Author Topic: Keep it or Ditch it?  (Read 1229 times)

markarsenal

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Keep it or Ditch it?
« on: August 02, 2015, 02:27:42 AM »
This is my first post after my intro. Just dumping some grey matter:

I moved to BC in January. I was previously living in a beautiful property in Sonoma County, California, where I had bought a small house which I listed on AirBnB and built a ADU on the land to live in. It was *almost* break-even, except that I worked in San Francisco until the company for which I worked was sold (on the day I moved), which meant a 150-min commute (by bus) each way 5 days/wk. So I had some non-Mustachian issues before I left my job.

But the key was I loved my house, and loved the little self-designed cottage I was living in. But I also had obtained my Canadian work visa and wanted to experience the True North.

The big question: should I keep that house?

Rather than leaving everything and selling the house, I left it in the fairly capable hands of my best friend, who I have allowed to live in the cottage for free in exchange for managing the rental since I left. I moved to BC and quickly decided I wanted to learn to sail and live on a boat, so I got a cheap 27' sail boat to serve as my house, and got some work at a restaurant on an island off the coast of Vancouver. I used to work in finance, so the job there to help me avoid using my small nest egg ("fuck you money" rather than FI) for daily expenses.

My friend is managing the rental well, but he has a really high standard as a host. I'm trying really hard to work with him to understand the budget but he likes to be a Superhost and tends to spend a lot on gifts for guests, the best towels and toilet paper, and such. He's bringing in more than I ever did when I managed the place, but the increased outlays in luxuries for guests is pretty much cancelling the higher rental income.

Reasons to keep it:

I love the house. I improved it a lot and put lots of effort into it. I would love to snowbird there someday. I love the community it's in. I have lots of friends there and love to visit. Basically, I'm emotionally invested in the place even though I'm adventuring elsewhere right now.

Reasons to ditch it:

It's a money pit. I am losing money on it every month on a cash flow basis. And it would be worse if I had to hire some 3rd-party manager rather than my bestie to deal with the place. Or, if he ever decided not to do it anymore I would be up a creek. It's value has appreciated well and I could walk away with a nice extra chunk to invest in my total market index fund if I sold it. I have many years of adventuring to do before I want to consider settling there again. The fact that I am complaining about my friend's hosting expenses and methods above shows that I feel slightly out of control on the situation and selling it would get me back in control of all of my finances...

How do I make a decision?

I'm not FI right now. I have enough "fuck you money" to avoid working an office job in finance like I had before - ever. I enjoy working as a cook and it supports me and I'm still saving about 40%, and it's a really nice portable occupation. It would probably be another 10 years before I'd be FI at this pay; though those 10 years include plans for a 6-mo bike tour across Canada, some sailing in Europe and the Antarctic, backpacking in Quebec and Labrador...

Basically, the potential financial drain from the house is making my ability to become FI more sketchy and dragging out my time horizons. But I still feel attached to it and want to be back there some day. Like in 10 years. But by then it could be the source of everything that crushes my FI savings plans...

Should I keep it or sell it?

Ask anything that you think I've left out!


Rezdent

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Re: Keep it or Ditch it?
« Reply #1 on: August 02, 2015, 08:12:41 AM »
So, reasons to keep it=emotional; reasons to sell=financial?

Selling it doesn't mean you won't ever find another cool place.
You don't have to lose your friends in that place by selling.
It's not only a financial drag, it's an anchor that keeps you from travelling freely.

Why are you paying so dearly to hold onto something you might want to use ten years from now? 
Are you that certain that you wIll want to go back then, and that all the places to live will be taken?

money_bunny

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Re: Keep it or Ditch it?
« Reply #2 on: August 02, 2015, 09:38:51 AM »
You could find a cooler place somewhere else in your future as well.

markarsenal

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Re: Keep it or Ditch it?
« Reply #3 on: August 02, 2015, 10:34:14 AM »
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So, reasons to keep it=emotional; reasons to sell=financial?

Great summary! Yes, that's pretty much it. I need to price my emotions and decide whether I'm over-paying for them.

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Selling it doesn't mean you won't ever find another cool place.
You don't have to lose your friends in that place by selling.
It's not only a financial drag, it's an anchor that keeps you from travelling freely.

All true.

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Why are you paying so dearly to hold onto something you might want to use ten years from now?
Are you that certain that you wIll want to go back then, and that all the places to live will be taken?

Well, it's the Bay Area housing market, and I've made the decision to take my income down by 90% from what it was when I bought the house. So realistically, I probably won't return to that market if I sell it. 10 years from now appreciation will have made it an unrealistic landing place.

But I grew up in California so having that anchor is a hard thing to give up!

Roots&Wings

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Re: Keep it or Ditch it?
« Reply #4 on: August 02, 2015, 01:23:31 PM »
What are the financials? Maybe I'm not quite following, but it sounds like you have:

1. A small house which you let your friend live in FREE
2. A separate ADU rental cottage on the same property which is losing money being managed by your friend

Can you possibly rent out both places to long-term tenants and get rid of the high overhead/luxuries that your friend is doing for the short-term rental? Without more details, it is hard to say.

markarsenal

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Re: Keep it or Ditch it?
« Reply #5 on: August 02, 2015, 07:43:38 PM »
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What are the financials?

Price I paid: $240k (March 2013)

Current assessed value: $340k

Loan balance: $200k

Monthly payment: $1700 (incl taxes, insurance, PMI on 30-yr loan with 10% down)

Average monthly cash income from rentals: $2200/mo (before income taxes and local rental taxes)

So after tax, it's about break-even, and of course any time maintenance or such are required, there's no real cushion for those.

Quote
Maybe I'm not quite following, but it sounds like you have:

1. A small house which you let your friend live in FREE
2. A separate ADU rental cottage on the same property which is losing money being managed by your friend

Opposite: my friend lives in the ADU and we rent out the house on AirBnB.

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Can you possibly rent out both places to long-term tenants and get rid of the high overhead/luxuries that your friend is doing for the short-term rental? Without more details, it is hard to say.

I'd rather sell it than rent to long-term tenants. Long-termers would likely make it harder to sell if I really needed to as well, since they are harder to get rid of and more likely to trash the place than vacationers.

As I type out these details, I just start going "what the hell am I doing keeping this place?" and my answer is "I miss the town, and don't want to disappoint my friend."

So I should totally sell it. I just need some punches in the face (in the form of arguments and reasoned statements I could give my friends and family in Cali) to get me going on that...