Hello Mustachians. I could use your input!
My wife and I are considering a move from inland SoCal to Seattle within the next 3-12 months. We are very familiar with Seattle, as we visit the in-laws at least once a year. We love the area and know it would be a great move for quality of life, and perhaps even professionally. The problem? The dollars and cents! I want to optimize the financials of a potential move. I've run the numbers on state income tax, but housing is one I cannot quite decide on.
We bought our first home in May 2012. We spent MANY years waiting out the housing bubble. We paid $170k for the house. I believe we can sell it today for $230k based on comps, and perhaps even more. (Sweat equity!) We owe about $125k on the property. It's a fairly standard suburban home, 1800 sq ft, 3 bedrooms/2 baths, single story, built in 2000, on a very small lot. It is in the best part of town, however the city itself is generally considered undesirable. Rentals in the area seem semi-stable, as the population is not the best off financially. Just under 14 years remain on the note, with PITI at $1350.
If we sell the house, the pros/cons:
- Fairly nice lump-sum to use for down payment in a much more expensive Seattle metro area. Perhaps even some left over for investment. If we buy we are probably looking at $350k-$450k, minimum. It is however not "needed" for a new house purchase.
- No overhead debt. I like this.
- No longer tied to CA taxes, although giving up what could be a very long-term bottom price. With Prop 13 still in place, taxes should remain relatively low.
- If we leave before May 2014, we will have to pay a pro-rated portion of taxes to capital gains. Not a deal breaker, but certainly part of the equation.
If we rent the house out:
- Rental income is somewhat stable in the area, but like most areas is unpredictable. Reasonably expect a rent of $1600/mo. Perhaps even more.
- Landlord is expected to pay water and gardener in the area. ($150/mo.) I would also plan to hire a property management since we would be so far away. (10%)
- Because house is on an original 15-year loan, the ROI is miserable ... at least until it is paid off.
- We could refinance to improve the ROI, but I see little reason to roll in refi costs at this point in time. We don't need to show an income from it every month.
- There is the chance that our careers may pull us back to the area someday. It would be nice to have a property to return to. I don't think this can be quantified though.
- While many in the area scoff at the consideration, it is a mere mile or so from the San Andreas fault. A major earthquake could cause damage that we would be responsible for.
The raw numbers:
- $1600/mo rent, $1350/mo PITI, $210/mo upkeep (water/gardener/prop manager). Then factoring in maintenance and vacancies, it is likely we net very little or even take a loss.
- Fully paid off and producing rent around the time we hope to be FIRE.
Any thoughts/input? Generally I would look at the numbers and see a negative ROI and run, but these numbers are skewed due to the original 15-year loan. If on a 30-year loan, I think we would be positive cash flow ~$4-500/mo (nearly 20% ROI annually). In any case, I'm tempted to sell just in an effort to simplify life and the financial books. I've gone back and forth on this, but i'm strongly leaning towards selling. Having extra cash on hand for a new down payment and/or investments is extremely desirable.