Author Topic: House value appreciated 200k last year, 220k year before. To sell or ??  (Read 4664 times)

pudding

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Hi folks, I bought a house in Vancouver Canada 9 years ago. The last few years the houses have been selling for ever increasing huge amounts.

It's become this big deal and no one of course knows where its going.

http://www.moneysense.ca/spend/real-estate/8-factors-that-really-mess-up-vancouvers-real-estate-prices/

I posted a similar post to this last year and its resale potential has since gone up around 200k !   

I ran into some problems with the city as I had the house split into 3 suites.

To resolve this I have had to

1. do some upgrades to authorize the basement suite and

2. take out the stove on top floor and make main and top floor one suite.   

3. I have a garage attached to house the city dont like it. An option I have is to knock it down and build a second 600 square foot house at the bottom of garden. I have finance in place to do it plans being processed and I'm in construction and plan to do it for a wholesale price.

It's been a hassle but at the end of the day I'll have 2 houses and the main house will have an authorized suite which makes it attractive to a buyer.

With the new smaller house and renovations on main house I think I could sell for around 1,900,000 next year.... thats a lot of doe!!... more than I ever imagined it would be!

Reason I'm writing this is, I'm a bit of a plodder, by that I mean I'll plod along and not pay a lot of attention to where markets are going and what options I might have. I focus mostly on my work, family and fitness.

If I sell it what would I do with the money? Is investing in markets scary and could I lose a lot of it?  I'm wondering what the risks are.

I don't mind what I do for a living, I do small renovations and mostly not too bad... though would certainly like to work less, but still work some.

At the moment the money is all in the house and has been for the 9 years since I bought it, I've thrown most of my money at it, and for the first 5 years it was a huge! pain in the neck and still is at times but a lot less than it used to be,  also is a good place to live and run my business out of.

Ideally if I could sell the small house separately and pay off the bank it would be great but at this point can't be done and has to be sold as one with main house. Though theres rumour that might change (or maybe not)

It's like Im asset rich, but not cash rich.... would hate for the bottom to fall out of things, but also if I'd sold it 5 years back as I almost did, I'd be having a fit right now as its since gone up about 700 thousand.

Although if I build the small house and rent it out on air bnb plus the rent from basement suite, I'd more than cover bills and end up with around 1000 to 1400 a month after expenses. Also mortgage paid down about a thousand a month. plus any upside in the value ( currently about 4 grand a week , but it surely cant go on like that) and a place to run my business from.

If I sell next year I could retire if I wanted to. That would be huge and I'd hate to miss this opportunity, it really is that once in a lifetime lucky break.

My own thoughts on it are that the bottom could fall out of it, but maybe 25% which is still a lot of money to leave on the table. ( around $375k!)

and depending on if/why it went down, it may be it would go back up....  theres a lot of Chinese money being invested here and looks to me like its at the point people cant ignore the elephant in the room.. if it goes down because the government stops the money coming in, then that might be a big blow.

http://www.cbc.ca/news/canada/british-columbia/sfu-real-estate-study-foreign-buyers-1.3572499

If only I had a crystal ball.  It's almost a bit of financial and life style , philosophical question I think.

Any thoughts appreciated.




Zoot Allures

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Congrats on owning such a great asset. I don't have any great expertise for you, but have been going through a miniature version of what you describe. Housing prices in Portland are soaring, and I now have a good deal of equity tied up in my rental house. I expect the market to crash or at least slow down at some point...doesn't it always happen eventually? I'm tempted to sell the place soon and lock in my gains. I could miss out on more future gains, but I'd be selling in a hot, seller's market, and could pass along the inevitable capital expenses to someone else. I would either throw the profit into stocks or would build my dream cabin in the mountains somewhere.

Honestly, though, in all likelihood I won't sell anytime soon. I have great tenants, and my loan balance is at $125k and dropping every year. Most likely scenario is I move back into the place myself eventually and establish residency again for two years, which means (I think) that when I do sell, up to $250k in profit won't be exposed to capital gains tax.

The situation in Vancouver is crazy. If I were you, I'd be very tempted to sell! I guess the only real advice I have is that if you find yourself thinking and believing that "the market can only go up," you should really consider selling, for your own good. :)
« Last Edit: June 22, 2016, 10:51:25 PM by Zoot Allures »

FIPurpose

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Sounds like you're over allocated in real estate. You do have another option if you want to keep the house, and that is releverage it with a mortgage. Though if it were me, I'd sell and get out. If the market really plummets, you'd hate yourself for missing the opportunity. Like the previous poster I'm in the Portland area, and I plan on selling sometime next year. Here's to hoping the market continues this direction for another year. There's a huge profit potential for me in something that was cheaper than renting. Congrats on the win.

scrubbyfish

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Definitely a tough call!

In a similar situation, I sold. BUT, this was because I: hated having mortgage debt (feared being unable to pay it at any future point), had my property taxes and insurance triple over the same period, and couldn't stand being a landlord anymore.

I LOVED that house but for me, I was ready to move on and have only ever been super happy I did. When I sold, I knew NOTHING about investing (you can read that story in my book, link below) so I didn't gain in the first few excellent market years. By the time I learned how to invest, the market had slowed down, lol. I'm still really happy I sold.

I can't say that would be true for you. More saying consider the personal factors (happiness or unhappiness of the actual owning).

re: Investing. You sound like you know the same amount I did when I sold. I encourage you to start learning NOW, so you're ready to allocate the money very quickly after selling. I loved the book Millionaire Teacher (written by a Canadian based out of Victoria, though lives globally now). Canadian Couch Potato website gives 'model portfolios' which match Hallam's take. I picked one of those and just follow it. But it's important for sanity (and not pulling out when the markets are down) to learn the basics first. You want to know which path within the model portfolios you're comfy with, how much money you'll need sooner vs later, etc. It is actually very fast to learn, so just grab a couple of books, read up, then ask your remaining questions here :)

Those around here (including me) believe the following:

1. The risk in a diversified portfolio is not that your money will disappear. The risk is that you will withdraw it while the market is down. By keeping what you might need in the next 5-10 years accessible (that is, in a more peaceful allocation), the rest can go up and down as it pleases. 5-10 years before you need the rest, when it's at a healthy return rate, you will move it to a less volatile option so it's ready for you whenever you need it.

2. If our entire worldwide economic system permanently collapses, such that these well-diversified investments are worthless, we'll ALL be in the same boat: living off-grid, hunting and fishing. In which case you're still a-okay :)

scrubbyfish

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p.s. I didn't sell quite at top of the market (we all know that's impossible to time, though some will luck out), but close enough to. And in that region of BC, prices have remained stable since, i.e. there was no further gain to be had. This helps my happiness.

Frankies Girl

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You've posted multiple times in the last year about this exact same situation. Why are you asking this over and over and still not changing anything? Just curious as you received lots of very good advice and seem to be ignoring it.


larmando

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I would definitely *not* releverage a possibly bubbly asset to invest. If I were you I'd try to sell: it's a lot of money and you could live off it quite safely with a lower withdrawal than most if you wanted to be super careful.

Also if you had sold 5 years ago and invested in an index fund how much would it be worth now? Sure the market might drop, but so can real estate values, and more than you expect.

pudding

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You've posted multiple times in the last year about this exact same situation. Why are you asking this over and over and still not changing anything? Just curious as you received lots of very good advice and seem to be ignoring it.

Good point and one I thought about when I was writing this post. I think just because I'm a bit knocked over by it all. The dramatic rise in the prices sell for here and when to get off the ride or stay on??? Just how do you make that decision.. If I'd sold it last year I would have got about 200,000 less than if I sold it today.  It's nuts how things have gone up here... so large amounts that it gets hard to say OK now is the time...
I think I'm just part excited and part wondering what others would do.

Heckler

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There's a huge profit potential for me in something that was cheaper than renting. Congrats on the win.

If you can find an affordable place to rent in the city you want to live in.  Unlikely around here actually.

Heckler

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We will hold and be happy to be mortgage free on a  place that's tripled in value in 13 years.  Once we don't want to live here anymore, we'll sell.

Gmullz

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The great thing about those of us who live a life where "enough" truly is "enough" is that we don't have to play the game of "well, if I just hold on a little while longer, I'll have even more!"

It sounds like you've made enough to last you forever, so why hang on any longer? I wouldn't be able to sleep if I owned a house worth that much in Vancouver. The thought of not selling before the market crashes would haunt me.

I guess the main concern is what you will do after you sell. Will you rent? Will you be ok with renting? Can you move out of the Vancouver market?

pudding

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I'd be fine with renting. Owning that house has been a pain in the bum.

I don't think im driven by greed. I mean if id sold that house a year ago, whoever bought it would be able to sell it today for what its worth now. Its not like Im screwing people out if money.

Probably will sell in spring 2017 and if all goes to plan I can have a stash that will last me as long as Im alive!

Hallelujah !

ender

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You've posted multiple times in the last year about this exact same situation. Why are you asking this over and over and still not changing anything? Just curious as you received lots of very good advice and seem to be ignoring it.

Good point and one I thought about when I was writing this post. I think just because I'm a bit knocked over by it all. The dramatic rise in the prices sell for here and when to get off the ride or stay on??? Just how do you make that decision.. If I'd sold it last year I would have got about 200,000 less than if I sold it today.  It's nuts how things have gone up here... so large amounts that it gets hard to say OK now is the time...
I think I'm just part excited and part wondering what others would do.

I wouldn't speculate, I'd make the decision based on whether or not it fit my goals given the current information.

And for me? Clearing the $1,000,000+ that you would net from selling would immediately enable me to live a lot more of my dreams than gambling with that future. That decision would take me about 30 seconds.

I think, particularly having read this thread and this other one and another one you will not sell but instead continue to hold the house hoping it appreciates more.  It may, it may not. No one knows what your goals and plans are. Given your threads and posts, not even you - I would spend some serious time thinking and talking this through with whoever it impacts (not sure if you have a spouse, you mentioned daughter/grandkids). Make a plan and stick to it.

Playing the lottery is exciting, too.

pudding

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You've posted multiple times in the last year about this exact same situation. Why are you asking this over and over and still not changing anything? Just curious as you received lots of very good advice and seem to be ignoring it.

Good point and one I thought about when I was writing this post. I think just because I'm a bit knocked over by it all. The dramatic rise in the prices sell for here and when to get off the ride or stay on??? Just how do you make that decision.. If I'd sold it last year I would have got about 200,000 less than if I sold it today.  It's nuts how things have gone up here... so large amounts that it gets hard to say OK now is the time...
I think I'm just part excited and part wondering what others would do.

I wouldn't speculate, I'd make the decision based on whether or not it fit my goals given the current information.

And for me? Clearing the $1,000,000+ that you would net from selling would immediately enable me to live a lot more of my dreams than gambling with that future. That decision would take me about 30 seconds.

I think, particularly having read this thread and this other one and another one you will not sell but instead continue to hold the house hoping it appreciates more.  It may, it may not. No one knows what your goals and plans are. Given your threads and posts, not even you - I would spend some serious time thinking and talking this through with whoever it impacts (not sure if you have a spouse, you mentioned daughter/grandkids). Make a plan and stick to it.

Playing the lottery is exciting, too.


I was sat drinking a beer tonight and thinking about this and what would be different if I sold it etc...
One thing that happened today is that my daughter said she is probably heading back to Toronto before the end of summer. (she's living in the house)

Once that bit of the jigsaw fell into place I was like, time to get this thing ready for sale.  So thats what I've decided to do. Now its a just a case of how to do it.   By that I mean that I have this order against the house from the city, they came around and said this that and the other needs to be done. And I can sell it until its done and they sign it off.

I have a few options, one is fairly easy, other one is to build this small house out the back and of course that takes longer and I really don't know if I can muster the enthusiasm for that.

And I agree I dont really know what I want. At the moment I have this existential thing going on where I really wonder what the F life is about and I dont know how to resolve it.

But I think with daughter announcing shes probably moving, and the way that house has appreciated in the last few years and also how the government seem to be getting into intervening to cool the market... it's time to press the ejector button and blow this one up!  And thankful as my ship has come in.

Thanks for your reply. One thing I have going on at the moment is living in this city I didnt grow up and feeling a bit alone, so I appreciate the chance to bounce ideas off people on here.

PS, daughters mother died when she was a kid.

Cassie

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I agree with Ilamo.  Fix it quickly and sell. Spring of 2017 may be a totally different story. A bird in hand.......

pbkmaine

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Lhamo is very wise. You should listen to her.

2Birds1Stone

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Sell!

pudding

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Congratulations on having timed the market well so far.  Having just received a good faith deposit on our apartment in Beijing (which more than tripled in value since we bought it in 2009), I understand the mixed feelings.  We sold a co-op apartment in NYC at a good price in 2003, but then saw the people who bought it from us sell it for more than 50% more two years later. Still, whether or not we are selling at the peak of the current market in Beijing, we are getting a very good price and will be officially FIREd when all is said and done, so I think we will have no regrets.

If I were in your position, I would do the minimum upgrades/code fixes that are needed to enable you to sell the house and put it on the market ASAP.  Do not bother with putting up a new building -- if the zoning allows for that, then maybe note it in your listing but let the buyer handle it/finance it.  If the garage is not fixable then tear it down and let the buyer decide what to do.  Start downsizing your personal belongings now, and try to identify where you will move (at least the neighborhoods you are interested in, if not exact buildings) once the house sells.  If you have enough financial cushion to do so, you might want to line up a rental even before the house sells -- easier to stage/show a house when you are not living in it.

Hi and thanks for your post.

I think I'm in the same mind on all the points you make here.

One is the not having regrets, if I had sold it 6 years back as I was going to do, for sure I would big regrets right now as I would have made maybe 40k and left 3/4 million on the table. But now its different, now if I sell it could pretty much be FIREd and that is a wonderful thing.

Also in agreement on pull the old garage down, ( or pay structural engineer to take a look as city require, could be salvageable) do the last of the upgrades ASAP and get the hell outta there!

Today the provincial government announcement that they are going to be doing things to make housing more affordable for middle class people in Vancouver... could go a few ways. One may even be that they will change the zoning to allow a duplex on a lot like I have..... anyway thanks and I think thats what I should do.... I have to sort of focus on it and get it done otherwise I could lose out and that would awful.

http://www.cbc.ca/news/canada/british-columbia/christy-clark-youtube-video-on-affordable-housing-1.3653136

pudding

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Just read this encouraging story, about a family of four that sold there Vancouver house and are travelling the world.


http://www.cbc.ca/news/canada/british-columbia/b-c-family-cashes-in-on-hot-housing-market-to-wander-the-world-1.3642714

ol1970

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Although long term real estate will relentlessly march upwards for a number of reasons, in your particular case I would go ahead and sell.  Diversifying your net worth is never a terrible thing, you could absolutely lose out on upside, but who cares as long as you've made such positive gains.  I'm in a bit of a similar situation.  I'm in the process of selling my home which is very anti-mustachian, 7,000 square feet 6 bed 7 bath on the end of peninsula of a beautiful lake.  I'm single and it goes without saying it is way more than I need...but I bought it for cash at the bottom of the market in '10 and will most likely make about $1M after fees and taxes, it was an investment I could live in and enjoy immensely.  I guess from that standpoint it was sort of mustachian, I didn't extend myself in the least to purchase it and made a sound investment in a market I understood well and knew was undervalued.  I didn't buy it assuming it would go up so much so quickly, but it did and now it is time to cash in and move on.  Good luck in your process as well!

Oh and keep some powder dry so the next time there is a "buying opportunity of a lifetime" in a few years you can repeat the process.