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Am I crazy? What would you do??

General discussions of the systemic, societal and civilisational effects of depletion.

Am I crazy? What would you do??

Unread postby gowgow2 » Wed 04 Jun 2008, 01:14:56

Ok, so we have a big decision to make and I'd like some advice.

We have a work at home business with fairly significant storage needs (we manufacture and sell a product), and it is taking over a significant portion of our 2700 sq/ft house. We'll be soon be buying a 2nd home business that will have even larger storage needs. We could of course rent a warehouse, but that could easily cost $2000-$3000/month and we'd very much like to continue to work from home.

In order to run both of these businesses from home, we'll definitely need a 3-4 car garage, and perhaps a 1700-2000 sq/ft open basement. The homes with these attributes in the area we're moving to are 5500-7000 sq/ft McMansions in the suburbs 15-25 miles from the city center.
I've been aware of the peak oil idea for a couple years and I'm convinced that serious problems are coming. I've read some of the books, watched "the end of suburbia" and several other documentaries on the subject. On the one hand, buying a huge house in the suburbs seems like a terrible idea, but honestly it's the best idea I've been able to come up with.

Everyone has their own ideas for the best ways to prepare for peak oil. Some have already bought a plot of land and are preparing by stocking up on supplies, starting a garden, planting fruit trees, and living a simpler life. Like many of these people, I have a family I'm trying to provide for. I suppose my approach to preparing is the polar opposite of those who have moved to the country to raise chicken and grow they own food. My approach is to try to earn every last damn cent I can before TSHTF. Who's with me???

We would never in a million years buy one of these ridiculous homes under normal circumstances. We don't give a rats ass about status, or keeping up with the joneses or any of that nonsense. Really, truly. But between these 2 businesses, they might (at least for awhile at least) take in $60,000-$70,000 revenue each month (and perhaps $14,000/month profit). My wife will run the businesses (with hired help), and I'll hopefully will be getting another job outside the home where I hope to earn another 80k/yr. I mention the numbers not to brag, but rather to emphasize that it's potentially a good opportunity that could work out well for us as long as the economy keeps chugging along.

Can you understand our dilemna? I'm sure that many of you would argue that buying such a home is a extraordinarily bad idea, especially now with the price of gas where it is and the grim headlines we've been seeing lately. But put yourself in my shoes. If the money is pouring in (relatively speaking) why shouldn't we buy the home and enjoy the jetted tub and granite counter-tops as long as we're able to? I suppose some here would brand us as capitalist pigs, "part of the problem", and I'll admit that our petroleum and carbon footprints will certainly be going up. But on the other hand, my wife at least will be working at home which is pretty "green", and we'll actually be manufacturing a product in the U.S. which is rare these days and something this country will need more of in the future.

I'd love to hear your thoughts because I'm struggling to know what to do. I suppose I could end up as one of those poor saps Kunstler speaks about with a home too far from the city that no one wants to buy and is too expensive to heat etc, etc. But if the economic meltdown/doomsday scenarios arrive in full effect, then I think most of us are pretty well f*cked no matter how we've tried to prepare. My thinking is that major energy problems will be relentless and almost certainly neverending, but will also be gradual and will happen slowly over time. As long as the economy is still somewhat in tact, hopefully I can continue to earn a buck and will have some time to build up various kinds of assets that will have at least some kind of value. When things truly unravel, I'd like to think I'll have some time to change gears and make whatever move is needed in order to do what is best for my family.

If you think the big home is a bad idea, do you have any better alternatives to suggest? Thanks in advance
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Re: Am I crazy? What would you do??

Unread postby threadbear » Wed 04 Jun 2008, 01:19:48

Why don't you buy 2 older smaller better built bungalows. Live in one and work in the other. I'd be renting the warehouse, if I were you, but if that's unacceptable to you, you might try this option.
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Re: Am I crazy? What would you do??

Unread postby Dreamtwister » Wed 04 Jun 2008, 01:24:08

RE: Storage space

Those modular steel buildings are a fantastic way to increase your storage space quickly. The catch is, you need some square footage on which to erect them.

I think it was Roy Rogers who said "Buy land, because God isn't making any more of it." Now, I'm not a particularly religious person, but the advice seems sound enough. Owning more land is rarely a bad thing.
The whole of human history is a refutation by experiment of the concept of "moral world order". - Friedrich Nietzsche
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Re: Am I crazy? What would you do??

Unread postby gowgow2 » Wed 04 Jun 2008, 01:32:14

Dreamtwister wrote:RE: Storage space
Those modular steel buildings are a fantastic way to increase your storage space quickly. The catch is, you need some square footage on which to erect them.

We've considered this option, but as you said, you need the land. We need to be in a metro area and the only places with this kind of land are just as far out as the McMansions we're looking at.

The 2 home option isn't such a bad idea. Maybe this is worth looking into further.
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Re: Am I crazy? What would you do??

Unread postby Dreamtwister » Wed 04 Jun 2008, 01:37:07

In that case, maybe you could consider an older, disused warehouse or factory? Many downtown cores have them, and everyone seems to be converting them into mixed-use residential nowadays anyway...

Price might be a factor though, they are very popular with condo developers.
The whole of human history is a refutation by experiment of the concept of "moral world order". - Friedrich Nietzsche
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Re: Am I crazy? What would you do??

Unread postby threadbear » Wed 04 Jun 2008, 01:37:54

gowgow2 wrote:
Dreamtwister wrote:RE: Storage space
Those modular steel buildings are a fantastic way to increase your storage space quickly. The catch is, you need some square footage on which to erect them.

We've considered this option, but as you said, you need the land. We need to be in a metro area and the only places with this kind of land are just as far out as the McMansions we're looking at.
The 2 home option isn't such a bad idea. Maybe this is worth looking into further.

The difference is renting a place in the sticks to use as storage is much wiser than buying at this point.
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Re: Am I crazy? What would you do??

Unread postby jlw61 » Wed 04 Jun 2008, 06:49:43

gowgow2 wrote:
Dreamtwister wrote:RE: Storage space
Those modular steel buildings are a fantastic way to increase your storage space quickly. The catch is, you need some square footage on which to erect them.

We've considered this option, but as you said, you need the land. We need to be in a metro area and the only places with this kind of land are just as far out as the McMansions we're looking at.
The 2 home option isn't such a bad idea. Maybe this is worth looking into further.

I would definitely be looking at keeping my costs as low as possible. The only way I would consider a McMansion is if it would help me sell significantly more product than I would be spending on it. Remember, a 200k house can be paid for in less than 2 years at 10k a month while an 800k McMansion would take over 6 years.

I also learned the hard way that a whirl pool tub and lots of toys are a diversion that take away from doing your business. Flashy toys also advertise that you are "making it big" and may encourage others to get into the game. A low key "we're working hard and barely making a go of it" approach, IMHO, is definitely the way to go. This would also give you the opportunity, if you cover your bases properly, of enjoying life a lot more than anyone else later in life, even if TSHTF.

If you purchase a second (or even third) small home, you then have rental property should you later decide to shutter your businesses. In the area I live in, I would definitely be doing this and checking out the smaller houses in the area (1200 - 1600 sq ft is a lot of space if nobody is living there). If your neighborhodd has been hit with a couple foreclosures, this could be a Godsend for your needs.
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Important lessons I had to learn the really hard way:

1) The time to economize is during the good times.

2) If you get and stay out of debt, nobody owns you and you are free to do almost anything at anytime.

3) Shiny toys and expensive cars are like holding up a sign and saying "I've got money, come and get some". They also tend to pull you away from the thing that makes you money to buy those shiny toys.

4) It's much easier to look poor while you laugh all the way to the bank over looking rich while you scramble to pay the bills.

5) The first budget line is a nice vacation every year. There are graveyards full of people who didn't live long enough to enjoy their retirement.
When somebody makes a statement you don't understand, don't tell him he's crazy. Ask him what he means. -- Otto Harkaman, Space Viking
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Re: Am I crazy? What would you do??

Unread postby Ainan » Wed 04 Jun 2008, 08:29:56

I would take the 'survivalists' approach gowgow2. Buy the McMansion, but save as much money as you can. Then buy a cheap piece of land in a very rural location. Always make sure you have enough fuel to get there and back on hand in your 'bug-out' vehicle.

If you can no longer afford to keep the McMansion then you still have somewhere to go and if its no longer safe to live in the McMansion then 'bugging out' is a good idea. The world won't be collapsing today, tomorrow, next week or even next year so don't rush into anything.
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Re: Am I crazy? What would you do??

Unread postby skyemoor » Wed 04 Jun 2008, 08:42:58

You mentioned that you would need to expand given a thriving economy. At this point, it looks like the economy is not expanding, and may be starting to contract. Do you have a business outlook plan? Would you need more space in a stagnant economy? If not, you have an option to remain where you are. You could also split one of the businesses into a warehouse district.

Do you have to be in the city you currently reside in or is your business primarily mail order? If the latter, consider cities and areas that would do well (or at least not poorly) as peak oil progresses. Any area highly dependent on petroleum will have a hard economic time when the full effects of PO hit. Read "Major US City Preparedness for Oil Crisis".
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Re: Am I crazy? What would you do??

Unread postby pup55 » Wed 04 Jun 2008, 09:12:41

Can you understand our dilemna

This is not much of a dilemma.

If you figure this house will cost you $750K, which is about what they are in my area, you are committing your business to about $4000 per month in payments.

For much less than that, you should be able to rent a little shop near your place, where you can lay out these assembly lines in some efficient manner, and have plenty of money to put in your pocket later.

That way, if the economy takes a dump you do not have to worry about losing your house. You are sad, but at least you do not have to move. You should buy a smaller house that you can afford with your $80K per year salary and no business income.

I know what you are thinking: "this doesn't apply to me because our little businesses are recession proof", well, they aren't. Trust me on this one.

In addition to not having a lot of employees walking around in your house all the time, and keeping down the chaos and clutter that no doubt surrounds you all the time, there are probably covenants and regulations in most areas that ostensibly forbid you from operating a little manufacturing business in a ritzy neighborhood. For one thing, the neighbors will no doubt complain about the employees' cars parked all over the front lawn.

There are some tax ramifications to this, of course, if you turn 50% of your home into some kind of little factory, you get to write off 50% of your utilities, repairs, and other frivolity on your taxes every year. But, chances are, you will still be better off setting these little lines up in a place that was designed for that purpose, because you will be able to run them in some sane way.

Chances are, if you set your inventory area, assembly lines, and finished goods areas up in an orderly fashion, you will be able to improve your productivity and quality, and lower your costs, thus causing you to make even more money.

Also, if you get sick of the whole thing, you will find it easier to sell these combined businesses for a lot more than you would the "home based" businesses.

Keep your overhead low.
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Re: Am I crazy? What would you do??

Unread postby joelchicago » Wed 04 Jun 2008, 09:31:57

I have purchased property further in the country to do something similar. Prices in my area are literally over 10X what I paid for the place (which is about 9000 sq ft). I drive an hour right now to get there (in my little Honda or on my cycle), but as the business grow, I have the option to move there and live very very cheaply.

Relocation a short ways outside the ex-urbs can help too, because if things do continue to ramp up for a while, the property values will only rise, and you can usually find a farm-ette or something like that, which nearly always comes with some kind of Morton building, usually 40x60 or bigger, which is really good for warehousing. And you're only another 3-5 miles from where you are looking now.

Just some more thoughts for you. Oh, by the way, my 2700 sq ft house (which is bigger than I should have bought) is 35 miles from the city center here in Chicago, and I'm nowhere near the fringe - the burbs just keep going and going and going.... That's what forced me to go rural (which, since it came with good land, is starting to look like a good decision).
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Re: Am I crazy? What would you do??

Unread postby Heineken » Wed 04 Jun 2008, 09:53:18

The future will be about contraction, not expansion.
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Re: Am I crazy? What would you do??

Unread postby Ludi » Wed 04 Jun 2008, 09:59:59

My advice as a business owner is -
Do not go into debt to expand your business!

My business has never been in debt and will never be in debt, to the chagrin of my bank. They don't understand the concept of operating a business in the black.

I also work at home - in the house and in a small shop building. We recently built a small storage building.
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Re: Am I crazy? What would you do??

Unread postby dinopello » Wed 04 Jun 2008, 10:07:23

If you live in SoCal, you could get one of these deals
Buy one McMansion, get another free !
In a sign of how difficult it is to sell new homes in Southern California right now, a San Diego developer is offering a "buy one, get one free" deal, pairing million-dollar homes with less expensive homes.
"We thought, 'Why does it just have to be on Pop Tarts and restaurants? Why not buy one home, get one free,'" Dawn Berry of Michael Crews Development told 10 News in San Diego.

Maybe there are similar offers wherever you are?

Are there potential zoning restrictions to operating your type of business in a rsidential area ? In general, I would look more to a lease of commercial space if I though my business would grow.
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Re: Am I crazy? What would you do??

Unread postby Ferretlover » Wed 04 Jun 2008, 10:14:55

I am no economic wiz, but there are others here who are-maybe they'll point out the pros & cons in my post for you.
If it were me:
Have your business buy a small farm on the outskirts of the city. One with a barn and/or outbuildings.
You could plants food trees and start a garden, etc., while providing space for your products.
You did not mention the product(s) you were selling. Are they going to be useful (basic needs) for the future? If not, don't get stuck with a lot of inventory-unless it is something you can trade or barter when TSHTF.
Those McMansions are going to make Very Good targets for the future zombie hordes! Not to mention, heating them. And, your employees-all it is going to take is one, who gets hit especially hard who then mentions to the wrong person, they know where they can get all kinds of stuff. As the economy goes down, you'd be stuck with the taxes, too. McMansion=Bad, BAD idea.
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Re: Am I crazy? What would you do??

Unread postby Heineken » Wed 04 Jun 2008, 10:25:24

I would pull in my horns, not expand. Consolidate. Strengthen what's strong about your business, minimize what's weak, and above all don't take on further risk (including the maintenance-cost risk posed by a McMansion).
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Re: Am I crazy? What would you do??

Unread postby dunewalker » Wed 04 Jun 2008, 11:08:39

gowgow2 wrote:Ok, so we have a big decision to make and I'd like some advice...
I've been aware of the peak oil idea for a couple years and I'm convinced that serious problems are coming. I've read some of the books...
I'd love to hear your thoughts because I'm struggling to know what to do... When things truly unravel, I'd like to think I'll have some time to change gears and make whatever move is needed in order to do what is best for my family.

gowgow2, it's hard to say whether I'm a doomer because I've read so many doomer novels, or that I've read so many doomer novels because I'm such a doomer. In either case, I've read quite a few and most seem at least somewhat plausible. This one is amongst the best:
http://www.survivalmonkey.com/SF%20book ... urrent.pdf

You can read the entire thing online, or download & print it out. The writer includes variations of your scenario in his plot.
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Re: Am I crazy? What would you do??

Unread postby Mack12345 » Wed 04 Jun 2008, 11:59:03

Buying the McMansion will be a HUGE mistake imo . Do whatever you have to do to avoid it .
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Re: Am I crazy? What would you do??

Unread postby gowgow2 » Wed 04 Jun 2008, 14:43:14

pstarr wrote:You mentioned that you would need to expand given a thriving economy. At this point, it looks like the economy is not expanding, and may be starting to contract. Do you have a business outlook plan? He says he 'manufactures' something in a 2700 sq. ft. suburban home. Doubt it. He probably 'assembles' something. Gold-lame hot-tub filter gaskets ? Downspout mittens (replete with gambling shar pei's) made from recycled Coke-bottles? Green patches for unsightly brown weed-holes in the lawn? Green fuel containers in that say "biodiesel?" (His 'assembly' is sticking the green label on them). Hot-Pepper Jelly? Crap no one will want very soon?

Our home is not suburban, but within the city limits of a large city. You are somewhat correct though. The product we make is a simple product to make and is only partially manufacturered in our home. The first step hapens in a local factory, then additional steps happen at our home, and it's finished off by some local seamstresses. There is a good demand for our products, but there are hundreds of competitors. Fortunately we've had success and have become one of the top brands with customers worldwide. Don't get me wrong though... it's still a small family businesses.
pstarr wrote:He then describes a preconceived decision ("the area we are moving to . . .") and makes like he needs to ask our opinion. The guy is a poser. He 'owns' one and is about to 'buy' a second business. At least one of these is not a business, but a failure. Just the nature of start-ups in America--98% fail. He wants his fancy home and nothing we will say will stop him. Maybe his wife or punker kid put him up to this post.

You're making assumptions. Both businesses are debt free and are profitable, but I wouldn't call either a blockbuster success. Business A has almost allowed us to save enough to pay cash for Business B. The hope is that with both businesses plus an IT job outside the home, that we'll earn enough to live confortably and save for the difficult times ahead. I think you pulled the "98% of startups fail" figure directly out of your ass. Many, perhaps most startups do fail, but it's not 98%.
We currently live in an area where real estate prices are high and the plan is to move to a city where prices are much lower. It looks like we'll be able to buy a home twice the size of our current home for only 80k-100k more than our current home. Someone thought that we'd be paying 750k, but the homes we're looking are are closer to the 500k-625k range and we expect to sell our home for between 470k-490k. Another reason we're considering this new city is that I was laid off from my current tech job (which ends at the end of September) and the city we are considering also has a good supply of tech jobs.
It's not true that I have my heart set on a McMansion. I'm truly not sure what the best move is for us. I don't care about having a fancy house, or fancy cars, fancy clothes, or fancy anything. But we would like a safe neighborhood with good schools, with kids around for our children to play with. We'd prefer not be be isolated, so the goats, chickens and home grown produce isn't going to happen for us...not right now anyway. I'd also prefer to find a home close to the light rail system because my thinking is that such homes, despite being in the burbs, would retain their value more as gas prices keep rising. There are many issues to consider and we need to carefully consider all the options.
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