Author Topic: Next step after house hack in two years  (Read 896 times)

thorbjorn88

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Next step after house hack in two years
« on: January 15, 2019, 10:42:42 AM »
My wife and I currently live in a duplex we own in Tucson, Az. Our plan is to move out of this property in about 2.5 years or so when we have a second child and will need more room. I'm trying to come up with a plan of what we want to do. The three options we're looking at are

1. Keep the duplex, rent both parts, and buy a single family house for us.
2. Keep the duplex and long term renter in one part while attempting to do short term vacation, corporate, or travel nurse accommodations with the unit we live in now.
3. Sell the duplex and buy a single family house for us to live in and a new investment property.

The mortgage, insurance, and taxes come to $1556.54 a month and we collect $1020 in rent a month for the other unit (3 bedroom with car port). Our unit is smaller (2 bedroom with garage) but nicer than the other one so we think we could probably rent it for around $800. So after monthly payments we would have $263.46 per month or $3161.52 per year for maintenance, taxes, etc.

What things should I take into consideration to make this decision? Any experience on the difficulty or tax implications of selling a house hack to buy a house and an investment property?


affordablehousing

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Re: Next step after house hack in two years
« Reply #1 on: January 15, 2019, 12:55:07 PM »
That sounds like a pretty skinny return having both sides rented. Is it a 10, 15 or 30 year mortgage? How much equity do you have in it? Is it high appreciation territory? How much emotional attachment do you have to the place? Would you ever return? For us we kept our duplex and bought a new bigger house thinking that we may someday like to combine both halves and return to that area, and, the rents had risen such that we were making a good return, big decision comes when the capital gains exemption burns off. You've got time to see what the market does, how rents perform, etc.

waltworks

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Re: Next step after house hack in two years
« Reply #2 on: January 15, 2019, 02:24:33 PM »
That is a godawful rental. You'll slowly bleed money AND have to manage 2 sets of tenants?

Sell it when you want to move out. You will have to cough back up depreciation on the half you rent out, since you've been (presumably) depreciating it. You will have to pay capital gains on the rented portion of the property as well. Neither of those should be huge hits unless you've been living there for a LONG time.

-W

thorbjorn88

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Re: Next step after house hack in two years
« Reply #3 on: January 18, 2019, 11:10:39 AM »
Thanks for the input. Yeah, it really isn't a good rental property. It was kind of a compromise between a place my wife would be happy living and something we could make some money renting out in the mean time.

Another Reader

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Re: Next step after house hack in two years
« Reply #4 on: January 18, 2019, 11:46:20 AM »
I would say it's been a decent house hack but today it would not make a good rental.  What is the value of the property and what are the terms of the loan?  Those numbers make some difference in how you should proceed.

Making decisions today about what to do in 2.5 years is not wise.  The market may change substantially between now and then. Start planning when you are nearing the lease renewal just before you want to sell.

smb232

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Re: Next step after house hack in two years
« Reply #5 on: January 21, 2019, 10:08:00 AM »
My only addition is that some loans (those backed by fannie mae for example) don't allow you to use them as an airbnb. This is true for our loan on a duplex that we own.

tralfamadorian

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Re: Next step after house hack in two years
« Reply #6 on: January 21, 2019, 10:38:43 AM »
Agree that it was an okay house hack but the numbers do not pan out for long term rental.

Enough

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Re: Next step after house hack in two years
« Reply #7 on: January 23, 2019, 05:42:58 AM »
Option 4: End the lease on the larger side in 2 years, use the last 1/2 year to fix up the larger size to your standards and then move into the larger unit when you're ready for the second child.

You don't lose money to real estate transaction costs.  You get to keep the benefits of having a rental property that you can split deductible expenses with.  This is assuming you're happy with the neighborhood you're living in now.