Author Topic: Is there any wisdom in selling my house?  (Read 4177 times)

mid-atlantic minimalist

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Is there any wisdom in selling my house?
« on: August 27, 2018, 11:32:21 AM »
I’m debating whether to (1) sell my house and downsize by renting a room in a shared house, which would also allow me to live easily without a car, or (2) keep my house and continue running it as a shared house.

Considerations: I’ve got “hair on fire debt” and a strong desire to extinguish it ASAP (details below). Specifically, I have a goal for significant debt reduction by November 1, 2019 (at least $50k). I aim to leave this area around that time and will sell the house if I still own it then.

I probably should not have purchased the house, but because I did, I now need to live with that decision. Since I moved in, I have rented out one room for $1000, except for the last few months that I’ve been between tenants. To increase that income, I plan to move into my small room and start sharing a bathroom, and rent out two rooms in the house for about $1,000 each (utilities included). I think the time of year will make it easier now to find tenants. As long as this house is mine, however, I’ll be dependent on having good tenants and feeling overwhelmed by trying to take care of it. What I *WANT* to do is sell the house. I’m evaluating whether there is any *wisdom* in selling. I should decide soon because if I don’t sell, I need to find roommates.

ME:
Single, East Coast HCOL major city, no dependents (except one pet)
Income: Before tax, around $145k (ordinary income and rental income combined); after tax about $100k

CURRENT EXPENSES
Housing Costs
Mortgage: 2237
-Principal: $582
-Interest: $1,339
-Property Tax: $252
-Homeowners Insurance: $64
Water/Trash 72
Home Warranty 52
Maintenance 100
Gas 50
Electric 75
Cable/Wifi 64
Total housing costs: 2,068 (mortgage principal not included)

Loans
Federal Student Loans 496
Private Student Loan 303
Personal Loans: 682
Credit Card Payment: 490
Total loan minimums: 1,971

Other Expenses
Cell phone 70
Groceries 250
Work food 50
Going out 100
Medical copayments 15
Haircut 20
Running shoes or race entries 30
Clothing 50
Dog food 70
Veterinarian 25
Music 15
Gifts 50
Travel 150
Misc 50
Total other expenses: $945

Car costs
Loan payment 295
Insurance 57
Registration 25
Maintenance 125
Total car expenses: $502

Total monthly payments: $6,068 (principal is included because it affects how much other debt I can pay)

DEBT DETAILS
Total non-mortgage debt: $176,613
Student loans: $110,506 at 4-5% APR
Credit cards and other loans: $24k at 5% APR and $30k at 11% APR
Car loan: $11,869 at  3% APR

HOUSE DETAILS
Current home purchased in October 2015: $410,000
Current value of the home: $410,000 (estimated by a realtor last month)
Mortgage balance: $367,102
Approximately 27 years remaining to maturity
Approximate cash receipts after sale: $28,000

KEEP THE HOUSE SCENARIO
Amount available for additional debt payments with rental income: $2470
Non-mortgage debt total in November 2019: 107,302
Net worth (if retirement doesn't grow and house doesn't appreciate) $28k

SELL THE HOUSE SCENARIO
Sell for $405,000
Net $28,000 cash after sale (assume closing December 2018); use cash to pay off and sell car, pay off some other high-interest debt
Rent a room for $800
$3716 total monthly payments (eliminate house and car costs)
Amount available for additional debt payments: $4,617
Non-mortgage debt total in November 2019: $50,554
Negligible effect on net worth, just under $28k

When I first posted this, it looked clear that the best option was to bring the two roommates in, because I just looked at it as off-setting my monthly housing cost, which would be so low. Now that I've done this analysis, selling the house looks to be far and away the best option. Am I missing something? I've checked all of my math and especially my debt-reduction calculator math many times over.

*I just realized I didn't factor in any transportation costs whatsoever into the house-sale scenario. I can get to work for free but would probably need to pay some non-work transit, uber, and bike-maintenance costs. I'll work that in tomorrow, but I don't see how that adds a ton of costs.
« Last Edit: August 27, 2018, 09:22:29 PM by gabster »

Endersmom

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Re: Is there any wisdom in selling my house?
« Reply #1 on: August 27, 2018, 12:27:57 PM »
How much debt do you have?
If you sold the house today would you put the profit towards your debt?
If you keep the house and have roommates for 1 year and then sell how much of your debt could you pay off?
We need more information to give you any useful advice.

mid-atlantic minimalist

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Re: Is there any wisdom in selling my house?
« Reply #2 on: August 27, 2018, 01:05:46 PM »
How much debt do you have?
If you sold the house today would you put the profit towards your debt?
If you keep the house and have roommates for 1 year and then sell how much of your debt could you pay off?
We need more information to give you any useful advice.

Thanks very much--I'd been so focused just on the housing cost per month that I hadn't considered how it would fit into my overall debt strategy. I'll add more detail this evening, and actually the questions you asked just made me curious about a few other pieces that I'll look into - so it was quite helpful.

mid-atlantic minimalist

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Re: Is there any wisdom in selling my house?
« Reply #3 on: August 27, 2018, 09:20:48 PM »
How much debt do you have?
If you sold the house today would you put the profit towards your debt?
If you keep the house and have roommates for 1 year and then sell how much of your debt could you pay off?
We need more information to give you any useful advice.

Thanks very much--I'd been so focused just on the housing cost per month that I hadn't considered how it would fit into my overall debt strategy. I'll add more detail this evening, and actually the questions you asked just made me curious about a few other pieces that I'll look into - so it was quite helpful.

I edited the original post to be a more complete case study. I feel like a changed person for having put in that work, in a very good way. If you have any insights, I'd be grateful.

Endersmom

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Re: Is there any wisdom in selling my house?
« Reply #4 on: August 28, 2018, 07:53:19 AM »
When you did the sell the house and rent numbers did you take off the $24000 that you had been counting as rent income?

mid-atlantic minimalist

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Re: Is there any wisdom in selling my house?
« Reply #5 on: August 28, 2018, 08:39:43 AM »
When you did the sell the house and rent numbers did you take off the $24000 that you had been counting as rent income?

Yes, I did take off that income. I used only my work income in that scenario.

I used the same work income figure in both scenarios, but it's not right, it should be about $1,000 per month lower. I need to re-do the math.

Tuskalusa

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Re: Is there any wisdom in selling my house?
« Reply #6 on: September 03, 2018, 09:55:40 AM »
In addition to the cash that the house sale would generate, it looks like you’d simply be happier without the house. So there’s a financial and emotional gain here. Given that, my vote is to sell.

I’d also recommend looking into selling the car and purchasing something cheaper for cash.

Linea_Norway

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Re: Is there any wisdom in selling my house?
« Reply #7 on: September 04, 2018, 05:43:59 AM »
+1 for selling the house and the car.
Not having a house to worry about, gives you more opportunity to focus on e.g. side-gigs. But find out whether you can rent a place with a dog. I can imagine that this reduces the options.
Borrowing money for a car is not a good option. Get a cheaper way of transport.

As your hair is on fire, can you reduce some of your expenses? Like cutting your hair yourself, not buying new clothes for a year. Not taking a new dog if the current one passes along. Not joining just any race, but picking a few cheap, local races. Reducing travel.

marty998

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Re: Is there any wisdom in selling my house?
« Reply #8 on: September 04, 2018, 03:20:41 PM »
A few questions:

1) why did you buy the house in the first place? What was the thinking then and why has it changed now?
2) how are you going to change your habits so you don't rack up $65,000 in credit cards, car and other personal loans?
3) Cable! No one should post a case study here without already having cut cable!

mid-atlantic minimalist

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Re: Is there any wisdom in selling my house?
« Reply #9 on: September 05, 2018, 08:12:39 AM »
Oh wow! Thanks for all the awesome replies! This is excellent.

In addition to the cash that the house sale would generate, it looks like you’d simply be happier without the house. So there’s a financial and emotional gain here. Given that, my vote is to sell.

I’d also recommend looking into selling the car and purchasing something cheaper for cash.

YES. Yes to the yes. Thank you. Selling the car would be the first move after selling the house. It wouldn't be too hard to stay car-free if I planned things well.

+1 for selling the house and the car.
Not having a house to worry about, gives you more opportunity to focus on e.g. side-gigs. But find out whether you can rent a place with a dog. I can imagine that this reduces the options.
Borrowing money for a car is not a good option. Get a cheaper way of transport.

As your hair is on fire, can you reduce some of your expenses? Like cutting your hair yourself, not buying new clothes for a year. Not taking a new dog if the current one passes along. Not joining just any race, but picking a few cheap, local races. Reducing travel.

I hadn't considered the opportunity for side-gigs, but that's a really good point. I am certified as a fitness trainer, but have not felt I could justify taking any clients with the limited time on my hands now. Carving out that time would likely be simpler with less on the household "to do" list.

I've been investigating rental housing options, and the doggy shouldn't make it too much harder to rent. Society seems to have shifted somewhat in that way since about 15 years ago when I first got a dog and tried to find places for us to live.

Thank you for the suggestions for reducing more of my expenses. "No new clothes for a year" actually sounds like it would be a fun challenge.  And I just bought new bras, so I should have everything i really "need" for a while :) You just reminded me about a free local race series that I've been meaning to look into.

A few questions:

1) why did you buy the house in the first place? What was the thinking then and why has it changed now?
2) how are you going to change your habits so you don't rack up $65,000 in credit cards, car and other personal loans?
3) Cable! No one should post a case study here without already having cut cable!

1) I bought it because I wasn't as knowledgeable as I am now, believed that "real adults have houses," and thought with little real information that it was the right thing to do. "Everyone" agreed it was the right thing to do, too. I also believed I would give up an expensive hobby immediately to make up for the higher costs. I had always rented and didn't know what went into maintaining a house. My thinking was literally clouded by depression.

2) That's really the heart of it all, right?  I struggle so much with this fear. I've made enough changes over the last year that I am mostly confident in my better habits. I never knew where all my money went, now I do. I had an incredibly expensive hobby that I justified by its health benefits, now I don't. A large amount of that debt went to care for very sick dogs--and while the sick dog decisions I don't regret because it aligned with my priorities and ethics, those are decisions I would make differently in the future for reasons unrelated to the costs. My car no longer feels "necessary" to me and in fact feels like an expensive, wasteful burden. And I'm no longer under the fog of depression. My net worth has been steadily increasing over the last year as I've implemented better habits, paid attention to what I am doing, and aligned my decisions with what I really want for my future. I do have moments that I'm scared I will slip back or my mental health will decline again, and fail. In which case, it kinda doesn't matter if I keep the house or not, I'll keep myself poor in perpetuity by any destructive means.

3) Thank you. I've kept it because of the renters, "all utilities included" without Internet would feel dishonest these days--but I can unload that stat if I won't have renters :)

Greenback Reproduction Specialist

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Re: Is there any wisdom in selling my house?
« Reply #10 on: September 06, 2018, 04:13:32 PM »
If I were in your shoes I would seriously consider trimming some fat on your monthly expenses as well.

I'm going to vote that you sell the house, sell the car, pay off the 30k credit card. Then attack the other credit card debt first. If you do those couple things and reduce your spending in the areas shown below, you will be looking at about $5.5k(4617+940) to throw at debt each month. You might be able to pull off completely paying off all debt in under 2yrs.

Also, your benefit of renting the rooms vs selling is a pretty long payoff of at least 14mo.... Maybe longer, and you have the added risk of home maintenance issues that arise from time to time, renter headache, etc.

(BTW unless I'm missing something, you have a negative networth of about $500k... not a positive 28k... You don't list your assets though)

CURRENT EXPENSES
Housing Costs
Mortgage: 2237
-Principal: $582
-Interest: $1,339
-Property Tax: $252
-Homeowners Insurance: $64
Water/Trash 72
Home Warranty 52
Maintenance 100
Gas 50
Electric 75
Cable/Wifi 64
Total housing costs: 2,068 (mortgage principal not included)

Loans
Federal Student Loans 496
Private Student Loan 303
Personal Loans: 682
Credit Card Payment: 490
Total loan minimums: 1,971

Other Expenses
Cell phone 70
Groceries 250 If this were me, I could get by on $150 easy
Work food 50 I would really consider if I need this or not
Going out 100 I would really consider if I need this or not
Medical copayments 15
Haircut 20 Not sure if you are a guy, but if you are, you could get a shaver.
Running shoes or race entries 30 I would really consider if I need this or not
Clothing 50 I would really consider if I need this or not, this is about my yearly clothing budget
Dog food 70
Veterinarian 25 I own a dog and cat.... is this because they have meds?
Music 15 I would really consider if I need this or not
Gifts 50 I would really consider if I need this or not
Travel 150 I would really consider if I need this or not
Misc 50 I would really consider if I need this or not
Total other expenses: $945 New total: $300($645 savings)

Car costs
Loan payment 295 Dude/girl... this is an expensive mode of transport
Insurance 57
Registration 25
Maintenance 125This seems really high, We have 2 high mileage vehicles and don't pay this much
Total car expenses: $502 New total: $207($295 savings)(btw where is the cost of fuel?)

Total monthly payments: $6,068 (principal is included because it affects how much other debt I can pay)

New payments: $5128($940 savings)






mid-atlantic minimalist

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Re: Is there any wisdom in selling my house?
« Reply #11 on: September 10, 2018, 10:16:54 AM »
If I were in your shoes I would seriously consider trimming some fat on your monthly expenses as well.

I'm going to vote that you sell the house, sell the car, pay off the 30k credit card. Then attack the other credit card debt first. If you do those couple things and reduce your spending in the areas shown below, you will be looking at about $5.5k(4617+940) to throw at debt each month. You might be able to pull off completely paying off all debt in under 2yrs.

Also, your benefit of renting the rooms vs selling is a pretty long payoff of at least 14mo.... Maybe longer, and you have the added risk of home maintenance issues that arise from time to time, renter headache, etc.

(BTW unless I'm missing something, you have a negative networth of about $500k... not a positive 28k... You don't list your assets though)

CURRENT EXPENSES
Housing Costs
Mortgage: 2237
-Principal: $582
-Interest: $1,339
-Property Tax: $252
-Homeowners Insurance: $64
Water/Trash 72
Home Warranty 52
Maintenance 100
Gas 50
Electric 75
Cable/Wifi 64
Total housing costs: 2,068 (mortgage principal not included)

Loans
Federal Student Loans 496
Private Student Loan 303
Personal Loans: 682
Credit Card Payment: 490
Total loan minimums: 1,971

Other Expenses
Cell phone 70
Groceries 250 If this were me, I could get by on $150 easy
Work food 50 I would really consider if I need this or not
Going out 100 I would really consider if I need this or not
Medical copayments 15
Haircut 20 Not sure if you are a guy, but if you are, you could get a shaver.
Running shoes or race entries 30 I would really consider if I need this or not
Clothing 50 I would really consider if I need this or not, this is about my yearly clothing budget
Dog food 70
Veterinarian 25 I own a dog and cat.... is this because they have meds?
Music 15 I would really consider if I need this or not
Gifts 50 I would really consider if I need this or not
Travel 150 I would really consider if I need this or not
Misc 50 I would really consider if I need this or not
Total other expenses: $945 New total: $300($645 savings)

Car costs
Loan payment 295 Dude/girl... this is an expensive mode of transport
Insurance 57
Registration 25
Maintenance 125This seems really high, We have 2 high mileage vehicles and don't pay this much
Total car expenses: $502 New total: $207($295 savings)(btw where is the cost of fuel?)

Total monthly payments: $6,068 (principal is included because it affects how much other debt I can pay)

New payments: $5128($940 savings)







Thanks a lot for the encouragement to re-examine my spending--that nice fat number is very inspiring. You are certainly correct that some things can and should be trimmed.  It comes down to priorities. I don't think I need such a high travel budget to still see family, but I do need to set aside some money to see them. I can think the rest of these through in a similar manner. Yes, $50 for clothes monthly is certainly unnecessary.

I didn't list the value of my house ($400-420k ballpark) or my retirement accounts ($80k), but I factored those into the net worth. my net worth is currently negative. The positive net worth figure is after 15 months of continuing to pay down.

I appreciate your help!

mid-atlantic minimalist

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Re: Is there any wisdom in selling my house?
« Reply #12 on: September 09, 2020, 03:57:45 PM »
Hello, to anybody that posted before and now sees this! I wanted to share an update.

I ended up selling my house, despite every person I talked to about it IRL encouraging me to keep it. This group were the only ones to encourage me to go forward with the sale. And I regret nothing! I used the proceeds to pay off high interest debt and get ahead of my massive debt problem. In doing so, I actually started to believe in myself and my value as a person again, which helped me to continue to crush debt and stick with better habits. (Before, I was so ashamed and paralyzed by the debt.  I didn’t realize how emotionally crippled I was by it, but I had given up any hope for a happy future and therefore better habits seemed pointless.)

My net worth has steadily grown over the last three years, from negative $70k the first time I tallied it up three years ago to $100k in the black now. Plus now I have an amazing boyfriend (soon to be husband) who I would NEVER have let get close to me before when I had so much debt. And I’ve been able to take an amazing career opportunity that I would never have even considered before because it required a clearance, and I would have just assumed I would not have been able to get one with all that debt.

Just wanted you to know there was a happy ending here. I’ll probably start a journal soon to cover more about what I’ve learned from years of mistakes. Thanks for the time you took to analyze a stranger’s problem and offer helpful advice! It makes a difference!

Montecarlo

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Re: Is there any wisdom in selling my house?
« Reply #13 on: September 09, 2020, 05:47:53 PM »
Hello, to anybody that posted before and now sees this! I wanted to share an update.

I ended up selling my house, despite every person I talked to about it IRL encouraging me to keep it. This group were the only ones to encourage me to go forward with the sale. And I regret nothing! I used the proceeds to pay off high interest debt and get ahead of my massive debt problem. In doing so, I actually started to believe in myself and my value as a person again, which helped me to continue to crush debt and stick with better habits. (Before, I was so ashamed and paralyzed by the debt.  I didn’t realize how emotionally crippled I was by it, but I had given up any hope for a happy future and therefore better habits seemed pointless.)

My net worth has steadily grown over the last three years, from negative $70k the first time I tallied it up three years ago to $100k in the black now. Plus now I have an amazing boyfriend (soon to be husband) who I would NEVER have let get close to me before when I had so much debt. And I’ve been able to take an amazing career opportunity that I would never have even considered before because it required a clearance, and I would have just assumed I would not have been able to get one with all that debt.

Just wanted you to know there was a happy ending here. I’ll probably start a journal soon to cover more about what I’ve learned from years of mistakes. Thanks for the time you took to analyze a stranger’s problem and offer helpful advice! It makes a difference!

Great story!

meandmyfamily

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Re: Is there any wisdom in selling my house?
« Reply #14 on: September 09, 2020, 08:59:14 PM »
What a great update!

brooklynmoney

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Re: Is there any wisdom in selling my house?
« Reply #15 on: September 09, 2020, 09:34:59 PM »
This is awesome good for you!!

BikeFanatic

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Re: Is there any wisdom in selling my house?
« Reply #16 on: September 10, 2020, 03:43:01 AM »
Thanks for the update, this story could morph into a great journal storyline  as well

Igelfreundin

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Re: Is there any wisdom in selling my house?
« Reply #17 on: September 10, 2020, 04:57:19 AM »
Congratulations! It takes real courage to make big changes like that, particularly when people IRL are recommending against it. I'm glad you have improved your financial situation, but even more importantly, your emotional situation. That's what matters most of all.

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