To move or stay put?

Question

Own a 4-acre parcel in eastern San Diego, CA that we plan to build our "forever home" on, hopefully within the next 5 years.

Bought a 2050sf, 3/2.5, 2-car garage new construction home on a 6500sf corner lot in Queen Creek, AZ on 1/30/21 for $422k. Walking distance to top-rated school, convenient to most things you'd need, great neighborhood. Potential list price of $570k, but would have long-term capital gains. Would be able to deduct $11k in improvements + 4% commission.

Looking at possibly buying a 3200sf, 4/3.5, 4-car garage new construction home on 1 acre on a cul-de-sac in a gated community for $795k about 8 miles south in San Tan Valley, AZ. Nearest top-rated charter school is 4 miles away. Neighborhood is not finished being built out and other comparable neighborhoods by the same subdivision name go for $1M-$2.5M. More than likely a potential for more profit, but must put in landscaping and fencing, maybe $40k.

If the goal is to make as much money as possible in order to have a big down payment on the future CA build, should we stay where we're at given the capital gains hit, or take the gamble of hoping the other house gets us a bigger profit margin? We do have 2 small kids so the vicinity to the school is important.

Please give me your best advice, we need to make a decision by Wednesday! I appreciate it so much!

Leslie Daffer · Answer

@Chris I. We were just trying to explore all options. We looked into a HELOC as well.

Chris I. · Answer

Why are you getting quotes on a cash-out refi as an investment property when you still live in it?  Also if you some cash out of it, rather than cash-out refi and lose that low-interest rate, you could put a primary residence HELOC on it.

Leslie Daffer · Answer

@Doug McVinua Hi Doug, I really appreciate your reply! Yes, I'm familiar with Kiyosaki. We live pretty frugally otherwise and have no debt other than our mortgage. We initially chose this QC property with the thought of potentially keeping it as a rental down the road. In current market conditions, it'd rent for around $2400/mo. However, I recently spoke with a CPA and learned more about the depreciation when you have a W2 job making $100k+ up to $150k/yr. Once the numbers are on paper, it wouldn't make sense for us at all to make this particular home a rental given my husband's salary & how it has been our primary residence we put 20% down on. I was quoted 4.75% interest on a cash-out refi on an investment property. Our current interest rate is 2.875% and it really doesn't seem wise to give that up. I do have a dream of being some kind of real estate mogul though, ha...

This entire idea of selling this QC home has stemmed from the fact that my husband is now 100% remote in IT and the house has no dedicated office space. It's been a struggle keeping our 2 & 4 year olds out of his workspace. Not only that - without getting too political - given the direction(s) CA is heading, I think we may need to consider other AZ options if this ends up being more long-term than originally planned. I definitely see your points and understand that our situation could change to the point where we could possibly own rental properties. If I knew better when I was younger, I'd probably have a couple already...hindsight is somethin' else.

Doug McVinua · Answer

@Leslie Daffer As a Realtor/Broker/Property Manager in the SE Valley of the Phoenix, AZ market for over 20 years I have watched the market grow concentrically the whole time. When I started real estate in Arizona everyone wanted to live in Ahwatukee, then it moved to Chandler, then Gilbert, and now Queen Creek has been the hot spot. I 100% believe in San Tan Valley, Florence, etc as the roads are either being built or are in the planning stages. The growth in Pinal county over the next 15 years will be phenomenal.

So, establishing the area you are looking at is solid let's discuss your strategy. Have you ever followed Robert Kiyosaki? Robert would teach that the home you live in is a liability, you are paying all of the expenses for living there. Yes, you have the appreciation and enjoyment of living there but what if someone else was living there, paying the expenses and you got the appreciation on top of that? Robert Kiyosaki would teach to live in a moderate home, buy investment homes (rentals) and let others make the payments. It's sort of a compounding effect to own property someone else is making the payments on and you reap the benefits.

As a Property Manager that lives in Queen Creek and loves the area I vote you enter the arena of rental homes! Every month we send owners tens of thousands of income off rental properties that they often have very little involvement in while they enjoy the income and easy life. Robert Kisayki understands leverage and sources of income, if you haven't ventured into the area it's some good information to digest. Yes, owning your primary residence is an investment, owning rental property is being an investor and you could have both.

Marcus Maloney · Answer

A little input here. I live in the area and both cities QC and STV are nice but I would look at the upside in STV as this is the path of progress for development with STV mountain development in the works. Just a thought

Theresa Harris · Answer

My understanding is your current place is the Queen Creek one since you said you bought it, I assume you are thinking of selling it to buy the place in the gated community.

Guessing the capital gains is because you only lived in it for 1 year and you'd be selling it.  Factor in the closing costs, realtor's fees and moving. Buying the new house would mean you'd sell that in a few years when you moved to your forever home therefore adding in an extra set of realtor's fees and other costs associated with selling.

If it was me, I'd stay as you are talking about moving in 5 years anyways.  You have a good school within walking distance for your two young kids.

Melissa Roybal · Answer

I think I would go for the first option in Queen Creek, AZ.  You would have less money into it, less of a downpayment, and you are close to everything.  If you stay for two years, you won't have the capital gains tax.  You also may surprise yourself and be able to hold onto it as a rental property in the future.  That's just my opinion, but good luck!