Severe Austerity

Future home state
Future home state

We bought the land. The closing wasn’t a happy occasion as it turned out. My husband and I chose to stress out and argue rather than relish the first moments of finally owning a piece of property. Perhaps that’s why this all happened 6 weeks or so ago and I didn’t bother to document the occasion. Thankfully we’ve been together long enough to overcome I’d say pretty much anything at this point, so we now joyously celebrate land-ownership together and all that lies ahead.

We just spent a week in MI at the property overseeing planting of $8,000 of oats and hay soil erosion control work on the driveway and slope. It was fun being there and exploring local living – what will be our grocery store, how do prices compare to LA, can we buy Pop’s brand of dog food, etc.? We’re also incredibly blessed to have family next door so enjoyed free accommodation. Our combined acreage, with all the sticks and tree branches a young labrador can imagine, was like crack to our precious Poppy.

$8,000 of oats and hay... AKA erosion control
$8,000 of oats and hay… AKA erosion control

Now we’re home though and in full austerity mode. We bought the land in cash and expect the house will cost around $350K-$400K to build, including drilling well, installing septic system and asphalting the driveway. Apparently the driveway will be our single largest expense, and we’ll get two guarantees: 1) it will crack, and 2) no one will steal it. We want to have at least half the build cost in cash up front then we’ll have a construction loan for the rest to convert to a mortgage once we take residence (my beloved USAA does not offer construction loans, so hello local bank). With a build start date scheduled for summer 2018, we have just over 18-months to come up with $200,000 (we’re starting at $0 as we don’t want to touch current investments).

We don’t have an extravagant lifestyle and do have good incomes, but we definitely live comfortably and there is lots of fat to trim in order to reach our goal. It’s doable but means severe austerity is officially ON. Fortunately, I track every cent and have spreadsheets that are works of art, so it’s very easy to see savings potential in each category of spending. Groceries is top of the list.

I re-read an amazing, potentially life changing quote on a Frugalwoods post this week. Mrs. FW doesn’t budget, she simply wakes up everyday intending to not spend money. She is right on that if I have a $250 grocery/household budget, I will spend that $250 because I’ve given myself permission. If I decide not to spend money, chances are good that I’ll only spend when necessary and therefore spend much less. Those drop-ins to Ralphs on the way home from work for a few items that always end up being $30+ sure add up, but they are always OK as long as they’re within the $250. I’ve been researching and shopping grocery smarter this week, and by my reckoning, I’m about $100 ahead than if I’d not put in that little extra effort.

Remember, Remember the Fifth of NovemberTo end on a completely unrelated grumble, I’m English, it’s Bonfire Night, and California is too bloody hot and windy to have a fire. Instead, here is our fire in Michigan last week where the autumn chill was a more appropriate companion on a Fall evening. I cannot wait until I can call that place home. $200,000 and counting…

 

Whirlwind Week

Sun sets over Lake Michigan
The sun sets over Lake Michigan

Whirlwind is the only way to describe this last week. Our offer on the land was accepted last Saturday, and barring any problems, we should close by the end of September. We’ll then be the proud owners of 2 acres of land 2,300 miles from home! Some moments I think we must be mad and it’s easy to get lost in worries for the future. How on earth are we going to save to build the house? What sort of home do we build? How do we leave California? What the hell am I going to do for a job? How do we fly the dog there for a visit at Christmas? How the mind spirals if I let it! To counter those thoughts, I imagine the view of the lake through the lush green trees, and the heavenly idea of one day waking up to that in my own bedroom, in my own house, that my husband and I built. The rest will work itself out.

Having never purchased any sort of real estate before, it’s also been an interesting week of learning. I had no idea what made up closing costs. What was title insurance? Who knew it was important for rural land to “perc”? I certainly didn’t think I’d ever be paying money to a soil erosion expert.

The title search has been cleared, so the person we are buying the land from is indeed the owner and there are no unpaid taxes, liens or other issues with the property. The title company is ready to issue a title insurance policy, meaning in the unlikely event of future problems, at least our initial investment is insured. Title insurance is one of the closing costs typically covered by the seller, but although we wouldn’t negotiate our offer, we did agree to pay the seller’s closing costs (with a cap of course) in addition to our own.

A perc test (AKA perk test or even a percolation test) evaluates the rate at which water drains through the soil. This is crucial information when thinking about installing a septic system. If the land didn’t perc, we wouldn’t be able to build a house. Fortunately, our land (well – soon to be ours) percs very nicely. This is thanks to soil that is loamy sand from 6″ to 7′ below the 0″-6″ of topsoil. Water drains beautifully through sand. Again, not something I’d ever paid attention to!

Speaking of soil, the next big event is our soil evaluation next week. The county expert visits the land for an erosion assessment, then our builder will provide us a cost estimate of what we’ll need to do to manage drainage over the couple of years before we’re ready to build. We suspect this will be nothing more than crushed concrete on the driveway to prevent washout, and perhaps a silt fence as an erosion control on the large berm. But, our offer on the land is contingent on a positive inspection as well as the builder giving a final OK that the land is in good shape to eventually build.

Pelicans over the Pacific
Pelicans over the Pacific

An exciting whirlwind of activity, and we’re grateful to our team of experts in the local area who are handling so much of the legwork on our behalf. We’re also grateful to receive beautiful pictures of sunsets on the bay, which are equally as majestic as those we currently enjoy over the Pacific.

Explorations

A few weeks ago we saw a lovely little house on a few acres of land on Zillow advertised at $212,000. The house was located in Michigan – over 2,300 miles away from our current home in LA. We loved the look of it, and last week I spent a day touring several homes in a beautiful town beside Lake Michigan.

I met a realtor who set up showings of five properties ranging from $175,000-$250,000 along a 20-mile stretch of the Great Lake.

A road and a Great Lake
A road and a Great Lake

That was the first time I’d ever done viewings with a realtor and I learned a lot. I kept being told it was a sellers market, but given the inventory and prices available, I didn’t really believe it. What I did believe is that we are spot on in our plans.

We are slowly planning our exit from Los Angeles over the coming years. We love LA and the climate and and and… But, it’s just too damned expensive. Three to five years is our timeframe. Neither of us want to have to sustain our current levels of income, and we desperately want a more peaceful and simpler way of life. This is not necessarily early retirement. It is about buying a property or a piece of land close to a large body of fresh water that we can pay off in a few years then live on a greatly reduced income (if we so chose).

Back to my trip… I viewed four houses and immediately began to realize what I was and was not looking for in a home. I also learned of the unique considerations for a property in that part of the world. The property that sparked all this was the last viewing of the day,

although I confess I made several drive-bys at different times of day to check on the light and location depending on the sun’s position. I liked what I saw, but was not without a few reservations. Perhaps the property was too tucked away? How would I feel alone there at night if my husband was away? Would it be too dark and dank in the winter?

Buy land. They're not making it anymore. - Mark Twain
Buy land. They’re not making it anymore.
– Mark Twain

Just about an hour before the viewing I got a call from my husband telling me to escape the realtor for a half hour and find time to go check out a piece of land that was for sale for $90,000. I managed to do so and quickly drove the beautiful lakeside road to the land. I was irritated if I am completely honest. I liked the house plan and was annoyed at the distraction.

That irritation quickly evaporated as I navigated my rented Jeep up the hillside “drive” (dirt road) to a cleared berm amongst a light forest of tall trees with nothing except greenery and a wooden swing in the corner. A couple of acres and plenty of room for a simple house. I got out of the car and walked the clearing, disappointed to find there wasn’t a view of the bay. A few steps further, and there was my beloved view. I remembered a previous visit to that same land. on the wooden bench in the corner (the only structure currently on the land) looking out onto Lake Michigan. It was December, very cold, with a good amount of snow on the ground. I remembered the peace that I felt then, and the peace that came over me again in that magnificent location. It felt like home, even without a house, a septic system, or a even a drilled well!

An interesting option
An interesting option

Time to meet the realtor again, and I drove the five minutes to see our original house. It was lovely. Without seeing the land, I would have made an offer right there. I felt it was overpriced, but I saw the potential and enjoyed the spirit of the place. The land that that house sat on was equally quiet and peaceful, but it was on flat land at the bottom of the hill.  This house was closer to the lake, but there was no view except for a thick fringe of trees.

I left feeling confused. Upon returning to LA and sharing detailed photos and descriptions of both house and land with my husband, we decided to take a trip together in the summer. There was no sense jumping in.

 

We called the realtor and the owner of the land, deciding our offers would be $180,000 for the house and $75,000 for the land. But, we wouldn’t act on anything until the summer, IF we acted on anything at all.

PeaceThe owner of the house just dropped the price to below $190,000, and the discussion is on again. The house would be a steal but I can’t ignore my gut feeling about the land.

What is it like to buy land and build a house? Is it going to cost twice as much? Is it better than buying a property that we’re not ready to occupy that’s 2,300 miles from LA?