Author Topic: To Sell or Not to Sell?  (Read 1316 times)

mountainjillian

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To Sell or Not to Sell?
« on: March 17, 2015, 03:15:15 PM »
Hello everyone!  I will cut right to the chase.  In 2012, my husband and I bought a condo that has since appreciated in value by (conservatively) about $100K-$125K.  It is our goal to purchase a modest single family home in our area, but it is also our goal to pay off our student loans, and it is also our goal to one day own multiple properties.  The options before us are as follows:

- Sell the condo now, use about 3/4 of the money we make for a down payment on a home and pay off the majority of our students loans with the remainder.  With this route, even with a higher mortgage in the end, our monthly bills SHOULD go down still by about $250/mo

- Keep the condo now and cash flow through rental (we think we can make about $400/mo extra on rent than what we pay each month), take a home equity line of credit to purchase a single family home, and keep paying down student debt "as we can" (I suspect most readers of this blog will NOT tell us to go this route, but who knows?)

- Just stay in the condo for now, and throw all our extra money at the student debt like our hair is on fire.  With this route, I think we could be out of the debt in a little over 2 years.

Thoughts?  Thanks fellow frugal friends!

Calimandc

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Re: To Sell or Not to Sell?
« Reply #1 on: March 17, 2015, 04:25:03 PM »
You are probably going to get a lot of different advice, but here's my personal take:

Keep the condo, stay in it, pay down the current mortgage.  Throw everything you have, including the kitchen sink (literally, the kitchen sink will have to go!) at the debt.  Pay off the debt.  When the debt is paid off, then save up to buy the new place.  You'll probably find that during the time you're saving your goals will change.  Then you'll have cash on-hand, rather than immense debt, and can choose if you want to own a new place, cash out the condo and retire, or keep living in the condo and making huge piles of cash to do whatever it is you want to do at that time.

If the place is big enough for you now, then stick with it and eliminate the debt.  You'll be very happy you did!

Here is a post I wrote some time ago that may add some insight into why I advocate this route:

http://forum.mrmoneymustache.com/share-your-badassity/debt-free-in-dc



Another Reader

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Re: To Sell or Not to Sell?
« Reply #2 on: March 17, 2015, 06:21:55 PM »
If you are saying that the rent you think you can get is $400 more than the mortgage payment, that is not the same as $400 cash flow to you.  You have not considered any other expenses if that is your thinking.  You have to factor in vacancy and collection losses, repairs and maintenance, capital improvements, and property management.  If you look through the threads here and on Bigger Pockets, the rule of thumb is 50 percent of the rent goes to operating expenses BEFORE debt service.  This condo may well be cash flow negative over time.

In your shoes, if it was time to get into a house (kids coming or you hate condo living), I would sell the condo and buy a reasonable house.  Be grateful for the opportunity to pay off your student loans and buy a house buying this condo gave you, and move on.  Once you have spent more time learning about rentals and are in a better cash position, then I would start acquiring strong cash flowing properties.