

Good people won’t stick around in the face of our worst selves.

 

Managing Exceptional People

2016-11-18-15-12-34While certain personality types tolerate constant correction, it’s corrosive to a relationship with an Alpha Child.

Here’s what works…

One Thing – What one thing, if it happened, would take performance to a new level? Pick your battles (or you will be constantly battling).

Default Position – When managing the highly competent, what’s your default position? Is it frequent, small doses of approval backed by admiration? It should be.

Skill Acquisition – Your Alpha Pups are keen to please by learning skills and completing tasks. ABC => Always Build Competence.

Mistakes – Make mistakes visible, teach a different approach with better outcomes then get back to your One Thing. Learning to forgive your own mistakes will help you forgive others.

If in doubt keep my mouth shut and work on my own one thing.

2016-11-22-07-14-18If you were taught constant-correction management (particularly in childhood) then it’s going to be tough to change.

Keep It Simple!

Pause.

Ask yourself…

What’s my One Thing, here?

+++

With my oldest…

  • One Thing – reading
  • Default Position – let things happen
  • Skill Acquisition – swimming, camping, sailing, enjoyment of nature, aerobic capacity, strength, reading, math, writing, persuation
  • Mistakes – teach via mantras AFTER the energy of conflict has left

The main thing people need is love.

Appetite

2016-07-29-10-30-41

Before nutrition, consider appetite.

Appetite is an interesting variable — it starts as a source of pleasure. However, its ability to give satisfaction is reduced as I feed it. Eventually, it becomes a source of pain.

During the holidays, we often reinforce:

  • Competitive binges (turkey!)
  • Manufactured scarcity (gravy!)

Well channelled appetite can be a source of tremendous energy. I’ve used my energy to win triathlons, achieve financial independence and, more generally, get stuff done.

But, I have also experienced varying degrees of ill-effects — functional alcoholism, obesity, metabolic syndrome, work-life imbalance, promiscuity.

 

2016-08-14-19-41-30My appetite touches all aspects of my life.

  • Binging (exercise, alcohol, food, sex, fatigue)
  • Scarcity (fear of missing out, fear of loss, envy)

In order for my nutrition strategy to be effective, I need to manage appetite across all areas of my life.

2016-08-15-16-34-57I seek to model what I teach my children:

  • You’ll get everything you need…
  • Unlimited fruits and veggies…
  • Never praise binges – no eating contests, no comments when we stuff ourselves, no keeping score via food…

While my teaching is designed to break the chain, my nutritional approach is a damage limitation strategy rooted in my personal reality!

2016-07-13-20-42-19The first two of our family mantras are designed to moderate appetite.

  • We’ve already won
  • We have more than we need
  • It’s OK to say “no”

By way of illustration, a father rarely needs to encourage a teenage son’s sex drive.

It’s a lot like that with my appetite.