Author Topic: Keep House or Sell for Equity?  (Read 1516 times)

socialforums2019

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Keep House or Sell for Equity?
« on: December 01, 2019, 09:05:16 AM »
House purchased at $415K
Latest house comp sold for $890K
Mortgage is 30 year, $145K @ 3.75%
Rental Income: $3200-$3400/mo

Want to upgrade to 3/2 SFH and better public schools.  Typical house will be $1.2-$1.5M and currently have $200K set aside for down payment.

Sell the house and put all proceeds into down payment to next house or keep the house, save another 2-3 years?

waltworks

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Re: Keep House or Sell for Equity?
« Reply #1 on: December 01, 2019, 10:45:16 PM »
Post a full RE sell vs rent case study (sticky at the top of the forum) and you'll get better advice.

Do you currently (or recently) live in the house?
Is that gross rents? Why the range? Do you charge variable rent month to month?
Or do you mean *potential* rental income?

In general, that's a bad rental - unless you're *netting* $3k+ per month after all expenses (ie, PITI, management, vacancy, capex/maintenance, etc) in which case it's not bad. At the high end you don't need to hit the 1% rule to make good money in many cases.

If you live there now, I'd sell it just for the capital gains exemption.

-W

socialforums2019

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Re: Keep House or Sell for Equity?
« Reply #2 on: December 02, 2019, 05:50:42 AM »
Post a full RE sell vs rent case study (sticky at the top of the forum) and you'll get better advice.

Do you currently (or recently) live in the house?
Is that gross rents? Why the range? Do you charge variable rent month to month?
Or do you mean *potential* rental income?

In general, that's a bad rental - unless you're *netting* $3k+ per month after all expenses (ie, PITI, management, vacancy, capex/maintenance, etc) in which case it's not bad. At the high end you don't need to hit the 1% rule to make good money in many cases.

If you live there now, I'd sell it just for the capital gains exemption.

-W

Yes currently live in the house and the range for the rent is due to potential rental income.  Current homes are renting out for $3,400/mo, but being conservative in my estimates, I've put own $3,200.

Updated below:

Market Value: $890K
Original Purchase price: $415K
Original Mortgage Amount: $165K
Interest Rate: 3.75%
Mortgage Term: 30 years
Term remaining: 24 years
Amount remaining on mortgage: $143K
Estimated Gross Rents: $3,200/mo
Principal and Interest (the P&I of your PITI - should match with the above info): $765/mo
Taxes and Insurance (the T&I of your PITI): $615/mo
HOA costs: $278/mo
« Last Edit: December 02, 2019, 05:55:32 AM by socialforums2019 »

Another Reader

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Re: Keep House or Sell for Equity?
« Reply #3 on: December 02, 2019, 06:32:43 AM »
Suspect the appreciation in your market has slowed as it has in most expensive areas.  If that's the case, in your shoes I would sell and take advantage of the capital gains exemption.

Dicey

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Re: Keep House or Sell for Equity?
« Reply #4 on: December 02, 2019, 07:05:18 AM »
Suspect the appreciation in your market has slowed as it has in most expensive areas.  If that's the case, in your shoes I would sell and take advantage of the capital gains exemption.
I agree with AR. I strongly suggest you only put 20% down and invest the difference. With mortgage rates being so low, it makes more sense to grab as much cheap money as you can.

SeattleCPA

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Re: Keep House or Sell for Equity?
« Reply #5 on: December 02, 2019, 07:25:04 AM »
Suspect the appreciation in your market has slowed as it has in most expensive areas.  If that's the case, in your shoes I would sell and take advantage of the capital gains exemption.

+1 to this.

If you don't know how the Section 121 exclusion works, which is what I think Another Reader references above, you need to learn how that works and make sure you're not missing a chance to avoid taxes on the gain.

One of the worst real estate investment decisions someone can make is to skip taking the Section 121 exclusion if it's available.

More info here: https://www.irs.gov/taxtopics/tc701

waltworks

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Re: Keep House or Sell for Equity?
« Reply #6 on: December 02, 2019, 08:58:40 AM »
Yeah, if those are gross rents, and there's an HOA, this is the biggest slam-dunk "SELL!" case study I've seen in a while.

Even with nothing ever breaking or requiring maintenance and no vacancy or management costs, you're talking about a net of like $19k/year. On $750k equity!

You could basically do just as well (actually, probably quite a bit better, since you'd probably net 30% less than that) buying TIPS with basically no risk at all.

-W