Author Topic: Should I unload my new house? How can I best go about doing so?  (Read 799 times)

pnw_guy

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Hi all,

About me: I'm new to MMM and the FIRE community. In my early 30's with a family and working in tech in the PNW.

My question: I just bought an expensive home that closed earlier this year in a high cost of living area. While the home is expensive, I specifically bought it because it has a basement that is ideal for a rental unit. My thinking was my renting that out I could substantially reduce my housing costs. However, I've recently learned that I can work remotely moving forward. Thus, my incentive to remain in a high cost of living area is substantially reduced, and my thinking is that if I can reduce my housing costs then I might be able to reach FIRE faster. So, here are my specific questions:

1) How should I think about - at least from a financial perspective - whether I should sell my new house? On the one hand, I think I could reach FIRE faster if I could reduce my housing costs and invest the difference. As mentioned above, I think I'll eventually be able to rent out the basement of my house to reduce my current housing costs, but even if this is possible, I still have the liability of carrying a large mortgage. On the other hand, I have quite a bit saved for retirement in index funds, so maybe I should keep the house and just rent it as a form of diversification?

2) If I do decide to sell it, what is the best methods for recovering the transaction costs that go into buying and selling real estate? I've read online that if one lives in a house long enough that it's generally better than renting. So does that mean I just need to sit on the house for a couple of years to let it appreciate? Or should I try to sink some money into it to make repairs and make it more valuable in hopes of recovering more of my transaction costs? I'm really not sure whether it's time, added value through repairs/upgrades, or something else that will help me recover the transaction costs.

ANY help whatsoever will be greatly appreciated! And yes, I do know now that buying an expensive house isn't consistent with the MMM philosophy :)

Cheers!

ixtap

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Re: Should I unload my new house? How can I best go about doing so?
« Reply #1 on: August 30, 2020, 04:48:10 PM »
Do you have somewhere else you would rather be?

Have you been told that WFH will be possible going forward, as opposed to just not having an end date at this time?

Have you considered getting a roommate or a few roommates?

pnw_guy

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Re: Should I unload my new house? How can I best go about doing so?
« Reply #2 on: August 30, 2020, 04:54:41 PM »
Do you have somewhere else you would rather be?

Have you been told that WFH will be possible going forward, as opposed to just not having an end date at this time?

Have you considered getting a roommate or a few roommates?

1) I can imagine being in lots of other places. I don't see myself as needing to live in a HCOL city. We don't really take advantage of most the aspects of city living, and would be fine in a smaller town/city in the Pacific Northwest that are significantly cheaper.

2) WFH option is indefinite

3) Haven't considered getting a roommate. Again, our house is two levels and we bought it with the intention of renting out the basement. That's still on the table. I don't anticipate a roommate in the upstairs because it's pretty full with our family.

ixtap

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Re: Should I unload my new house? How can I best go about doing so?
« Reply #3 on: August 30, 2020, 05:00:53 PM »
Do you have somewhere else you would rather be?

Have you been told that WFH will be possible going forward, as opposed to just not having an end date at this time?

Have you considered getting a roommate or a few roommates?

1) I can imagine being in lots of other places. I don't see myself as needing to live in a HCOL city. We don't really take advantage of most the aspects of city living, and would be fine in a smaller town/city in the Pacific Northwest that are significantly cheaper.


2) WFH option is indefinite

3) Haven't considered getting a roommate. Again, our house is two levels and we bought it with the intention of renting out the basement. That's still on the table. I don't anticipate a roommate in the upstairs because it's pretty full with our family.

"Indefinite" means there is a decent possibility of being required to return to the office, you just don't know when. I would not sell up under that label.

The first post just said "I," no "we:" can be a pretty significant context difference. The roommate is still possible if there is an extra bedroom, but definitely rent out the separate space before exploring the roommate option.

rmorris50

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Re: Should I unload my new house? How can I best go about doing so?
« Reply #4 on: August 30, 2020, 06:43:18 PM »
I donít know if Iíd uproot and move just on indefinite WFH. These are unusual times, decisions can change. What if a vaccine comes out and businesses start wanting people to come back in? On the other hand I doubt we will go back to 5 days a week in the office for the foreseeable future. And the real estate market in many places is hot due to the low interest rates, so you may not lose out as bad as you normally would selling so quick. I also assume you are being paid big city salary and can pocket a lot more moving to a cheaper place. And maybe in the future if you do have to go into the office, itís infrequent enough that the hotel cost isnít bad if work wonít pay for it.

So maybe I would consider moving. But moving is a major pain. Very tough call and lots of pros and cons. Good luck, let us know what you do!


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calimom

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Re: Should I unload my new house? How can I best go about doing so?
« Reply #5 on: August 30, 2020, 07:58:08 PM »
Sometimes,  when people first discover MMM and new ways  of thinking about money,  there's an initial reaction to make drastic changes. Buy an  electric bike! Buy an Instant Pot! Sell the house! Those can be helpful things...or  not. Have you seen the "Playing With FIRE" documentary? It's worth a watch. Sometimes just tweaking your existing life is a place to start: eliminate debt, maybe sell an unused car, scrutinize the grocery bill. Cut cable, investigate lower-costt investmentt options, pad the EF.

In your case,  I would advise  caution in making a radical housing/geographic change.You just bought your house. As others have noted, WFH options may change over time. I'd seriously look at what it would take to convert your basement into a viable rental. HCOL area=HCOL rents. See if you can secure a qualiity tenant. Moving incurs fees, no matter what. RE transfer costs, movers of some sort, taxes and the like. Maybe hold steady for a bit. It's generally thought that when buying a house you live in it for 10 years, though there are of course lots of exceptiions to this.

Whatever you decide to do, welcome to the forums and wishing you the best  as you navigate all the changes happening around us all.

waltworks

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Re: Should I unload my new house? How can I best go about doing so?
« Reply #6 on: August 30, 2020, 08:07:01 PM »
What are your actual life/fulfillment goals? Without some context, it's hard to answer this. If you don't have a plan in mind other than "sell the house and move somewhere else", it's probably a bad idea. Transaction costs are high, hassle factor is high, and since you don't have a plan, you might not even like your new life.

If you've always wanted to be a hobby farmer or live in a mountain town (please don't move to mine, though) or whatever, and your expensive house is a millstone around your financial neck, and your wife and kids don't like where you live... pull the trigger, sure.

-W

Abe

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Re: Should I unload my new house? How can I best go about doing so?
« Reply #7 on: August 31, 2020, 02:33:00 AM »
Hi all,

About me: I'm new to MMM and the FIRE community. In my early 30's with a family and working in tech in the PNW.

My question: I just bought an expensive home that closed earlier this year in a high cost of living area. While the home is expensive, I specifically bought it because it has a basement that is ideal for a rental unit. My thinking was my renting that out I could substantially reduce my housing costs. However, I've recently learned that I can work remotely moving forward. Thus, my incentive to remain in a high cost of living area is substantially reduced, and my thinking is that if I can reduce my housing costs then I might be able to reach FIRE faster. So, here are my specific questions:

1) How should I think about - at least from a financial perspective - whether I should sell my new house? On the one hand, I think I could reach FIRE faster if I could reduce my housing costs and invest the difference. As mentioned above, I think I'll eventually be able to rent out the basement of my house to reduce my current housing costs, but even if this is possible, I still have the liability of carrying a large mortgage. On the other hand, I have quite a bit saved for retirement in index funds, so maybe I should keep the house and just rent it as a form of diversification?

2) If I do decide to sell it, what is the best methods for recovering the transaction costs that go into buying and selling real estate? I've read online that if one lives in a house long enough that it's generally better than renting. So does that mean I just need to sit on the house for a couple of years to let it appreciate? Or should I try to sink some money into it to make repairs and make it more valuable in hopes of recovering more of my transaction costs? I'm really not sure whether it's time, added value through repairs/upgrades, or something else that will help me recover the transaction costs.

ANY help whatsoever will be greatly appreciated! And yes, I do know now that buying an expensive house isn't consistent with the MMM philosophy :)

Cheers!

See what rents and laws are in the neighborhood before considering renting the house out. It's a big undertaking if you have no prior experience. Or, find a property manager and struggle to cover your costs (in most markets). I think renting out the basement is a better idea, as you are basically finding someone to help pay your mortgage rather than trying to turn a profit to help pay your mortgage somewhere else. Someone with more experience renting in your city can help with that question.

Also, I'd caution against making too many life changes with a fluid situation. If your plan is downsizing and staying in the same city, that's a safer bet regarding working from home and its longevity. A lot of industries are going gah-gah over permanent working from home, but I've seen enough fads to know that nothing is permanent in business. Work on things that calimom suggest, then re-evaluate. 

former player

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Re: Should I unload my new house? How can I best go about doing so?
« Reply #8 on: August 31, 2020, 03:04:57 AM »
Seconding Abe's post and adding: this is not an "I" decision it is a "We" decision.  I have hung around these forums long enough to see what happens when one member of a family discovers the way of the mustache and goes all in without bringing their partner along: it rarely ends well.  So my advice would be: there's some great stuff in MMM but please don't suspend your critical thinking skills when applying it to yourself and your own life.  And before you do anything to translate it into real life you need to read the thread about getting your SO on board:

https://forum.mrmoneymustache.com/ask-a-mustachian/how-to-convert-your-so-to-mmm-in-50-awesome-steps/

Abe

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Re: Should I unload my new house? How can I best go about doing so?
« Reply #9 on: August 31, 2020, 10:39:29 AM »
Seconding Abe's post and adding: this is not an "I" decision it is a "We" decision.  I have hung around these forums long enough to see what happens when one member of a family discovers the way of the mustache and goes all in without bringing their partner along: it rarely ends well.  So my advice would be: there's some great stuff in MMM but please don't suspend your critical thinking skills when applying it to yourself and your own life.  And before you do anything to translate it into real life you need to read the thread about getting your SO on board:

https://forum.mrmoneymustache.com/ask-a-mustachian/how-to-convert-your-so-to-mmm-in-50-awesome-steps/

Another good point. Also if you have kids, consider their social lives.