Author Topic: sell house, begin renting with baby on the way  (Read 2019 times)

Frugal D

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sell house, begin renting with baby on the way
« on: September 16, 2016, 05:02:27 PM »
Work has been wearing on me lately so maybe I'm not thinking straight, but is it crazy to sell our house and rent with our first child on the way? Here are the numbers:

Age: 30
Home value: $1,000,000
Mortgage: $240,000
Home equity: $760,000
401k: $250,000
Taxable: $150,000
Other debt: $0
Annual household income: ~$250,000
Annual spending not including mortgage payments: ~$36,000

So is it crazy to sell the house and invest the $760,000 and rent somewhere? We live in Seattle so rents won't be cheap. Convincing my wife to do this will be a challenge, but wondering what the forum thinks.
« Last Edit: September 16, 2016, 05:11:01 PM by Frugal D »

Goldielocks

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Re: sell house, begin renting with baby on the way
« Reply #1 on: September 16, 2016, 05:24:09 PM »
I would have saved so much money if I hadn't doubled up on "home ownership" and "spending on young children" in my late 20's and early 30's.

---- If you have lived in your home for more than 7 years, then you may not be tempted by "renovations" and "improvements" to your home... if so, this advice does not apply to you --------

When we shifted to a rental situation when the youngest was 4, it was an amazing savings, despite the rent = former mortgage payment.   No more urge to buy a new blind to replace the crapped out old one, no urge to buy "nicer" fridge or improve the yard...   All of the money was ours to spend or keep as we wished, on ourselves.

MayDay

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Re: sell house, begin renting with baby on the way
« Reply #2 on: September 16, 2016, 05:35:14 PM »
We currently rent with little ones, have also owned 2 different houses.

Renting is pretty awesome.  Your basement flooding (and other home disasters) suck extra a lot when you have a baby, no time, no sleep. 

But ultimately I want to be a homeowner, not a renter.  So think about long term- if you sell this house, but want to stay in Seattle, how will you feel if you are priced out of the market in a few years?  Or are you willing to move?

Astatine

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Re: sell house, begin renting with baby on the way
« Reply #3 on: September 16, 2016, 06:10:00 PM »
What are tenancy laws like in your city? Where I live, you sign a 12 month lease but you can be asked to move out at any time with 4 weeks notice (I think - it's been a while since I rented) if the owner decides to sell or if one of the owner's relatives wants to move in. A friend of mine had to move 3 times in less than 3 years because of this. Our rental market is pretty tight so finding a new place to rent in just a few weeks and organising to move is not fun and very stressful.

Frugal D

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Re: sell house, begin renting with baby on the way
« Reply #4 on: September 16, 2016, 06:12:50 PM »
Is this the right way to look at it?

Interest on my house is $800 per month and I currently rent my house from the government (taxes) for $600 per month. If we sold I could invest the proceeds of $760,000 and collect a 2% dividend equal to $15,200 which would be $12,920 after taxes.

Therefore, if I could find an apartment for $2,477 or less I would come out ahead, right? 

waltworks

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Re: sell house, begin renting with baby on the way
« Reply #5 on: September 16, 2016, 09:00:24 PM »
You'll make more than 2%, at least over the long term, in most investments.

I'd sell, if you can talk your wife into it. 3/4 million is FIRE money in many places.

-W

lhamo

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Re: sell house, begin renting with baby on the way
« Reply #6 on: September 16, 2016, 10:04:23 PM »
Depending on what you are looking for in terms of location/size, you might be able to get something that is cheaper FOR NOW.   But rents are going up so quickly -- more quickly than property taxes, even with the extra stuff like ST3 -- that your rent would probably exceed your mortgage payment by a considerable amount in just a few years.

Just to give you a point of comparison, I managed to rent a 2br/2ba condo in Pinehurst (on 15th NE) for 1600/month last summer.  In December, my landlord notified me if I wanted to renew the rent would be going up to 1900/month at lease renewal in July.  My daughter was coming back for school, so I needed a 3br anyway so I did not renew the lease.  I kept my eye on listings all spring, and in the area I need to be in for schools (NE Seattle), small 3br townhomes were going for 2000-2500/month, and houses (even crappy run down 1ba ones) were pretty much 2300 and above.  I ended up getting a detached 3br townhouse on a busy street for 2340/month. 

If you are ok with 1 kid in a 1 br for awhile, or up to 2 kids in a 2br, you will have more choices and probably be able to get something for cheap. If you are ever trying to rent a 3br, just be aware that supply PLUMMETS and prices go up accordingly.  And then you also have to deal with an insecure housing situation in relation to schools. 

Basically if you are planning to stay in Seattle for more than 2-3 years, I would not sell now.  And if you are thinking of putting your kid(s) in public schools, it is never too early to start researching the options, because you need to plan out your housing pretty far in advance if you want to get into some of the better/higher demand schools.  The choice school I got my daughter into for 3rd grade had over 100 kids on the kindergarten waiting list this year. Most of those people probably already lived in the neighborhood. 

waltworks

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Re: sell house, begin renting with baby on the way
« Reply #7 on: September 17, 2016, 11:18:56 AM »
Rents and property prices tend to move together - and neither of them will generally exceed inflation over any long period of time. Some basic spreadsheet work or understanding of exponential growth will tell you why.

If you bought a house in the last 5 years or so, you probably feel like a genius. If you were renting, you probably feel like a sucker. That doesn't mean the situation will stay the same going forward. Housing (both owning and renting) will eventually revert to the mean/become boring again and prices will be back in line with their long run averages. That will mean either another crash at some point (IMO less likely) or a long period of price stagnation below the rate of inflation (more likely according to my own personal crystal ball). 

-W