Unsure what to do with my current primary residence

Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes

3y

Probably sell the house. Financially it does not make sense to keep. As far as the funds go that's up to you on reinvesting. BP is about real estate investing so I would so look into that. You will only net 100K ish which could be a decent down payment if you did 5-10% down. San Diego is expensive so not sure how far that'd go. Starting out you could put in a CD, so you can get your bearings. Then in 6-12 months look into investing/buying a property. With moving I would not do any crazy decisions with the funds you make on the sell.

2 Reply

Max Reynolds

Property Manager · San Diego · Member since 2022 · 24 posts · 19 votes

3y

Dan - my recommendation would be the following:

- Confirm with your insurance agent what exactly your price change in insurance will be so that you can better understand your monthly payments will be.

- Complete a rent survey yourself because that is way too big of a range. Check Zillow, apartments.com, Craigslist, and other marketing platforms to look up and see what is available for same number of bedrooms, similar SF, and similar renovations (excluding powerwalls, etc.). Call each listing to see what the leasing activity has been like and create a list of those properties to follow up with after it is leased to confirm what price it leased for.

- Vet each listing you call to see how active that agent/property manager is in the area to see if they are the most qualified to rent your house out for the highest price. I know you have already talked to other agents but see what those you call have to say about their pricing for your home and if the fair market rent you came to a conclusion on is feasible. Keep in mind that unless you are actually considering using the agent/property manager to market your home for a future sale or lease, they might be a "yes man" and be agreeable to get you off the phone if they feel they are providing free information with no opportunity to work with you.

- If you are at or close to a break even and are in the financial position to do so, I would hold onto the property. At such a low interest rate, majority of your payment is paying down principle. Additionally, you benefit from appreciation, depreciation, and other tax benefits that come along with owning real estate. No one has a crystal ball but IF rates drop next year, your home value might increase (don't know the supply/demand in your market) and if so, might be a better time to sell if you choose to.

- I am wary of CD's because you are typically locked in for extended periods of time and the return is not all that great. My savings account currently pays me 4.3% where as a CD I bought last year is only 4.5%. What if you come across a good deal on a property you want to buy but your funds are tied up in a CD? This happened to me and wished I had more liquid funds to put into the deal.

Now, I don't fully know your situation/market and can't give tax, financial or legal advice but this would be my real estate advice and personal opinion if I had the same situation here in San Diego.

Reach out with any questions about the San Diego market.

3 Reply

Andrew Reiff

Member since 2021 · 26 posts · 3 votes

3y

I would use my realtor wife :), who is on the best selling team in Ann Arbor, to sell your house while the inventory is so low, and the prices she is currently getting for listings are so crazy. Then invest that money wisely and grab some gains in the market, while you wait for a reduction in rates, and then buy your dream home in San Diego. Good luck my friend.

1 Reply

Account Closed

Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes

3y

Quote from @Dan Deng:

Hello All,

I have decided to come to the BP forums to ask for your advice and or thoughts on my current situation. I currently live in Ann Arbor, MI and own a primary house here. Due to a new job offer, my family is moving to San Diego, CA. I currently own a house in Ann Arbor which we purchased back in 2019 for $550k at a 2.1% mortgage interest rate over 15 years. It's now worth almost $700k. Normally, I'm sure most people would sell their house so they can put the money into a downpayment on their next house. However, I'm in a fortunate situation where I will be able to move in with my parents for at least the next 2 years so I don't have to purchase or rent a house in San Diego for a bit. Now for the dilemma:

I really like my house I purchased and put a lot of money into the house not cosmetically but upgrades that I wanted like solar panels, 2 Tesla Powerwalls and a BRAND new super efficient heat pump and 99% efficient furnace. Unfortunately, these upgrades do not improve the price of the house nor are typical things that new home owners are looking for especially in Michigan.

I am trying to decide whether I should sell my house and put the money in a CD until I'm ready to buy a house in San Diego or to keep the house and rent it out. Houses of my size and type are not commonly rented in Ann Arbor and the rent ranges I got from a local real estate agent ranges from $3,100 - $4,500 based upon when and how new the houses were. My current cost for the house is about $3,700 for mortgage + insurance + taxes. Thus the house will likely be cashflow negative once you include cost of maintenance and increased costs for insurance and taxes due to no longer being homestead. I'm really reluctant to give up a low interest rate.

The way i see it... I have 4 possible options:

1. Sell the house - Save the money on a CD (Or something else similar) until about 2 years in the future
2. Sell the house - buy something in San Diego as soon as possible
3. Keep the house and find a long-term tenant for it
4. Keep the house and find a long-term tenant, sell in 2 years then buy a house in San Diego

So, anyone want to give me their take on what they would do if they were in my situation?

If you sell the house now, you get tax breaks. If you wait too long you'll have a tax bill.

Having a rental that far away, can be a nightmare according to landlords I've seen post on Bigger Pockets.

Are you convinced real estate prices always go up? Hmmm, you weren't around for the last 3 crashes eh?

By selling now, it frees up cash to invest elsewhere as opportunities arise.

Maintaining a negative cash flow wears on you before long.

1 Reply

Dan Deng

OP

New to Real Estate · San Diego, CA · Member since 2022 · 5 posts · 4 votes

3y

Quote from @Max Reynolds:

Dan - my recommendation would be the following:

- Confirm with your insurance agent what exactly your price change in insurance will be so that you can better understand your monthly payments will be.

- Complete a rent survey yourself because that is way too big of a range. Check Zillow, apartments.com, Craigslist, and other marketing platforms to look up and see what is available for same number of bedrooms, similar SF, and similar renovations (excluding powerwalls, etc.). Call each listing to see what the leasing activity has been like and create a list of those properties to follow up with after it is leased to confirm what price it leased for.

- Vet each listing you call to see how active that agent/property manager is in the area to see if they are the most qualified to rent your house out for the highest price. I know you have already talked to other agents but see what those you call have to say about their pricing for your home and if the fair market rent you came to a conclusion on is feasible. Keep in mind that unless you are actually considering using the agent/property manager to market your home for a future sale or lease, they might be a "yes man" and be agreeable to get you off the phone if they feel they are providing free information with no opportunity to work with you.

- If you are at or close to a break even and are in the financial position to do so, I would hold onto the property. At such a low interest rate, majority of your payment is paying down principle. Additionally, you benefit from appreciation, depreciation, and other tax benefits that come along with owning real estate. No one has a crystal ball but IF rates drop next year, your home value might increase (don't know the supply/demand in your market) and if so, might be a better time to sell if you choose to.

- I am wary of CD's because you are typically locked in for extended periods of time and the return is not all that great. My savings account currently pays me 4.3% where as a CD I bought last year is only 4.5%. What if you come across a good deal on a property you want to buy but your funds are tied up in a CD? This happened to me and wished I had more liquid funds to put into the deal.

Now, I don't fully know your situation/market and can't give tax, financial or legal advice but this would be my real estate advice and personal opinion if I had the same situation here in San Diego.

Reach out with any questions about the San Diego market.

To give a little more detail, the reason why the rent amount has such a large range is because in the last 12 months, only 9 properties of 3000+ Sq Ft (Mine is barely over 3000 Sq Ft) rented. The range of rents was as I posted. I will say that mine is more similar to those on the bottom end of the range since I have a relatively older home (One was a brand new build rented out for $4000 same size). Right now there is only 1 house in all of the area for rent with 3000+ sq ft and they are nearer to downtown asking $6,500 which I don't think is comparable to what I have. Because of this, I don't think there are really any agents who are "actively" renting out homes like mine. All 3 of the agents I spoke with have mentioned that this would be called an "executive" house which does not have great supply or demand.

Only reason I mentioned CD was to park the money somewhere guaranteed safe with growth. However, you are right that maybe the absolute right house comes onto market that I really want and don't want my money tied up. Probably then will just put it into a high yields savings account.

0 Reply

Caroline Gerardo

Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes

3y

You are married and the job in San Diego is a w-2 job?

Write off $500000 of gain for sale married couple of Ann Arbor home. Sell for $700000 and put the funds in a one year CD at 5.5 at Chase today. Say you net $190000 and keep the CD you will have $200000 in a year with tax owed on the $10,450 interest on the CD. This is the most conservative bet. Live with parents squirrel away all your income, save up another $50000 in a year. $250000 down payment on $900000 house in San Diego. Payment will be like $5800 a month no HOA and most of San Diego has HOA. You need about $168000 or less a year in income to make that payment.

OR---Keep the Ann Arbor house and rent it but take losses. You can write off the depreciation, losses against your w-2 income. You need a professional property manager. Ann Arbor gets a pile of snow, the solar panels are going to crack, pipes are going to break because the tenants will make mistakes. Your 2.1% rate is almost free money BUT a 15 year loan makes the payment high and a problem. Do you have $80000 in cash or checking or liquid if the tenant doesn't pay? Will the Ann Arbor house keep increasing? I guess 1% more. $3700 - minus $4000 rents 10% property manager- minus 400 minus repairs 200 = $400 loss a month or $4800 off your w-2 income. When you go to sell in a year or two talk with your CPA about the pickle- now the house is an investment asset. Do your children want to inherit this house? You have no experience picking tenants and will not be able to unclog a toilet at midnight. Will you ever return to Ann Arbor? Can your parents help you buy a house in San Diego if you do not sell? How old are your children?

I'm voting for sell because managing a rental far away is going to take work and a loss.

1 Reply

Wendy PattonBusiness Member

Real Estate Consultant · Clarkston, MI · Member since 2009 · 864 posts · 350 votes

3y

@Dan Deng the good news is that profit is TAX FREE since you lived in it over 2 of the last 5 years - however that rate is very good and although there is not a lot of cash flow if you rent it - there is likely a ton of principle going towards the mortgage balance. Hmmmmm you need to do the math to see what works better, but if i were you I would sell it unless you wanted to move back in it one day.

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1 Reply

Robert Schwaner

Member since 2022 · 6 posts · 2 votes

3y

have you considered renting it out on Airbnb, that is what i did with my home when i moved away and it turned out to be the best investment decision i have made. If I were you I would at least go to data.rabbu.com and punch in my address and bedrooms to see what you might expect to make. Ann arbor is actually a fairly well visited place so i think you would do pretty well as a full time rental, be sure to look at the top 75% of airbnbs and not just an average for your address because the average includes a lot of people who only airbnb their property sometimes. Best of luck!!!!

1 Reply

Dan Deng

OP

New to Real Estate · San Diego, CA · Member since 2022 · 5 posts · 4 votes

3y

Quote from @Robert Schwaner:

have you considered renting it out on Airbnb, that is what i did with my home when i moved away and it turned out to be the best investment decision i have made. If I were you I would at least go to data.rabbu.com and punch in my address and bedrooms to see what you might expect to make. Ann arbor is actually a fairly well visited place so i think you would do pretty well as a full time rental, be sure to look at the top 75% of airbnbs and not just an average for your address because the average includes a lot of people who only airbnb their property sometimes. Best of luck!!!!

I have looked into Airbnb but I cannot find many in the area who can property manage for me as I will be far away. The other thing is that I was told from the one who do Airbnb that the average revenue will be lower than long term renting. However, the number from data.rabbu.com seem to be a lot high ($5k monthly average) which I find hard to believe!

0 Reply

Account Closed

Professional · Canton, MI · Member since 2016 · 296 posts · 230 votes

3y

Quote from @Dan Deng:

Hello All,

I have decided to come to the BP forums to ask for your advice and or thoughts on my current situation. I currently live in Ann Arbor, MI and own a primary house here. Due to a new job offer, my family is moving to San Diego, CA. I currently own a house in Ann Arbor which we purchased back in 2019 for $550k at a 2.1% mortgage interest rate over 15 years. It's now worth almost $700k. Normally, I'm sure most people would sell their house so they can put the money into a downpayment on their next house. However, I'm in a fortunate situation where I will be able to move in with my parents for at least the next 2 years so I don't have to purchase or rent a house in San Diego for a bit. Now for the dilemma:

I really like my house I purchased and put a lot of money into the house not cosmetically but upgrades that I wanted like solar panels, 2 Tesla Powerwalls and a BRAND new super efficient heat pump and 99% efficient furnace. Unfortunately, these upgrades do not improve the price of the house nor are typical things that new home owners are looking for especially in Michigan.

I am trying to decide whether I should sell my house and put the money in a CD until I'm ready to buy a house in San Diego or to keep the house and rent it out. Houses of my size and type are not commonly rented in Ann Arbor and the rent ranges I got from a local real estate agent ranges from $3,100 - $4,500 based upon when and how new the houses were. My current cost for the house is about $3,700 for mortgage + insurance + taxes. Thus the house will likely be cashflow negative once you include cost of maintenance and increased costs for insurance and taxes due to no longer being homestead. I'm really reluctant to give up a low interest rate.

The way i see it... I have 4 possible options:

1. Sell the house - Save the money on a CD (Or something else similar) until about 2 years in the future
2. Sell the house - buy something in San Diego as soon as possible
3. Keep the house and find a long-term tenant for it
4. Keep the house and find a long-term tenant, sell in 2 years then buy a house in San Diego

So, anyone want to give me their take on what they would do if they were in my situation?

Hi Dan,

I think it makes sense to do the Dave Ramsey analysis and flip it around. Would you purchase a house in Ann Arbor with the same return right now if you lived in San Diego? I'd assume you wouldn't. Also, it's good to keep in mind that if you rent it out for an extended period of time, you will lose your federal tax exemption on the gain which is the last thing you want to do.

If you need any assistance selling, I am an attorney and a real estate broker. I have a team of all BiggerPockets members who have bought and sold in and around Ann Arbor. I also went to law school and undergrad at UM, so I know the area well. Happy to work with on commissions to reduce costs.

Josh

2 Reply

Timothy Howdeshell

Investor · Fresno, CA · Member since 2016 · 222 posts · 237 votes

3y

This is a tough one! Without knowing more about your personal financial situation, it is a little tricky to give tailored advice. The story changes a little for someone making $80,000/yr vs $200,000/yr. I'm going to assume that you're closer to the latter given the amount of upgrades you made in a short time and the cost of your home initially (understanding that you purchased for very low rates). But even still, we don't know your other liabilities, whether you have a high savings rate or are paycheck to paycheck, etc. San Diego is an expensive place to live, but the parental help will cut this cost down dramatically.

I'm leaning more towards keeping the property. If you're pretty DIY and have someone you can call on to address issues or check on things then you may consider self-managing the property. Class A (Executive) rentals usually have much less tenant issues than cheaper properties. My aunt (who is an actual executive) refinished a bathroom in a rental she was in temporarily :-) It's not a guarantee, but trends that way.

If you can swing the negative cash flow you'll likely break even between loan paydown and negative cash-flow if you sell after a couple of years. There's liability there, but it would give you time to find out if you like being a landlord and if the negative cash flow will be too impactful negatively. Just make sure you sell before 2 years if you do to not have to pay capital gains taxes. Best of luck!

2 Reply

Katie Balatbat

CPA and Attorney · San Diego, attorney · Member since 2022 · 301 posts · 219 votes

3y

@Dan Deng

It might be smart to take advantage of the capital gains exclusion under IRC 121 while you can, especially since managing rentals from afar is difficult unless you have a trusted property manager or resource. Unless you really believe the Ann Arbor market will appreciate drastically in the next few years, or plan to move back or have a child move in or similar, I think you may find better appreciation (especially if willing to accept cash negative or similar) in the San Diego market. Of course, lending rates are high right now but most research out there still shows an upward trend of house prices for the expected future for SD that you may have to weigh the added financing costs with possible lower purchase price against the reverse in a few years (if rates even decline enough to make a big difference). If you need referrals for realtors in San Diego to discuss your options with and details of the market, let me know. Also, I'm not sure of the probate laws in MI but be careful when coming to CA about your estate planning, especially if you own any real property since probate laws are expensive and somewhat gnarly. Let me know if you need referrals there also. Best of luck with the move!

*This post does not create an attorney-client or CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.

1 Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

3y

Quote from @Caroline Gerardo:

You are married and the job in San Diego is a w-2 job?

Write off $500000 of gain for sale married couple of Ann Arbor home. Sell for $700000 and put the funds in a one year CD at 5.5 at Chase today. Say you net $190000 and keep the CD you will have $200000 in a year with tax owed on the $10,450 interest on the CD. This is the most conservative bet. Live with parents squirrel away all your income, save up another $50000 in a year. $250000 down payment on $900000 house in San Diego. Payment will be like $5800 a month no HOA and most of San Diego has HOA. You need about $168000 or less a year in income to make that payment.

OR---Keep the Ann Arbor house and rent it but take losses. You can write off the depreciation, losses against your w-2 income. You need a professional property manager. Ann Arbor gets a pile of snow, the solar panels are going to crack, pipes are going to break because the tenants will make mistakes. Your 2.1% rate is almost free money BUT a 15 year loan makes the payment high and a problem. Do you have $80000 in cash or checking or liquid if the tenant doesn't pay? Will the Ann Arbor house keep increasing? I guess 1% more. $3700 - minus $4000 rents 10% property manager- minus 400 minus repairs 200 = $400 loss a month or $4800 off your w-2 income. When you go to sell in a year or two talk with your CPA about the pickle- now the house is an investment asset. Do your children want to inherit this house? You have no experience picking tenants and will not be able to unclog a toilet at midnight. Will you ever return to Ann Arbor? Can your parents help you buy a house in San Diego if you do not sell? How old are your children?

I'm voting for sell because managing a rental far away is going to take work and a loss.

I think he only has 150k of gain but regarless it tax free thats pretty compelling

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Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

3y

Quote from @Dan Deng:

Hello All,

I have decided to come to the BP forums to ask for your advice and or thoughts on my current situation. I currently live in Ann Arbor, MI and own a primary house here. Due to a new job offer, my family is moving to San Diego, CA. I currently own a house in Ann Arbor which we purchased back in 2019 for $550k at a 2.1% mortgage interest rate over 15 years. It's now worth almost $700k. Normally, I'm sure most people would sell their house so they can put the money into a downpayment on their next house. However, I'm in a fortunate situation where I will be able to move in with my parents for at least the next 2 years so I don't have to purchase or rent a house in San Diego for a bit. Now for the dilemma:

I really like my house I purchased and put a lot of money into the house not cosmetically but upgrades that I wanted like solar panels, 2 Tesla Powerwalls and a BRAND new super efficient heat pump and 99% efficient furnace. Unfortunately, these upgrades do not improve the price of the house nor are typical things that new home owners are looking for especially in Michigan.

I am trying to decide whether I should sell my house and put the money in a CD until I'm ready to buy a house in San Diego or to keep the house and rent it out. Houses of my size and type are not commonly rented in Ann Arbor and the rent ranges I got from a local real estate agent ranges from $3,100 - $4,500 based upon when and how new the houses were. My current cost for the house is about $3,700 for mortgage + insurance + taxes. Thus the house will likely be cashflow negative once you include cost of maintenance and increased costs for insurance and taxes due to no longer being homestead. I'm really reluctant to give up a low interest rate.

The way i see it... I have 4 possible options:

1. Sell the house - Save the money on a CD (Or something else similar) until about 2 years in the future
2. Sell the house - buy something in San Diego as soon as possible
3. Keep the house and find a long-term tenant for it
4. Keep the house and find a long-term tenant, sell in 2 years then buy a house in San Diego

So, anyone want to give me their take on what they would do if they were in my situation?

sell.

rationale:
1. for the next few years or so you will live in san diego anyway
2. ann arbour may be reaching its appreciation peak soon, this is not really an 'exciting' city like austin
3. if you rent it out, it's negative CF
4. you will buy again in san diego anyway and need the money from the profit.

you may also think from another perspective, in case you can live for free, which city you are willing to stay, ann arbour or san diego ?
this is very easy choice lol

2 Reply

Daren H.

Real Estate Investor · Desoto, TX · Member since 2013 · 560 posts · 528 votes

3y

I know nothing about your financial situation so take this with a grain of salt. If you are going to sell it in the next two years anyway, I would probably sell it now and take the gains tax free. This is just me personally. Life happens and you don't know that the situation will be in 2 years or if you will have the right options or market conditions available in 2 years that make sense (what if San Diego explodes even more). Not sure what you are shopping for in San Diego but it sort of feels like you might be swapping your equity and rate for a higher cost of living. But I would imagine you would experience even more appreciation. Plus, if being in San Diego is best for your life and happiness, then that's important too.

I will say this, there is one primary residence I wish we would have never sold despite the tax free gain. I regret it to this day. There is another that I am good with us selling and taking the gains tax free. Good luck in whatever decision you make.

1 Reply

Henry ClarkPro Member

Developer · Member since 2020 · 4k+ posts · 4k+ votes

3y

Sale the house. Tax free. You’re on a real estate forum. You need to ask how to make money on your investment in California.

Use your strengths. You have a family you could live with.

Look at duplex, MFH.

STR and live with your parents as needed.

0 Reply

Bud Gaffney

Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes

3y

@Dan Deng HOLD. Low interest rate and will be paid off in ~12 years….get a tenant in there.

2 Reply

Naz Hossain

Developer · San Antonio, TX · Member since 2019 · 177 posts · 81 votes

3y

@Bud Gaffney I agree with this. But also see the side to where you can capitalize on tax free profit. That’s golden too. You can think of the house in Ann Arbor as a retirement fund and rent it out. If there’s one place in Michigan I wouldn’t mind have a rental it’s in Ann Arbor. Here’s the thing. If you do decide to sell to use towards another investment you can 1031 it so still enjoy the tax breaks. If you don’t need the money now or n he near future (2~3) years I’d keep it

0 Reply

Dave FosterBusiness Member

Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes

3y

@Dan Deng, You can afford to be patient for a while. You can go ahead and rent that house out for 3 more years (as long as you make sure and sell while you have still lived in it for 2 out of the previous 5) and get your gain tax-free. Plus during that time you'll be enjoying the amortization on an incredibly low-interest loan (which means much more money is going to principle each month and this is paid by the tenant).

At any time during these 3 years you can sell if you find a property that interests you more.

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0 Reply

Marcus R.

Real Estate Agent · Denver CO · Member since 2019 · 210 posts · 333 votes

3y

Another vote for hold.

I think selling is only as good as your next best option which is a 5.5% CD. Not a bad option but this option should still be there in the future. You can hold for a year and see how you like being a landlord and can sell in the next year or two once rates improve and you're able to list during peak season vs now. This should still fall within the window for tax free primary cap gains. Yeah you might lose money but education costs either money or time so you'd be paying for your landlord education.

Also take a look at your principal paydown. On a 15 year at 2.1% the principal paydown is probably substantial.

Just a thought, but look into college gameday rentals (form of STR). Saw a Shark Tank episode a while back where some dudes had a pretty good business model of getting homeowners in huge college football towns to rent out properties. Might be something there giving the strength of Michigan's football program.

0 Reply

Matt Devincenzo

Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes

3y

Quote from @Dan Deng:

...I'm really reluctant to give up a low interest rate....

This is an awful reason to make a decision. I have the same inclination at times, but the current rate is a relic of the past that you shouldn't dwell on when making a decision today. Imagine if you could get $250K tax free saving you $35K in taxes (a guess)...how many years of low interest does that take to make up? How many more when reinvested?

Would you buy your house as a rental today? If the answer is no, then your overall plan needs to be to sell. So then back to your question, sell now or sell later? First criteria is I would 100% sell within the next 3 years to capture your Section 121 exclusion.

I'd go with options 2 or 4. So run 'concept' numbers selling now and reinvesting, selling in a year and reinvesting, selling in two years and reinvesting and one will rise to the top.

The other piece of this is how much MORE will homes cost in SD in 2 years vs. today? That should also be weighed against the investment return above. My guess is home prices stay stable or possibly increase locally. That's based on the current transactions staying strong, as well as many tech jobs coming to SD placing upward pressure on nice SFR housing. I could be wrong, I could be right, and if right who knows how much...but either way I'd make a decision on 2 or 4 above.

0 Reply

Daniel B.

Rental Property Investor · WA AL, FL · Member since 2021 · 28 posts · 46 votes

3y

Quote from @Dan Deng:

Hello All,

I have decided to come to the BP forums to ask for your advice and or thoughts on my current situation. I currently live in Ann Arbor, MI and own a primary house here. Due to a new job offer, my family is moving to San Diego, CA. I currently own a house in Ann Arbor which we purchased back in 2019 for $550k at a 2.1% mortgage interest rate over 15 years. It's now worth almost $700k. Normally, I'm sure most people would sell their house so they can put the money into a downpayment on their next house. However, I'm in a fortunate situation where I will be able to move in with my parents for at least the next 2 years so I don't have to purchase or rent a house in San Diego for a bit. Now for the dilemma:

I really like my house I purchased and put a lot of money into the house not cosmetically but upgrades that I wanted like solar panels, 2 Tesla Powerwalls and a BRAND new super efficient heat pump and 99% efficient furnace. Unfortunately, these upgrades do not improve the price of the house nor are typical things that new home owners are looking for especially in Michigan.

I am trying to decide whether I should sell my house and put the money in a CD until I'm ready to buy a house in San Diego or to keep the house and rent it out. Houses of my size and type are not commonly rented in Ann Arbor and the rent ranges I got from a local real estate agent ranges from $3,100 - $4,500 based upon when and how new the houses were. My current cost for the house is about $3,700 for mortgage + insurance + taxes. Thus the house will likely be cashflow negative once you include cost of maintenance and increased costs for insurance and taxes due to no longer being homestead. I'm really reluctant to give up a low interest rate.

The way i see it... I have 4 possible options:

1. Sell the house - Save the money on a CD (Or something else similar) until about 2 years in the future
2. Sell the house - buy something in San Diego as soon as possible
3. Keep the house and find a long-term tenant for it
4. Keep the house and find a long-term tenant, sell in 2 years then buy a house in San Diego

So, anyone want to give me their take on what they would do if they were in my situation?

A lot of good points have been made for selling and for holding. Another factor to consider is that if you rent it out, although it would technically be cash flow negative, you would go from making a $3700/month mortgage payment to about $700-$1200 due to the rental income (ballpark figures). So you would actually net about $2500-$3000 more per month than what you are right now. In addition, you have three years to sell for the tax-free capital gains. During that time the rental income alone should bring you 50-100K. Further, appreciation, potential rent increases, tax right-offs, and principal pay down are all benefits you could take advantage of. No rush to sell.

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Maxwell Ventura

Real Estate Agent · San Diego, CA · Member since 2016 · 308 posts · 173 votes

3y

Congrats on the move to SD!

My 2 cents - sell the house and take advantage of capital gains exclusions since you've lived there 2 consecutive of last 5 years. Sounds like slow growth if you hold on to it and more hassle than what its worth. You reaped a great amount of appreciation last 4 years and very likely growth will be very slow moving forward. Capitalize on your equity & cash out onto a better asset

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Twana RasoulBusiness Member

Real Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes

3y

@Dan Deng Sell the house in Ann Arbor and live with your parents in San Diego and take your time to buy something here over the next year or two

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Kenneth Donaghy

Real Estate Broker · San Diego, CA · Member since 2016 · 355 posts · 195 votes

3y

@Dan Deng, I agree with the rest with the people who say, sell, take advantage of the tax free gains. Purchase something in SD when it's right. You want to get a positive return on your equity!

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Unsure what to do with my current primary residence

Unsure what to do with my current primary residence

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