Have to move out of state - advice on what to do with my primary?

Question

Hi all. I own a 3B/2.5Ba townhouse in Fremont, valued at $905k, with $690k left on a 30year fixed at 5.625%. For personal/family reasons, my wife and I need to move out of state sometime in the next 12 months.

I’m trying to figure out what to do with this property. We’d lose about 70k selling at appraisal value, and comps have rent at around $4300 which would be far short of cash flowing after maintenance & management costs.

Looking for creative ideas on how to execute this move as painlessly as possible. I have $200k cash to deploy in the process, but would prefer to use that for a down payment on a home in the place where we’re moving (similar VHCOL area.)

Alfath Ahmed · Answer

That is a tricky situation since the home is not cashflow positive. However, I would look at other options to see if AirBNB will work or Furnished Finder for travel nurses. Owning in California means the property will always appreciate.

I would do the math even to see if the amount of money you are losing every month is great than the appreciation factor. It might be worth holding onto. In Columbus, I own assets that A-class areas where it is not cashflow positive but I have since used other strategies and taken hits because of the appreciation factor.

Mike Dymski · Answer

Sell your current primary and buy a new one.  Limiting your investment opportunities to one property is, well, very limiting.

The 70k loss is irrelevant...it's a sunk cost and you can claw that back with the current property or any other investment...whichever is fastest/best.  It's even more irrelevant if you are buying a similar home in a market that also has decreased in value.

Matt Devincenzo · Answer

First thing I see is you're close to hitting the 2 years OO for a tax free sale on any gain...obviously you don't currently have any gain, but if you can wait it out then any future gains would be tax free...it gives you some wiggle room later.

I don't know Fremont specifically that well, and local market drivers could change my perspective, but looking at the 3 year trend on sale price I think you'd do well to hold 6-24 months if at all possible. The last couple years of data are hard to point to conclusively just because so much was changing in the market, but it looks like at this point you've likely ridden the value down, and from here it is likely to rise and has started its trend back up. We're not likely to see major appreciation in the coming years, but I do think buyer sentiment will improve which will likely lead to better pricing via competitive offers vs. the current market.

I'd see about delaying my move 6-8 months....you may see an uptick in sale prices come Spring and get out clean then. This won't cost you anything but your normal monthly housing costs for now. Then as my second option I'd plan on trying to rent for 12-24 months starting this spring if you still think that pricing isn't where you need it. Between now and then you can really crunch the numbers on rent vs. costs and decide how much negative you can stomach....at worst you still decide to sell in the spring and maybe it's a $40K loss instead of your current estimate.

Either way I'd cross over the Oct 2024 occupied period so I could preserve the possibility of tax free gain. Maybe this turns around and you're looking at a gain in 30 months and having that available will be a big benefit.

Grayson Chao · Answer

I believe this is what we will ultimately go with. Luckily I have the ability to absorb the negative cash flow from my W2 income, and I'm convinced that the area will appreciate in the medium term.

Thanks all for your advice, this has been an enlightening thread for me!

Marc Rice · Answer

Take out a HELOC on it and rent it out. Use the HELOC to buy more BRRRR properties.

Kevin Hintz · Answer

I faced a similar situation when I had to move for work. Instead of selling at a loss, I rented my place out, even though it didn’t cash flow much. It gave me time to wait for the market to improve, and I used my savings for a down payment on my new home.

Henry T. · Answer

Where do you get losing 70k selling? If you did Redfin I'd figure about 40k. Maybe you have fix up costs?  I would sell. Yes you may also see an uptick in value with interest coming down.  I don't recommend being a landlord in Seattle.

Joseph Bui · Answer

Send me a DM with your full number (purchase price, estimated sale price, current mortgage payment, hoa(?), estimated rent, etc, etc, etc and I'll try to break it down for you.

Ray Williams · Answer

Agreed. There may be PM models out there that are hospitality based that can drive up revenue, and possibly not be 25%+ for you. But ask around your area or look up properties on AirBnB to see who the hosts are.

Grayson Chao · Answer

I'd appreciate that very much, thank you!

Have to move out of state - advice on what to do with my primary?

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