Sell the house and rent??

Question

Hello!

My husband and I currently live in an area where the market is especially hot, and we recently were told by a realtor we could probably sell our house for $60k more than we bought it for 3 years ago. Our house is a 2 bed, 2 bath starter home that we were planning on moving from in the next few years anyways when we start a family.

We are considering selling the house now and getting our money out while we can, and then renting for a year or two and hope the market cools off. Obviously, we can't predict the future and we don't know what is going to happen in the market, but it seems too good to be true right now.

Is this a good idea? Why or why not?

Brent Coombs · Answer

@Keli Wike, I live in a market where even during the last GFC, our prices did NOT go down. Yes, we have cycles, but it's mainly been: will our market be flat for a few years, or go up and up. What a lot of people forget is that if/when they sell for the explicit purpose of being able to take advantage of an expected downturn later, there are valid reasons why the (later) cost of the home you want to buy now but can't afford may STILL be out of your reach at that time, even if you've got a nice $50k deposit that's been hanging around for years earning you zero extra equity.

#1 reason: the Banks close ranks, making it hard to qualify for the extra amount you'd still need.

#2 reason: will your own circumstances be immune from being affected by a bad economy?

Looks to me like your intuition is to NOT sell? If so, you may very well have good instincts.

But I can certainly see why a REALTOR would suggest selling! Welcome to BP. All the best...

Bob Floss II · Answer

My wife and I are in the same position with our house, but we are about to have our first baby and are in no position to move.  If we weren't expecting, I would be getting ready to put the house on the market. You can never predict what will happen with a property.  You could suddenly get a bad neighbor, something could happen around your home, or something in your home could break.  If you are in a good position and can make a nice profit, seize the opportunity.

I say sell, lock in your profits, and find your next home.

Jack B. · Answer

I like the idea of buying a duplex, but would go four units if you could. In reality 60K after transaction costs will be more like 45-50K, but if you use that and the original DP wisely, you will do far better owning than renting right now. And there is still up side in this market for quite some time to come.

Alex Deacon · Answer

@Keli Wike Consider this. Sell the home and buy a nice side by side duplex. If the market cools so what you have income stream from the duplex and you live in the other half. Plus all the profit from the sell of your home is tax free.

Just one answer for you to consider

Keli Wike · Answer

Selling 2 bedroom homes in our area is actually fairly easy - it is an area with a lot of small starter homes in it, and we have a leg up with our 2nd bathroom - most are 2 Bed, 1 Bath. We would eventually be able to "upgrade" into a larger home, but as I mentioned, we would want to rent and wait for the market to cool down a bit in order to get a better deal on a home - not losing a lot of equity in one or two years.

Our fear is that we sell and the market continues to go up, and then we miss out on the opportunity to turn an even larger profit.

We really love our house a lot, so we want to make sure we are making a smart, logical decision.

Patrice Boenzi · Answer

@Keli Wike I am a Realtor and investor and I have clients say, "I want to sell my home, but in this seller's market I am scared I wont find anything." It can be a tough decision, BUT this is just my two cents....I can always find somewhere to live, force equity, flip etc. If I have an opportunity to make 60K on my property I am selling it. Now remember I said I am an investor too - we flip houses and buy rentals.

If you can, you life and finances allow, you have to take advantage of the market while you can because it can change in a heartbeat. Question - how difficult is it to sell a 2 bedroom home in your area because in some markets they are harder to sell? Would the equity you get out of your home allow you to "upgrade" to a larger home, a nicer community, better schools, more amenities etc? If you can position yourself to purchase another property, maybe one that needs a bit more work or upgrading and get it for a good price it could be a win-win for you.

Buying vs Renting - as a landlord I love my tenants and there will always be a need for rentals; however, whether you own a home or are renting you ARE paying a mortgage it just depends if you are paying your own or someone else's mortgage.

Not sure if they allow reverse contingencies where you are at, but here a seller can sell their home and ask the buyer to give them a certain amount of days to put a new home under contract and if they can't find a home within that timeframe the contract can be voidable.

Hope that helps a bit.