Author Topic: Housing Dilemma: Rent, Sell or Stay?  (Read 4272 times)

Onomatopeya

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Housing Dilemma: Rent, Sell or Stay?
« on: May 17, 2015, 09:06:40 AM »
Let me start by saying that I have recently become a huge fan of MMM and the concepts promoted here and have been making good solid progress improving our household finances. So here's where I come and ask my fellow experienced Mustachians for some advice on housing.

Two years ago wife and I purchased a condo outside Washington, DC, within what is called over here "the DC metro area". Here's a quick picture of where we stand:
  • Condo value: 450k
  • Loan: 360k, 20 yr fixed rate at 3.375%.
  • Mortgage Payment: ~2,100/month
  • HOA dues: ~515/month
  • Mortgage Escrow (Tax): ~400/month

Also to consider into this scenario is our daily commute to work:
  • One way commute to downtown DC of ~10 miles, which in a typical DC area traffic means around 45 minutes to 1 hour on a one way commute.  That's a total 8-10 hours a week or "working" full time on a Saturday
  • Both wife and I commute together in one car (civic 08, manual). Our offices are literally across the street from each other
  • Metro is an option, but that would represent 9 dollars per person a day for daily commute. Free Shuttle to our condo plus metro still adds up to a 2 hour daily commute
  • Sometimes, we both can work from home once a week.

About our household:
  • Annual Household income: 250k pre-tax
  • No kids, but planning on having them very soon
  • Wife and I both in our early 30s
  • No credit car debt
  • No car loans
  • Personal 5 yr loan that will be repaid on its first year hopefully before end of third quarter this year (thanks to reading MMM!!)

Some additional factors to consider in:
  • I'm realizing lately that our commute is getting to us and starting to make us feel miserable during our beloved commute times (road rage? starting the day with the left foot?)
  • We feel our social life has deteriorated living in the suburbs as most of our social activity happened right in DC (we used to rent a place closer by, had a 15 minute commute by metro).
  • Green areas around the suburbs are definitely a plus. We enjoy the outdoors with our dog.
  • Did I already mention I hate commuting to DC?

Housing market:
  • Keep in mind that housing prices in DC are very high. A condo in DC similar to what we currently own would easily be 200k more expensive, which we can afford but may not necessarily be the wisest investment.
  • Our current place can probably be rented for 2k/month. Maybe a bit more but not sure if that would fly. My initial impression is that we would be in the negative if we rent it.
  • I don't think our condo has had an increase in value during the past couple of years. I would say it could be sold at about the same price, maybe a bit more. But I'm no real estate expert.

So on to what I came here for...what woud a fellow Mustachian do:
  • sell our condo and purchase a home/condo in DC
  • rent our condo and purchase a home/home condo in DC
  • sell our condo and rent in DC
  • rent our condo and rent in DC
  • stay sit, stop nagging about it and take it like a man

Thanks for taking the time to read through it.
« Last Edit: May 19, 2015, 01:27:52 AM by Onomatopeya »

Roland of Gilead

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Re: Housing Dilemma: Rent, Sell or Stay?
« Reply #1 on: May 17, 2015, 09:16:03 AM »
wow, $915 a month for taxes and dues (I figured you didn't mean taxes were $400,000 a month)

Any idea what a comparable place rents for?  Almost sounds like you would be ahead even paying $2500 a month to rent a place.

forummm

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Re: Housing Dilemma: Rent, Sell or Stay?
« Reply #2 on: May 17, 2015, 09:21:30 AM »
If you could find a cheaper rental opportunity near work, it would improve your cash flow and quality of life regarding commuting and social life. There would be other tradeoffs like the green space. I don't think there are great options here, but it sounds like you've thought this through and are more aware of local prices than I am. Your commute sounds like a daily drag. Since you work across the street from each other, if it's possible to find a small apartment near your work, you could both walk there--which would be fast, free, and better for your health. You might not even need to keep the car.

Onomatopeya

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Re: Housing Dilemma: Rent, Sell or Stay?
« Reply #3 on: May 17, 2015, 09:24:48 AM »
wow, $915 a month for taxes and dues (I figured you didn't mean taxes were $400,000 a month)

Any idea what a comparable place rents for?  Almost sounds like you would be ahead even paying $2500 a month to rent a place.

Yes, it's a whooping 915/month. I know...what was I thinking! Dumb decision I would say. Renting a comparable place would probably be 2500, but one can get a smaller apartment for around 2000. Housing prices in DC are one of the highest in the region. I've been here for many years now.

PharmaStache

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Re: Housing Dilemma: Rent, Sell or Stay?
« Reply #4 on: May 17, 2015, 11:20:35 AM »
I think whatever you do, it needs to be done with kid(s) in mind (since you say you want them soon- I'm assuming you don't want to move into a 1 bedroom and then move again a year later).  Where's the best place for them to live?  Does an affordable apartment near your work fit 1 or 2 kids?  Is it a child-friendly area with parks and activities nearby?  What's the plan for when they are born- will you both keep working?  Your commute sounds horrible with kids (you'd barely see them, if you were both working!) so I hope you can find something in a better location.

BlueHouse

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Re: Housing Dilemma: Rent, Sell or Stay?
« Reply #5 on: May 17, 2015, 12:13:22 PM »
I also had a condo in Va and felt I was dying out there.  In your place, I would sell your condo (it's the HOA dues that kill the deal) and move into a fee-simple townhouse on a metro line. 
As far as kids go, just be sure that you'll be willing to let your kids be urban kids and that you'll be willing to send them to school here.  If you're handy and want to spend all or most of your time fixing up a house, then buy a fixer-upper.  I'm not, so I concentrated on new homes.  The Near Southeast and Southwest waterfronts are both experiencing phenomenal changes with a lot of new construction.  There is enough new construction that you're not competing for limited supply as you would in Northwest.   I'm not a housing expert, but my experience has shown me that buying in the first phase of new development can be risky and can take a while before the benefits come through, but the second phase is usually a money-maker.  I bought in the second phase of a new townhouse development and my model house is selling at $150k higher than what I paid 3 years ago. 
I also wouldn't buy a flipped house here right now -- many reports coming out about mass-sales with very shoddy work.
Start checking the local blogs for info on neighborhoods and developers' plans and permits -- very telling about what to expect.  DCist, urban turf, jdland.com; the southwester. 

mozar

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Re: Housing Dilemma: Rent, Sell or Stay?
« Reply #6 on: May 17, 2015, 05:18:36 PM »
I live in
« Last Edit: May 10, 2018, 12:56:54 PM by mozar »

nzmamma

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Re: Housing Dilemma: Rent, Sell or Stay?
« Reply #7 on: May 17, 2015, 05:30:53 PM »
[

+1 this. You mighy find that where you are now makes more sense with kids. I know our social life took a huge hit with kids and it wouldn't have mattered if where we lived. Also, that commute time could be even worse with littlies...

quauthor=PharmaStache link=topic=37289.msg664492#msg664492 date=1431883235]
I think whatever you do, it needs to be done with kid(s) in mind (since you say you want them soon- I'm assuming you don't want to move into a 1 bedroom and then move again a year later).  Where's the best place for them to live?  Does an affordable apartment near your work fit 1 or 2 kids?  Is it a child-friendly area with parks and activities nearby?  What's the plan for when they are born- will you both keep working?  Your commute sounds horrible with kids (you'd barely see them, if you were both working!) so I hope you can find something in a better location.
[/quote]

Onomatopeya

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Re: Housing Dilemma: Rent, Sell or Stay?
« Reply #8 on: May 19, 2015, 01:09:25 AM »
Sounds like general consensus is to move out and sell the condo, even though that would mean taking a hit because the house as not appreciated enough to compensate for closing and other costs?

mozar

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Re: Housing Dilemma: Rent, Sell or Stay?
« Reply #9 on: May 19, 2015, 11:45:07 AM »
I think the general consensus is to move back to dc. Selling or renting out the condo depends on whether its more likely to break even on the sale or can you get all your costs covered by renting it out.

ShoulderThingThatGoesUp

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Re: Housing Dilemma: Rent, Sell or Stay?
« Reply #10 on: May 19, 2015, 12:02:10 PM »
I guess you didn't like my answer in the Real Estate forum, but it's the same. What you paid before does not matter. Ever. Look up what a sunk cost is, understand it, and internalize it. It will save you money and stress.

norabird

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Re: Housing Dilemma: Rent, Sell or Stay?
« Reply #11 on: May 19, 2015, 12:48:00 PM »
Rent out the condo if you can pay for the mortgage and fees on the income, sell if not; and definitely rent when you relocate to DC.

Onomatopeya

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Re: Housing Dilemma: Rent, Sell or Stay?
« Reply #12 on: May 21, 2015, 05:53:15 PM »
Thanks for all the comments so far. I see some consensus on renting in DC instead of buying. Thoughts and reasoning on this?

norabird

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Re: Housing Dilemma: Rent, Sell or Stay?
« Reply #13 on: May 21, 2015, 08:49:34 PM »
As you plan to have kids, the dc place won't necessarily be very long term, right? And the fees and property taxes may be very high. By renting, you avoid those costs.

PJ

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Re: Housing Dilemma: Rent, Sell or Stay?
« Reply #14 on: May 22, 2015, 10:39:44 AM »
One question that crossed my mind while reading your post, and that I don't see addressed in the other responses, is what is your long term plan?  Not just "will one of you stay home once you have kids?" but even further out.  As high income earners, with little debt other than your mortgage, you could theoretically be FI relatively soon.  Is RE part of your plan?  If so, what's your timeline?  That could impact your decision making.  i.e. would the condo be where you want to retire to, would it provide a good income stream in your retirement if you rent it out, if you bought a new place in DC and weren't planning to retire there would you be in it long enough to offset the costs associated with buying.  And so on. 

No answers, just more questions for you to consider.