Author Topic: Sell home in anticipation of FIRE or stay put?  (Read 2897 times)

ZiziPB

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Sell home in anticipation of FIRE or stay put?
« on: June 14, 2016, 10:19:27 AM »
I posted this in my journal but I thought I would open this question up to wider audience in the hopes of getting more feedback.

I am planning to FIRE in the spring of 2018 (April 1, 2018).  I currently own a condo (townhouse) in CT.  Upon FIRE, I am planning to move overseas (where I already own the property I will live in).  The question I have is whether I should sell the condo soon and rent until I'm ready to FIRE or wait with the sale until FIRE .  The reason I'm thinking about an early sale is that I'm very concerned that we'll have a recession before spring of 2018 and that I will be unable to offload the condo then. 

I think if put it on the market now it would sell fairly quickly as there doesn't seem to be any other units lingering on the market at this point.  It would probably sell for $260,000-270,000. 

The outstanding balance of my mortgage is $186,600.  The mortgage payment is $2310 per month of which currently $1080 is principal, $477 interest and $753 taxes.   The HOA is $290 per month in addition to the mortgage payment. The loan is a 15 year loan at 3% interest.  I have no other maintenance costs as the unit is fairly new (5 years old) and in excellent condition.  If I wait to sell it until 2018 the loan balance will be paid down to just over $160,000. 

If I sell this place now, I would need to rent for the next 2 years.  I could find a one bedroom apartment with a reasonable commute and the amenities I want (washer/dryer is very important for me) for $1300, or two bedrooms probably for $1800 or so.  If I wanted a garage like I have now then I would probably have to pay around $2000 for a 2 bedroom unit.  So I don't think I would really save much money over the next 22 months given that a large portion of my mortgage payment is going towards the principal.  Moving costs would probably eat up any savings.  That's the purely financial analysis. 

The other aspect of it non-financial: I love my place and it makes me very happy to come home every night.  It's in a great location - close to everything yet quiet.  There are a couple of parks within walking distance.  My commute to work is 9 miles which takes 15 minutes if there is no traffic.  It's energy efficient.  It's a bit too big for myself alone but works really well for when my daughter is back home from university.  On the other hand, the condo is located in a very high tax town and the taxes can only go up.  We have a steady supply of renters and potential buyers from a nearby research hospital and other employers, but the condo is not in a good school system so the buyers tend to be single professionals and empty nesters.

The going rental rate for condos of the same size and style in my complex is $2,500.

What would you do in my situation?  Sell and rent or stay put until FIRE?

sis

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Re: Sell home in anticipation of FIRE or stay put?
« Reply #1 on: June 14, 2016, 10:44:30 AM »
Is this condo convenient for commuting to NYC?  The only reason I ask is because I feel like if you can commute to NYC from the condo you are maybe a bit protected from a recession.  Also, food for thought if it is within commuting distance of NYC - one of the major subway lines in NYC will be going down for 1.5 years starting in 2019.  I think that there will be at least some people who live along the L train who move out of the city for this reason and it could affect nearby real estate.

ZiziPB

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Re: Sell home in anticipation of FIRE or stay put?
« Reply #2 on: June 14, 2016, 10:56:48 AM »
Is this condo convenient for commuting to NYC?  The only reason I ask is because I feel like if you can commute to NYC from the condo you are maybe a bit protected from a recession.  Also, food for thought if it is within commuting distance of NYC - one of the major subway lines in NYC will be going down for 1.5 years starting in 2019.  I think that there will be at least some people who live along the L train who move out of the city for this reason and it could affect nearby real estate.

Nope, central CT location.

sis

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Re: Sell home in anticipation of FIRE or stay put?
« Reply #3 on: June 14, 2016, 11:49:43 AM »
Is this condo convenient for commuting to NYC?  The only reason I ask is because I feel like if you can commute to NYC from the condo you are maybe a bit protected from a recession.  Also, food for thought if it is within commuting distance of NYC - one of the major subway lines in NYC will be going down for 1.5 years starting in 2019.  I think that there will be at least some people who live along the L train who move out of the city for this reason and it could affect nearby real estate.

Nope, central CT location.

Okay in that case I think that it is spreadsheet time.  What is your marginal tax rate?  Do you currently itemize deductions or use the standard deduction?  You also need to factor in the fact that depending on where you wind up renting you might not get your security deposit back.  You will have to account for how much it costs you to move to the new place in terms of renting a u-haul etc.  The other thing to consider is that since you are planning on retiring to another country, you might just be able to sell your place furnished in 2 years time and get money for the furniture that way.

ZiziPB

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Re: Sell home in anticipation of FIRE or stay put?
« Reply #4 on: June 14, 2016, 12:43:20 PM »
Thanks for you input, sis.

Marginal tax rate is 33%.  I itemize but because of AMT, the only tax deduction I really get is on the mortgage interest but not the real estate tax (and I would assume it is then effectively at 28% which is the AMT rate). 

Selling furnished in my location is generally unheard of and I don't expect that I would get much more for the place with the furniture left behind.  I was planning to just sell my stuff through Craigslist when the time came.

mozar

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Re: Sell home in anticipation of FIRE or stay put?
« Reply #5 on: June 14, 2016, 01:18:32 PM »
What happened in your area during the last recession? Did it recover quickly? If it did, I would assume that the same thing would happen. In Washington DC construction stopped during 2009 and resumed in 2010 so it was a brief pause, but the suburb I live in took 3 more years to come back. So what do you think will happen?  How many quarters do you think we will be in a recession?  And can I borrow your crystal ball? :') You could watch days on market reports and if they increase you could pull the trigger then. If I were you I would get a roommate.

ZiziPB

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Re: Sell home in anticipation of FIRE or stay put?
« Reply #6 on: June 14, 2016, 01:50:44 PM »
Central CT took quite a while to recover.  I don't even know if it actually fully recovered yet.  I bought the condo just over 3 years ago and it's worth less today than it was in 2013 :-(

I'm not claiming to have a crystal ball.  The risk of recession is always there.  Say, 50/50?  In my case, I know I will be selling in early 2018, so I'm just trying to avoid any risks I can easily avoid before then. 

A roommate is not a possibility as my daughter stays with me during the holidays and in the summer.  Plus, I really don't want a roommate.

I may give my realtor a call.  She knows the complex extremely well and has been selling units there for years.  I'll see what she has to say.

mozar

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Re: Sell home in anticipation of FIRE or stay put?
« Reply #7 on: June 14, 2016, 04:08:30 PM »
Your realtor would know more than people outside your area.

Rubic

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Re: Sell home in anticipation of FIRE or stay put?
« Reply #8 on: June 15, 2016, 12:28:21 PM »
I'm selling my condo in anticipation of FIRE, which will include international travel.  I can rent during the interregnum for 6 months, then month-to-month afterwards.  My rent will be 65% of my current housing expenses. Selling now means I won't be rushed to sell when I'm ready to travel.


ZiziPB

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Re: Sell home in anticipation of FIRE or stay put?
« Reply #9 on: June 16, 2016, 07:34:59 AM »
Thanks for all the responses.  I am waiting to hear back from the agent, so we'll see what she has to say.

Dicey

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Re: Sell home in anticipation of FIRE or stay put?
« Reply #10 on: June 16, 2016, 07:43:41 AM »
You can also use Zillow to check for recent sales and sales histories. The Zestimates are hogwash, but actual sales data is helpful. Remember that realtors occasionally inflate values to obtain listings. Ask to see actual comps, not guesstimates.

ZiziPB

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Re: Sell home in anticipation of FIRE or stay put?
« Reply #11 on: June 16, 2016, 07:49:34 AM »
Thanks Diane.  Zillow has a significant delay in showing the closed sales (at least that has been my experience).  I have a high level of trust with this realtor - I have worked with her on several transactions since 2003.  And she knows me well so she knows I that I only believe concrete information :-)  She is also the agent with the most  sales (by far) in my complex so I know she will give me accurate and most up to date information.

Axecleaver

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Re: Sell home in anticipation of FIRE or stay put?
« Reply #12 on: June 16, 2016, 08:00:53 AM »
Quote
I have a high level of trust with this realtor - I have worked with her on several transactions since 2003.  And she knows me well so she knows I that I only believe concrete information :-)  She is also the agent with the most  sales (by far) in my complex so I know she will give me accurate and most up to date information.
Just be aware that agents are trained to get people to buy and sell today, and not to wait. This is how they earn their commissions, so their interest is completely aligned with telling you what you need to hear to sell.

We went through a similar thought process recently ourselves. Our FIRE date is currently June, 2020. We had a very unique rural property we'd bought in 2010 for 341k. It was very isolated which is a pro to some folks, and a con to others. Has a bass pond and two acres of lawn, again, great for some folks but people who want to live in a development with neighbors and BBQ's wouldn't be interested. Stairs and two levels, so older folks wouldn't be interested.

We had tried to sell in 2013 for 350k, when we moved temporarily to Hawaii for work. We had three showings in a year. Last year our daughter went to college, so we decided to try again. Dropped it to 300k on Zillow and we had an offer within 48 hours.

We tried renting but ran into a series of misadventures that convinced us we'd be happier in a house (see journal for the details). We found something a lot more marketable in a development nearby, which we're confident we'll be able to sell quickly when the time comes.

So how does this apply to you? If you're worried that it will be difficult to sell when the time comes, sell now. Then you can rent for a couple years and be confident that you'll have less details to wrap up when the time comes. If you feel it will be quick to sell, then stay where you are until you're 6 months out from FIRE. You enjoy the property and you have to live somewhere. Market risk is going to be there no matter when you sell, so don't try to time the housing market.

ZiziPB

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Re: Sell home in anticipation of FIRE or stay put?
« Reply #13 on: June 16, 2016, 08:46:39 AM »
Thanks Axecleaver.  Good point on not trying to time the market!  And I appreciate your thoughts on the decision process and timing.

I talked to the agent - she's sending me comps (there is one unit that has gone on the market in the last couple of days and a bunch of units sold over the last year).  She says units are selling but slowly.  I need to be prepared for 6+ months on the market.