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With the beginning of retirement for the Baby Boomers, those born between 1946 - 1964, the housing market will be swamped with existing homes for sale, as the baby boomers move toward retirement in places such as Florida, Arizona and South Carolina. Beginning as early as 2008, the housing market will see an abundance of existing homes coming on the market, as the first year of baby boomers become 62 years old.
Three years later, in 2011, when the first year of baby boomers reach 65, the housing market will begin to see a wave of homes put on the market by both 65 year olds and 62 year old baby boomers. Approximately 1.7 to 1.8 million existing homes will be added to the for sale list, every year for the next 18 years, through the year 2029.
The asking price of existing homes will have dramatic price drops as sellers try quickly to sell their homes prior to 2012 when a record number of baby boomers become 65 years old, approximately 3.8 million. Figuring that Baby Boomers are married to a spouse of the same age, then the number of existing homes to come on the market in 2012 would be 1.9 million.
In some instances, a Baby Boomer is married to a spouse of different age, younger or older. Whereas, the annual number of existing homes coming on the market by Baby Boomers can vary. The decision as when to sell may fluctuate, as a Baby Boomer waits for a spouse to reach age 62 or age 65. Nevertheless, the actual number of Baby Boomers remains the same, but the number of existing homes to come on the market may very well be much larger than expected, if Baby Boomers are married to someone younger. In my case, my wife is ten years younger, born in 1957, but we are still considered a Baby Boomer couple (see charts below). Births are rounded to the nearest thousands, with the highest being 4.3 million in 1957.
Births are rounded to the nearest thousands. One can easily see a "boom" in 1946, when births went from 2.8 to 3.4
million. The end of the boom is not as clear, however. Perhaps that
delineation was marked when annual births dropped below 4 million
Building Our Home
In the early years of our marriage, we decided to wait on buying a home, until we retire, and then we will build our retirement home. During our working years, we rented. I was an engineer and customers came to go over blue prints and projects. I also operated a computer business from home and was able to take tax deductions for portions of the rent and the utilities. Some of my work required trips to the customers office or to a project site. My car was used for my work and was also tax deductible, as well as the gas, oil, maintenance and auto insurance.
I also entertained customers, whereas tax write-offs for business lunches and outings were deductible, as were advertising and other items of promotional advertisement. A tax deduction for office in the home can only be deductible if you rent. Deductions for office equipment, including filing cabinets, chairs, desks, lamps, tables, computer equipment, telephone equipment, fax machine, printers, test equipment, water, electricity, fuel oil, law service and etc. are all porportionately tax deductible office expenses, only when you rent. The deductible requirement is that customers must come to your office for products or services.
Hypothetically, if we had purchased a home for $100,000 with a 30-year mortgage we would have paid approximately $1,000 a month as a mortgage payment. That's a total of $360,000. Certainly, we could have taken a tax deduction for the interest over the 30 years. However, by rule of thumb, we would have replaced the major appliances at least 3-times at $3,000 x 3 = $9,000. We would have repainted the exterior at least 2-times at $2,500 x 2 = $5,000. We would have repainted the interior at least 3-times at $2,500 = $5,000. We would have replaced the roof at least once at $2,500. We would have black-topped the driveway at least twice at $1,800 x 2 = $3,600. We would have purchased and replaced approximately 7 lawnmowers at $1,000 each x 7 = $7,000. We also would have purchased and replaced approximately 7 snowblowers or snow plows at approximately $650 each x 7 = 4,550. We would also had to replace the deck twice at $3,000 each x 2 = $6,000. Without including the interest, this would have been a total cost of $140,150.
Fully deductible interest.
In most cases, you are able to deduct all of your home mortgage interest. Whether it is all deductible depends on the date you took out the mortgage, the amount of the mortgage, and your use of its proceeds.
If all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages. (If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category.) If one or more of your mortgages does not fit into any of these categories, use Part II to figure the amount of interest you can deduct.
The three categories are as follows.
Part I - Mortgages you took out on or before October 13, 1987 (called grandfathered debt).
Part II - Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2006 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately).
Part III - Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2006 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2).
The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home.
So, theoretically when you deduct the mortgage interest, you saved paying tax on the amount that is interest. Whereas in our case, that would have been an approximate tax savings of 25-percent of $260,000 or about $65,000 over the thirty years. So if we paid a total of $360,000 plus $40,150 in maintenance and up keep over the 30-years, the total would be $400,150 less the tax savings on the interest, being a savings of $65,000. The total of a $100,000 home over 30-years, after tax deductions for interest, would have been $335,150. Trying to sell that 30-year-old home in a depressed housing market and in a market soon to be swamped with existing homes, would be a real challenge to hope for any profit.
In having a business in our rented home, here's how the savings mount up. Twenty-Five percent of the $1,000 per month rent for 30-years is $90,000. Twenty-Five percent of the electric bill, water, fuel oil, lawn service, snow-plowing, carpet cleaning, garbage service, at an overall monthly average cost of $565 for 30-years is $141.25 per month, and $1,695 per year, for 30-years is 50,850. Internet service and email for the business averaged $200 a year for 25-years is $5,000. Automobiles used for the business were deductible at an average of $6,500 per year for 30-years was $195,000. Auto insurance for business automobiles was also deductible at approximately $1,200 per year for 30-years was $36,000.
The gasoline, tires, batteries, oil changes, license, inspections, are also deductible on the business automobiles at an average cost of $150 per month, or $1,800 per year for 30-years was $54,000. Office equipment, furniture and office supplies were also deductible items at an annual cost of approximately $1,200 per year for 30-years was $36,000. The business telephone bill was also deductible at an average cost of $840 per year for 30-years was $25,200. Business lunches and outings were also deductible at an average of $2,000 per year for 30-years was $60,000. Business travel, airline tickets, parking, hotels, rental cars, meals and entertainment were also deductible at an average of $3,500 per year for 30-years was $105,000. Business lunches and entertainment is also deductible at an average of $2,500 per year for 30-years was $75,000.
The total deductible business savings has been approximately $732,050 over the 30-year period. It has been a good decision for us to rent a home, rather than buying, because of the tax advantages for the business. Renting would not be a wise financial decision if a person did not own and operate a business from their home. Tax deductions are only allowed when the business in the home, is a rented home. The decision to rent was the right financial decision for us, during our working years. Now in our retirement years, we are ready to build our two retirement homes, and build homes for our children, without the need of financing or a mortgage.
We did not want to be in today's invironment, where the hope of selling an existing home at a profit is quickly diminishing, as potential buyers are mostly becoming those who are illegal aliens, working for minimum wage. As of June, 2007, new two bedroom homes are being built in the Catskills by Roscoe Lumber, for as little as $28,000 and new three bedroom modular homes are being sold for as little as $67,000. There are large developing sales now, for double-wide Mobile Homes, starting around $50,000 for a 3-bedroom. There are new single-wide Mobile Homes selling at an average cost of $32,000. Illegal aliens have incomes of less than $20,000 a year, it seems unlikely that they would qualify for a mortgage of more than $50,000. If both husband and wife work and have a combined income of $40,000 they could qualify for a $100,000 mortgage.
With foreclosure homes at an all time high and with declining property values, home owners are not able to get additional refinancing to pay-off credit card debts. The number of foreclosure properties continue to rise and are expected to have mortgages made available with little or no money down.
Our choice has been to wait until our retirement and to then build our retirement home or homes. We want to be in New York for spring, summer and fall, but spend the winter months in Florida. We have five children and we want to also build homes for our children. We have two sons, one 23 and the oldest is 35. Both of our sons are healthy boys and very strong. Our boys are both experienced in carpentry and home building. We have discussed our plans with our children and they are very supportive of our retirement plans.
Beginning in January of 2005, I started making purchases on eBay of the tools and equipment that we will need to build our homes. I continue shopping for more tools and equipment for building our homes and hope to have everything we need by the year 2009. With so many existing homes coming on the market, and the decline in building construction of new homes, prices for lumber and building materials are going down as well. It is most likely that we will also see liquidation sales by many large building supply outlets.
Shown below are some of the items I have purchased for building our retirement homes and for building the homes for our children. Most of our purchases have been on eBay, where I have been able to shop for bargains and quality construction items, even cars, trucks and trailers. I enjoy sorting through the selections and buying one piece at a time. It's all part of our master plan. Take a look at the pictures below. My wife and I truly enjoy shopping at eBay.
In building our house ourselves, with the income that we have, it will take us about five years
to acquire all the tools we will need for five men to all be working at the same time. We are buying
enough tools for as many as eight men to be working at the same time. We don't actually anticipate
having eight men all at the same time, but we want to be prepared with enough tools for eight men.
In some instances, several men and women can be installing drywall, taping and spackeling the drywall and sanding the drywall. Several people can be installing insulation with staple guns at the same time. Several people can all work together in painting the drywalls at the same time.
Eight people can work together putting on the roof. We will have four roofing nailers and we will need helpers to lay out the shingles, inorder to stay ahead of the nailers. We will have four nailers for putting on the siding and we will need four helpers to keep bringing the siding pieces to the nailers.
Rafters or trusses will be build onsite in a preassembled jig. We are planning for three workers to be doing the assembly of the trusses, while five other workers will raise and set the trusses in place. There will be eight nail guns available for putting the sheathing on the roof and the sides of the house.
We will have eight screw guns that will be used for putting screws in the roof sheathing along all outside edges and along the peak, with three inch spacing. Screw guns will also be used for all sub-flooring plywood sheathing to avoid loose squeaking floors.
There will be enough power tools of all types to have as many as eight people working at the same time. In the event that we don't have eight people, then we will have spare tools in reserve, in the event that a tool should break or malfunction during the project.
Once the outer walls are in place and some of the interior walls, wiring for electric outlets, telephone jacks, computer network jacks, cable TV or satellite TV jacks can be installed. Thermostat and doorbell wiring can also be installed at this time.
After the walls are up, plumbing and all wiring can also be installed at this time for the kitchen, bathroms, and to all the bedrooms for washers and dryers located in each bedroom.
Below are some pictures of our planned retirement home in New York.
This New York retirement home is being built for a warm and comfortable family atmosphere. We look forward to having our children home for weekends and for holidays. We look forward to having our grandchildren come and spend time with us. When we are both dead and gone, we hope to leave our children and grandchildren with strength, self confidence and the courage to go after all they want in life. We hope to have set an example for our children, how to achieve their goals and avoid debt, by paying as they go.
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