How We Got Here

We’ve always had real estate as part of our retirement plan. It’s a constantly-evolving vision, as most long-term plans are. The property we just paid off is in the Chicago area and was purchased by my husband in the mid-2000’s on a 30-year mortgage.

We met in early 2010, and a year later we had decided to get married and move across the country for school. Selling the property at that time would have made zero financial sense, with the housing market still in its Great Recession death spiral. We signed on with a rental management company, packed our cars for the West Coast, and became long-distance landlords.

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After somewhat recovering from the anxiety and self-pity I’ve put myself through in the past couple months, I got curious about how our spending patterns morphed during our state’s recent “lockdown”.

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Our building experiment in Sedona, Arizona has finally resulted in a livable house, and it has a scheduled closing date where it will change over from being under a construction loan to being under a regular mortgage.

Whooohoooo!

In case we have not already bored you to tears with details on this: the build is a 3-bed, 2-bath main house with a separate “mother in law quarters” that is 2-bed, 1 bath. Both units have a kitchen and washer/dryer.

The Construction Loan

You can read about the early numbers (lot cost, down payment on the build, etc) in this post from December of last year.

We ended up borrowing $456k for the build itself, which was about what we planned on. The biggest surprise was that despite this being one of the last vacant lots in the middle of uptown Sedona, there was no gas line to the property. Getting one there cost $13k.

That $456k did include the excavation costs, which can be one of the higher-ticket items when building in the very rocky, cliff-covered landscape of Sedona.

Out of Pocket Expenses

We paid cash (via credit card) for our cabinets and and appliances, totaling around $20k.

These purchases resulted in thousands upon thousands of American Air miles, British Air miles, and the BA Travel Together Ticket. We have already gained back about $11k from said miles, and there are over 190k miles (and the Travel Together Ticket) left to use. So we’re feeling good about that particular building/travel hack.

But back to the subject at hand…

Landscaping Costs

The internet tells me the rule of thumb on landscaping is to spend about 10% of the value of your home on landscaping.

The last time this project was appraised, the value was $706k. So $70k on landscaping would be acceptable, I suppose?

We are not spending anywhere near that that much on landscaping, although we are paying good money to have a well-reputed landscaper handle it for us.

The landscaping plan currently includes retaining walls all around the property (very necessary in our minds), six new trees (required by the City of Sedona despite the fact that this was a dirt lot full of weeds), gravel and flagstone work, two paver patios (in addition to the covered patio that is part of the house), and fancy sitting boulders, a built-in waterfall, and a built-in gas fire pit. There will be plenty of smaller foliage as well. All the plants will be native so no irrigation system will be needed.

We’re going to leave landscaping costs out of the grand total, not because we want to mislead anyone but because landscaping preferences are very individual and costs are so wildly variable depending on what you need and want done on your property.

Grand Totals

Some quick math with the above numbers tells you we have spent around $476k on this thing after the lot cost ($89k) and the down payment ($60k).

It’s probably most useful to say it this way: we’ve put in ~$170k of our own money into this (not including landscaping) and taken on a ~$460k loan (rounded up to account to for closing costs when it morphs into a regular mortgage and whatever else we may have missed).

Update: After this post was published, we got an $18.8k refund from our contractor. So let’s adjust the above numbers to more accurately say we put ~$151,200 of our own money into this property, not $170,000. So the cost per square foot numbers I’ve shared below are a little higher than they should be.

Cost per Square Foot

Cost to build was $185/sq foot if you include the garage and covered patio (which has lighting, a ceiling fan, etc). It was $255/sq ft if you include only interior space.

I just read an article about building in Sedona that said to expect $300 – $350 per square foot on your new build. Some new homes are currently going up in the $800 – $1200 per square foot range.

It’s very possible that we’re building a peasant house in the middle of a town zoned exclusively for castles.

Regardless, the median list price of new-ish homes in our area is well over what we spent. This is what we were aiming for in order to play it safe should we need or want to sell quickly.

The Mortgage

We’ll have $460k in debt on this thing as of January 2020; monthly payment with taxes and insurance will be $2.6k.

Our interest rate is 4.1%, because it’s a “second home” and our third mortgage (we have a rental in another state as well as our primary home).

We’ll let you know how it appraises in a couple weeks.

Happy New Year, everyone! See you in 2020!

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Update: The home appraised for $741,000 in January of 2020.