Selling some shares at a loss... for home repairs!?

[jeromedawg]

Hey all,

I was originally planning/hoping just to TLH and 'capitalize' on some losses but am wondering if it would ever make sense to 'cash out' on the loss and use that money in other ways as needed (like for home repairs/fixes).

Has anyone ever done this or something similar, where you needed to draw down a bit of money and took a loss to get it (as opposed to a gain)?

[Sandi_k]

No, we haven't personally done that exact maneuver.

But I would argue it's not far from doing a cash-out refi to improve your rentals or your home. In essence, you're betting that funds from the portfolio can be reassigned to improving your real estate's value.

In my mind, that then becomes a change in asset allocation - and I'd be fine with that. Especially if the cost of NOT doing it means your real estate continues to degrade - think leaky roof, or inadequate drainage around the foundation.

[jeromedawg]

No, we haven't personally done that exact maneuver.

But I would argue it's not far from doing a cash-out refi to improve your rentals or your home. In essence, you're betting that funds from the portfolio can be reassigned to improving your real estate's value.

In my mind, that then becomes a change in asset allocation - and I'd be fine with that. Especially if the cost of NOT doing it means your real estate continues to degrade - think leaky roof, or inadequate drainage around the foundation.

We have a few different ongoing projects that are costly: solar, electric panel upgrade, HVAC replacement and then landscaping (including drainage & irrigation). The landscaping I'm still planning/researching and trying to figure out the viability of DIYing it - it's quite a lot of work though. The drainage part is probably the trickiest thing due to dealing with the old giant roots of several ficus trees. Anyway, if it gets to the point that it's a better idea just to hire out at least part of the landscaping work, then that would probably add a pretty significant cost as well. We've already poured a good amount into this place and while I'd say our cash reserves aren't in the red, I'm just trying to forecast, budget and look for alternative funding sources as well. I was thinking along the similar lines though in terms of "change in asset allocation" where I'd be taking the loss and 'transitioning' it over to real estate/RE improvements that would hopefully *add* value to the home. On the other hand, there are plenty out there who advise against considering your primary residence as an investment.

[Sandi_k]

I don't think of our home as an investment. I do think of it as an asset.

We take care of our assets.

We spent nearly $100k on our current house several years ago; we replaced all of the windows with high-efficiency windows. We repaired the damaged roof. We replaced bad doors. We replaced the HVAC. We replaced the non-working garage doors. And we stuccoed the exterior, over older wood T-111 siding.

We got a screaming deal on the house because it was so dilapidated, and we were willing to bring the house up to snuff. It's now worth more than twice what we paid for it 11 years ago.

Did we expect that? No. But the improvements were reasonable, improved our utility costs, reduced decaying exterior systems, and decreased our stress.

I suspect that the changes you make will be absorbed into the base value of the home - it's essentially changing the timing belt on the car that you live in - not required RIGHT NOW, but something that needs to be done to ensure continued good operation.

That said, I would shop hard, and DIY what I could to reduce the outlay of cash. Anyone on this board? Gonna do fine in comparison to most. ;)

[PDXTabs]

How large are these losses? You can offset like kind capital gains/losses dollar for dollar. After than you can deduct $3k/yr (carried over forever AFAIK) against your ordinary income.

I don't think that realizing losses is necessarily a bad thing if you need the money.*

* - EDITed to add: or at all. Don't keep a loser if you wouldn't buy it today.

[jeromedawg]

How large are these losses? You can offset like kind capital gains/losses dollar for dollar. After than you can deduct $3k/yr (carried over forever AFAIK) against your ordinary income.

I don't think that realizing losses is necessarily a bad thing if you need the money.*

* - EDITed to add: or at all. Don't keep a loser if you wouldn't buy it today.

If I were to dump everything with a loss today, it would probably be to the tune of $15k or so but I'd be dumping A LOT - I guess I would just 'take what I need for home repair' from that cash-out and then buy the 'equivalent funds' with the rest though.
As far as carryover, I already have a significant amount of losses from the super fat dip in March 2020 so I'm 'maxxed' out on deducting the $3k/yr for probably for the next 15 or so years.


ALSO, per my understanding it's best to prioritize selling the short term losses first and then the long term right? I have a number of short terms losses although smaller dollar amounts which I think is still fine to offload. After that I have several long term positions where the loss is anywhere between 10-15%. But I have a single long term position that's only around 1.5% and the cash-out for that one would be pretty significant $50k - this seems like a higher opportunity cost though and probably not something worth selling for that little of a loss. Even if I were to put that money right back into a similar fund, it just feels weird selling off that much at once to claim a comparatively small loss haha.