Author: Kristina

Like any remodel, we’re having a variety of little issues out there. The plumber caused a leak, damaging a cabinet. The bottom drawer swelled up so much it will need replaced.

The electrician broke an expensive new light fixture. Someone installed a baseboard heater a foot off the ground (why?) and it needs moved down, to line up with the others. The window installers broke a riser for the sprinkler system, so when it came on, water was gushing everywhere. Luckily John had stopped up there on his way to work and noticed it.

But it’s exciting to see the upgrades.  One of my biggest priorities was to get the windows replaced. They were failing, and leaking. Not only leaking water when it rained, but also leaking air. They were extremely noisy in the wind; howling and whistling. And we get a lot of wind in New Mexico, particularly on top of that hill.  It was like a haunted house up there!

All the windows are getting replaced. Most of them are just being switched out with the same size, but one, with an excellent view of the mountains, is being reconfigured to take better advantage of the view.

Here’s the before and after shots. Originally we had 3 windows with a total of 5 window panes breaking up that view. Now there’s just one big picture window. Actually, that’s a terrible photo and doesn’t do it justice. Let’s just say that in person, it’s a surprising and dramatic improvement.

 

Greed, guilt, or just plain fear? I’m noticing I’m really stressing about buying rentals, and trying to make the best choices with the funds. Trying to avoid tax pitfalls and maximize returns…to the point where I’m getting insomnia. And I’m wondering why that is? Why am I not simply grateful for what we have? Why don’t I just make a good guess and go for it?

I think part of it is guilt. I’ve always worked very hard in life. I was a single parent while working, going to school, and earning both a master’s degree in environmental science and a certification in life coaching. For many years I worked in 2 careers simultaneously, environmental planning and life coaching.

Now I’m only working part-time as a life coach. I don’t make that much money anymore, compared to when I was working 2 jobs. Meanwhile, John is working very hard. I worry about him. His health isn’t perfect. We’re both getting older. I feel like I should be doing as much as I can; doing my part by investing this money wisely.

I want him to be able to retire while his health is still good, before he ruins his health working too hard. But with the health care system so messed up in this country, how can we even guess how much we’ll be spending on health care?

Guilt – John works harder than I do. Guesswork – the inscrutability of the future. Grateful – to not have to work as hard as I used to. Grateful – to be in New Mexico again. Grateful – to be able to coach my clients. Greed? What is that, really? How do we ever know when enough is enough, and when wanting becomes wanting too much?

One thing I think I will do, is lower my coaching rates a little bit. My rates seemed normal in California. In fact, they were normal in California. But my perspective is different now that I’m back in New Mexico. Of course my clients are mostly in California (and New York and Boston), which is possible because I work over the phone with them.  But still, I’m here now, in New Mexico. Maybe my rates can reflect that, to some degree at least.

At my request, John spent this evening building a spreadsheet to try to estimate this final leg of our working life prior to retirement. How long do we have to work? How hard do we have to work? How many rentals or other investments do we need? Do I need to accept more clients, or go back into my environmental career? I’ve run spreadsheets before myself, and now I’m looking forward to seeing his.

We hope to go hiking on Mt. Taylor tomorrow and we can talk about it then. It’s our little mini-trip since we canceled our 4-day backpacking trip; being too busy working.

We are now under contract to buy this cute little townhome on Academy Ridge Road!

This is House #11, you can see more photos in my Day 13 post.

There was one other offer that came in right after ours, but this time we won the bid. I think part of what helped was we offered immediately after it went on the market (John hadn’t even had time to see it first), so were able to get under contract before the weekend. Plus, it being the Friday of a holiday weekend probably helped too.

One of the things I love about this house is it’s somewhere John and I would be happy living ourselves. I like being able to offer for rent a place that I feel good about. And it feels like a little bit of a safety net, if we did ever had to downsize, or move back into town for health reasons or something.

Inspections will be this coming week, with a hopeful closing date of only 2 weeks from yesterday.

The only question now is what to do with the remainder in the 2031 exchange. We tried to spend it out, but we didn’t want to over spend it. And we didn’t find a property we liked worth exactly the right amount, so we ended up under spending it. Our options are to take the remainder in cash and pay 35% tax on it, or to try and buy a little bit of land for cheap. A third option would be to use the remainder as a down payment, and take a loan to buy yet another rental, but neither John nor I want to do that.

I believe in paying taxes, but 35% of a chunk of money is still a chunk of money. I had originally been thinking something like 15%, which is the capital gains rate. But turns out, all gain up to the accumulated depreciation taken on the property is taxed at the Sec. 1250 rate of 25%. Then add to that the state tax, which in New Mexico would only be 2.5%, but since the property was sold in California, we have to pay the California rate of 10%. For a total of 35% tax.

On the other hand, what would we do with a little plot of low-end land? Land doesn’t generate cash flow, and there’s almost no appreciation in New Mexico, and it’s very difficult to sell land here. So we’d just have a piece of land.

I sure wish I could simply use 1031 funds for remodeling, because I could always find remodel projects, LOL!

Speaking of…the new windows have arrived at the Homesteads house, and they are just starting to cut the old ones out.

 

It’s hard to watch all the destruction going on at the Calle del Norte house, which we are buying. We’re set to close on Thursday.

Here’s a photo of a length of trench, with the casita in the background.

The new septic tank is in.

Now they are trenching for the drain field. The trenching is very deep. Here you can see the line going down along the bocce ball court, which connects the tank to the field, which is located out past the trees.

Here’s the tree I’ve been trying to save. If you zoom in, you can see some large roots have been severed.

 

Here’s one of the workers, carefully maneuvering the smaller of the backhoes between the bocce ball court and some juniper that I cut back, hoping to save. He had originally requested all that juniper be cut down. After I cut out about 1/3 or 1/2 of it out, he has room, but barely.

There’s a lot of disturbed ground out there now, and in the desert it will be years before it looks natural again, which is discouraging. But when you flush, you want it to go down…and stay down!

 

Meanwhile, as if I didn’t have enough to do running around saving trees, we are still bidding on potential rental property.

I saw three houses yesterday. I visited House #9 a second time, and also saw two new ones. I’m going to call them House #11 & #12, although I think I’ve actually seen more than that.

House #11 is in great shape! The conventional wisdom when buying rentals is that you should buy something in less-than-perfect shape, because you can negotiate a low price and then fix it up as needed. That is true in some markets and in some situations. It’s not as true for us.

 

For one thing, it happens that in our area, the cost of fixing up a property is quite high compared to the low cost of purchasing already updated property. Secondly, John and I would prefer to use our 1031 pre-tax money, rather than out-of-pocket post-tax money. So it makes more sense for us to pay for the upgrades in the sales price, rather than doing them ourselves later. Plus, we’re already in middle of a remodel on our own house!

 

The problem is, everyone else wants those perfect-looking houses too! There was a bidding war on the first house we tried to buy, House #7, and we didn’t bid high enough. It was too far over our budget.

House #11 is in a good school district on a nice, quiet, well-maintained street.

 

The only downside is it’s an attached property.

 

In the old days, I’d call it a duplex, but they don’t seem to call them that anymore. They also used to sell the two sides of a duplex at the same time as one building, but nowadays they sell the units individually like condos or townhomes. Maybe that’s why they’re calling it a townhome.  I’d love to buy both halves, but the other half isn’t for sale, and I’m not in a position to buy yet another rental right now anyway.  So half a duplex it is. (It’s the one on the left.)

 

This one has nicer materials than House #9; granite counter tops and modern tile in the kitchen and bathrooms.

It also has a gorgeous backyard. Nice backyards are hard to keep up in rentals, and some landlords opt for low-maintenance rock gardens and hardscape (paved patios, etc.)  But I’m a sucker for a beautiful yard. It just means that I’ll need to put some language in the lease about garden upkeep. Also I will have to be out there on a regular basis, checking up on it. There is a drip system, which will help. And that bright green spot of lawn is actually artificial turf.

 

We now have construction going on at both Calle del Norte and Homesteads. They are both within walking distance from the house we’re temporarily renting. So lately I’ve been doing a morning and afternoon walk to check on things at both houses.

This morning at Calle del Norte, they’ve brought in a much smaller backhoe, which of course they should have brought to start with, since they had already been out to scope the site. But at least it’s here now.

This guy is pumping out the old tank, getting it ready to abandon. The system needs a new tank as well as a new drain field.

Then when I went back at noon today, they were busily digging a deep hole for the new tank (with the smaller backhoe).

So far they haven’t impacted the chamisa, which is the bluish bush behind him. It’s a native that blooms in a beautiful, brilliant yellow. But I’m anticipating that once they start trenching, they’ll plow right through it.

By the way, do you have any idea how long it took me to figure out how to spell chamisa? I tried chemisa and chamesa and google totally failed me. I finally found reference to it on a local website.

Meanwhile at the Homesteads house, demolition continues.