Posted a bit of my dilemma a while back, but have a few updates. Here's the long and short.
We own a house and the vacant lot next door in a really nice, small downtown area. People love living down here due to the quaint feel, restaurants, events, etc. So, our property is worth significantly more than that in the surrounding area. We got it during the depths of the downturn and got a crazy bargain on it. Like, really crazy. We paid $200k for the house and the lot combined.
The lot is buildable and similar lots in the area have sold for around $200k recently, give or take $15k. Our house alone is now worth around $270k, too. So, if we were to sell today, I'd estimate that we'd walk away with $200k (the lot) + $110k (our downpayment plus the increase in value in the house). And it'd all be tax free.
The only catch is - we love living where we live. Our house doesn't quite work for us as it's pretty small, but we're in one of the best locations in the city. We can walk everywhere and I can bike to work. However, we can't afford to buy a bigger house because they're so expensive now (I mean, we theoretically can, but we don't want to spend that much money). I'm torn.
If we remodeled our house and sold the lot to pay for renovations, we'd spend a fortune on remodeling plus the house would lose much of its old-time charm. If we built on the lot, we'd have a huge percentage of our net worth tied up in our home. If we sell both, we'd end up paying a ton to move a few blocks away or we'd move to other areas nearby which aren't nearly as nice, aren't walkable, don't have great events, etc.
On top of all that, I'm worried that the popularity of the area may fade at some point and I'd lose out on the chance to make a ton of money on this. There are no signs that this will happen (in fact, just the opposite), but it's still a fear I have.
The freedom that would come from having $300k completely liquid is extremely enticing, but I feel like I'll regret moving if I end up in a semi-junky subdivision, even with a paid-for-in-cash house.