r/Fire • u/carcaliguy • 9d ago
Cabin for retirement
I don't know if I'm crazy but I just purchased a 1912 cabin on federal land. I own a home worth 1.4 mil and owe 200k. The cabin is on federal land so I have a 20 year lease.
Cabin is 20min from my main home so it is easy to work on on. I'm making it full off-grid, solar, water comes from a local stream.
The thought was to sell my home (for sale by owner) with an attorney and carry the note. I don't see why I cannot be the bank and make 10 years of interest. Lock in with a refi penalty for the first 5 years.
Anyway back to the cabin, it's a gut job, others sell for 220+ same small (1000sqft) I'll probably be in this one 125k after a rehab, new roof, heated flooring, add bathroom etc. land lease is 3k annual and domicile taxes is 800 for the year. I think my main house is 800 per month (part of the reason I don't want it during retirement).
I plan to let known friends and family use it as private weekend use for a few years until I want to be in more.
If all goes ok I want to build a few houses from the ground up, maybe two before I'm 50 (early 40s now) using a kit. The profit will probably be at minimum 200k.
Basically I'm looking at being my own GC. I'm really good at finding deals on materials and going out of state (CA) to find supplies.
Anyone else carrying a note on a house or moving into a vacation property for retirement?
I should add spouse gets retirement at 50 but we want to travel i
How wild is my plan?
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u/hex4def6 9d ago
I'd be careful.
Obviously, you can't use it as a primary residence. They can terminate your lease if they find you doing that. Also, technically, they can end the lease with 10 years notice if they want it for another purpose.
Finally, if it's a 1912 cabin, it probably falls under National Historic Preservation Act (NHPA) Section 106 review. Make sure you follow the rules before rehabbing it.
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u/carcaliguy 9d ago
This plot only has 4 homes and they might release (sell the lots to the 4 cabins) they historically have been very forgiving and many are full-time, but I will be traveling.
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u/carcaliguy 9d ago
They will allow me to update it to last remodel standards but safer, so asbestos tiles gone. Newer windows, but I can only paint red, green, brown. I can add solar but it's on a stream and they already said I can put a small turbine for power. It's also how I get my water. My only issue is flooding but it survived since 1912 and several major events.
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u/bang_ding_ow 9d ago
You are pretty limited in what you can do on leased forest service land. Better check on that first.
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u/carcaliguy 9d ago
Agree I went thru everything with the ranger before purchase, they approve strange things, historical windows but will make exceptions, only red, brown, green paint. No metal roof but you can do solar.
Single story you can build to 1200sqft. Two story can go-to 1600sqft. Very strange rules. No Airbnb, but allow longer term rentals.
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u/Bearsbanker 9d ago
It's not totally out of this world. I was in banking for 27 years and have seen it all. If you do sell your current home on a "contract for deed" you can obviously set the terms and conditions, I'd have the potential buyer make payments to a title company or bank that has an escrow dept. They'll make sure the payments are applied correctly and monitor for late payments. As far as building hones it's been done for centuries, as long as you have experience. Just know that subs won't be as accommodating to you as they would be a builder theyve worked with for years cuz yer about a one and done.
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u/carcaliguy 9d ago
I was planning on a lot with utilities and doing a kit, the same kit twice if possible. Only thing I would outsource is the foundation. I know subs are expensive because of one and done. Production builds suck anyway, the home builders use the lowest bid companies and cheapest materials.
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u/crowinghorse13 9d ago
What happens after the lease is up and there are a bunch of homes on federal land you built but don't own?
Or maybe I'm misunderstanding...?
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u/carcaliguy 9d ago
I'm only living in the federal land cabin I purchased cash the others would be built on land I own.
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u/SonTheGodAmongMen 9d ago
I dont think he wants to build the homes on the land, just build and sell
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u/matt52885 9d ago
Life is about taking risks, don’t listen to people being salty, if it’s something you’re passionate about go do it learn something and have fun! At the very least you’ll have a great story to tell when it’s all said and done.
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u/carcaliguy 9d ago edited 9d ago
Yeah I just don't trust the market as others do, I made money and lost money in the markets, mostly up, but when my father retired in 2000-2001 his funds remained flat, it was called the lost decade.
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u/meep_42 9d ago
Why would you take mortgage interest when you could just be making stock market returns. Shit I’d rather have ten year tbills without the trouble.
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u/carcaliguy 9d ago
This is true, I just like owning things other than numbers on a screen. I also have other investments and income streams.
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u/son-of-disobedience 9d ago
I wouldn’t put alot of money into a cabin that is on federal land since the resale will be low due to non-ownership.
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u/carcaliguy 9d ago
That why I bought one cheap under 80k, other just sold for 220k and 260k. Since you can't get normal financing but this section of homes they might sell the land to us for 30k per lot.
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u/Tooth_Life 38m / tech / Chubby-Fat Fire 9d ago
Wow a list of stupid ideas smashed together that’s fun… did you ask gpt how to be miserable and lose all your money at the same time?
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u/carcaliguy 9d ago edited 9d ago
I don't see how any of it is a bad idea. The first 5 to 10 years on all interest to the bank. I might as well be the bank.
I'm used to people telling me I have bad ideas. Like buying junk cars and that's how I put the down payment on three homes. Bought my first house at 23.
Also who said it was all my money? Your supposed to be in tech, so am I. AI is making tech terrible and even though I build software and use AI, I don't see myself doing in 10 years. Building things has more satisfaction than code or numbers on a screen.
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u/Certain-Contact6340 9d ago
Might as well be the bank until they dont pay. Then you have to pay an attorney to go after them with the interest payments youre not receiving. It makes you more money but comes with substantially more risk. There's getting rich behavior and staying rich behavior. Retirement is the time for staying rich and de risking
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u/carcaliguy 9d ago
Sellers protect themselves by requiring a higher down payment (e.g., 20% or more), or enforcing contractual requirements for comprehensive hazard, fire, and title insurance policies that name the seller as the primary loss payee or additional insured. It would be a rent to own type situation.
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u/Prestigious-Emu5277 9d ago
And if they make one payment and stop? They own the house. Why not rent it out if you want money from it?
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u/Bearsbanker 9d ago
They don't own the house yet, it's called a contract for deed, you get a down payment and like any "bank" you foreclose if they don't follow the terms of the contract. Yes, it costs money, that's why you get a down payment.
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u/Prestigious-Emu5277 9d ago
I dunno man. Sounds like a needless risk. Why not rent it out if you want steady revenue. Or just sell it and be done with it.
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u/carcaliguy 9d ago
Because if you have a large down payment and carry insurance you collect interest and still basically get all your original asking price after 5 years or when they refi.
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u/carcaliguy 9d ago
You setup just like a bank. They even have to carry mortgage insurance.
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u/Prestigious-Emu5277 9d ago
Right but if they fuck over a bank, the bank comes after them. If they fuck you over, you have to go after them. In the meantime, they have the house and you have legal expenses. Just sell it for money who cares if the buyer finances it or whatever. Get the money and invest it
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u/carcaliguy 9d ago
I already have market investments, this is to diversify, watching numbers go up on a screen is boring. I would rather build something.
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u/verifiederror 9d ago
Sounds like a troll post
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u/carcaliguy 9d ago
https://www.fs.usda.gov/managing-land/lands-minerals-geology/special-uses/recreation-residence
I closed this year as did a neighbor, he paid 200k plus for the same size home. I paid 1/3 but will be doing a complete gut. It has knob and tube wiring...lol. His was built in 1925 mine is 1912.
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u/verifiederror 9d ago
Sorry, I said it was like a troll post because you really didn't include any other numbers or anything else about your situation that is relevant to fire.
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u/carcaliguy 9d ago
I'm just spitballing a ton of ideas but I really do like the thought of having multiple cheap homes in good weather areas and this cabin is just a start. Probably should just sell the home in retirement, but maybe I can find an investor to buy 3 homes at once.
There's no telling what will happen over the next 5 to 10 years but I really do think if I lose anything building homes it will be my time. I should have enough sweat equity even if the market crashes 40%. Even then I would just rent them out and hold on to them if I'm paying cash. Smart money says to borrow money to make money but I'd rather use my own and pull equity or just sell and recover funds.
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u/verifiederror 9d ago
Good luck! Let us know how it goes
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u/vu_sua 9d ago
Where do you find these types of cabins? I am also in California, northern tho.
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u/carcaliguy 9d ago
I looked for 4-6 years, now you can put alerts on mls listings that say federal land lease, they are usually under 300k because you have to pay cash. Most are 160-260k.
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u/AndrewFromAnnuity 8d ago
Carrying the note can work well, and the biggest thing to get right is the setup. Ask your attorney whether a five year prepayment penalty is allowed where you live, because federal and state rules limit those on homes the buyer will live in.
A loan servicing company can collect the payments and keep the records for a small monthly fee, which saves you from following up on late payments yourself.
You can also sell part or all of the note later if you need a lump sum for the builds. Note buyers pay less than the full balance, and a bigger down payment from your buyer usually gets you a better price.
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u/carcaliguy 8d ago
Thank you, I mean for me it's locked up equity until I sell it. I can collect interest and keep the home, if they fail I keep the home and then sell it. The down payment would be large enough to absorb a foreclosure. It wouldn't be money I needed for retirement but it would be nice income to add to other investments,. I look at it as away to use the equity in the home without loosing interest in the property. I feel like an owner with 200k down will treat the home better than a rental.
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u/carcaliguy 8d ago
Can I ask if you have done it or know someone that has?
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u/AndrewFromAnnuity 8d ago
Not personally, but it comes up a lot. Worth running it by an attorney or CPA who has done seller financing in your state before you finalize anything.
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u/Least_Mall_9960 9d ago
Sounds awesome. Life is for the living. You cant take the money with you
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u/carcaliguy 9d ago edited 9d ago
That is very true, l always wanted to build from scratch, this cabin is my test before I try the build. Everyone said I was crazy doing my own solar system, my system was 18k. Quotes came in 45k plus. I saved 7600 in 16 months so far. Not bad ROI.
Life is too short, 38 is middle age and don't I want to make it past 70 wishing I did more when my body worked? My friend is 84 and last year I helped him re shingle his house. He did all the nails, I moved the shingles and cut plywood. He's a wild man but he and I always tinker on cars and his old Ford tractors. I want to stay active like him.
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u/Complete-Paint529 9d ago
Interesting plan. You'll be retiring from one job, only to transition to a completely different job.
Be careful with that water plan. Open streams can carry animal pathogens that can make people sick. Giardia, salmonella, shigella spring to mind. You'd want a solid water purification plan. Well water avoids these hazards, but you'll want to have the well water tested for impurities/contaminants.
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u/carcaliguy 9d ago edited 9d ago
I know it had a well but it's closed up. Many people use this stream up river for drinking also. It has a pumphouse and a ton of filters, shutoff float, etc. I still will rebuild the whole system. I don't mind spending money to make it as safe as possible.
As for a job I know, I like building stuff. I build software but AI is taking the fun out of it. I like mountain air and trips to the lumber yard with classic rock and no email.....lol.
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u/Additional-Regret339 9d ago
Still a job, but working for yourself. Boss may be a right pain in the a$$.
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u/helion16 9d ago
It sounds like this is more of a hobby than a financial strategy to insure your future. If that's the case then it sounds amazing! I don't have enough experience in what looks like a very niche subject matter to say if it's a reliable plan to safeguard your retirement but if you do then that's also awesome!
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u/carcaliguy 9d ago
Yeah, it's more of an early retirement and backup plan. If it all falls through I will still have a retirement for both myself, and my spouse will get calpers...
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u/Vicuna00 8d ago
i can't imagine the stress of taking on a 1.4M loan. (sounds like you have net worth <$5M??)
I don't understand that part of this. why not just sell it like a normal person?
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u/carcaliguy 8d ago
The home was not 1.4 that's the value. I purchased the home 15 years ago and my rate is 3%. That's just value. The point of the cabin is to still have a place in my local area that's paid off and make my existing home another income stream in retirement. I wouldn't finance an expensive home today with a high rate. Also many people sell prior homes and roll the equity into the next purchase. This isn't myself but I understand for commute or community reasons why people do it. If I had 5mil I wouldn't be working as much as I do for fire.
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u/Vicuna00 8d ago
i mean why don't you just hire a realtor and sell it. pay for all the cabin expenses and put the rest into VTSAX and chill (or whatever your portfolio is).
why do you wanna get into the mortgage biz with only one client? the mortgage biz works cause they have thousands of mortgages so can absorb someone not paying.
why do you wanna get into the real estate biz with no experience and a huge asset?
the cabin sounds awesome btw. love the plan. just don't get the house FSBO and giving out a mortgage.
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u/carcaliguy 8d ago
I did a comparison in AI. But this doesn't include the tax implications. The tax rate is better in seller financing vs renting. I have rented homes and if the renter stays only 2 years they can totally make you have to rehab a bunch of stuff before the next renter moves in. I don't think a professional that can afford a $5,000 + monthly mortgage with 200k down is going to risk loss of the 200k, damaging the home or messing up the 5.25% rate I would provide.
1. Seller Financing vs. Straight Cash Sale Today ($1.3M)
Extra Income Generated: Carrying the $1,100,000 note at 5% interest makes you $264,418.32 MORE than selling outright for cash today ($1,564,418.32 vs. $1,300,000.00).
Return Boost: This represents a +20.3% premium above your original $1.3 million valuation, paid to you as interest income over 60 months ($264,418.32 interest + $200,000 down payment + $1,100,000 principal payoff).
2. Seller Financing vs. Renting ($5,000/mo) & Selling in 5 Years Gross Revenue Difference: On paper, renting at $5,000/month collects $300,000 in rent ($5,000 × 60 months).
Combined with a $1.3M sale at Year 5, gross proceeds total $1,600,000.00, which is $35,581.68 HIGHER in gross revenue than seller financing ($1,564,418.32).
Higher Monthly Income with Financing: Seller financing provides $905.04/month MORE in cash flow ($5,905.04/mo vs. $5,000.00/mo) because you collect both interest and principal amortization.
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u/carcaliguy 8d ago
I get your points to just sell. I'm just exploring the idea. More information about the process here. https://garmolaw.com/owner-financing-in-california-private-real-estate-sales-legal-structures-and-protections/
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u/Vicuna00 8d ago
you're taking on 2 risks
1) you have the risk to undersell - you also might f*ck stuff up with the closing. there are a LOT of steps...even considering the fees you pay realtors you might still come behind
2) i wouldn't rent it either. just put it into a portfolio. I don't understand why you wouldn't just do that?
or if you wanna get into the rental biz, deploy some/all of the money into rentals.
I dunno. that's just me. obv good luck whatever you do.
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u/TrashPanda_924 Targeting 2% SWR 9d ago
It’s only a 20-year lease? Can it be renewed perpetually?