Need Suggestion- Which is better choice
Hi
When I moved to more appropriate home, I rented my previous SFH which is 7 miles away.
Facts:
-The move happened on Jan 5 , 2013.
- I have 265K loan on that home with my net payments $1800pm (Tax+Mortgage+Insurance) and average maintenance of $150pm.
- The ARM (2.625%) on home resets in October 2016. The ARM was taken out when I occupied the home
- Current Rental income is $2500pm which is 10% below market as tenant is A+
- I claim 12K as depreciation on home on returns, after expenses I end up with very little taxable income
- Current market value of home is 820K and property was bought for 450K (+ 40K permitted upgrades)
Help Sought in sorting dilemma:
A. If I sell and close this fall, I will rake in profits tax free approx 300K as per tax laws, sale within 3years of primary residence. With equity in it, I will get 500K cash
B. If I keep home I will keep having rental income
In case I do -
A.I get 500K i can reduce mortgage on my current primary home which is jumbo - so it will become conforming and may be invest some money in tax managed balanced funds.
B. Rental Income helps pay college... increase over time, real estate appreciation....
Life /Financial Situation:
- Kids set to go to college in 2 years and 7 years ( => sponsor 8 year of university)
- Outside home equity I have 401(k), Emergency Fund to cover 1 year of expenses, and 529 to cover 1 year of college, and a tiny play brokerage account, paid up cars no loans.
- Risk averse
- Want to semi -retire early and use obamacare efficiently and some non stress job income to sail from 55 to 65. When I hit 55 kids will be almost done college.
Please suggest A or B...??
Serious first question which may seem odd but will help advise - Do you anticipate your kids going to an Ivy league school with no scholarship, or are you thinking Cali State school with partial scholarship, or something in between?
Originally posted by @Dana Whicker:
Serious first question which may seem odd but will help advise - Do you anticipate your kids going to an Ivy league school with no scholarship, or are you thinking Cali State school with partial scholarship, or something in between?
In my opinion, elder one has 50% chance at Ivy league, other one may be 20%, but I like UC system and want to plan for it
If you are happy with $550 a month in cash flow on $500K+ equity then keep it.
I think you could do a lot better and I would not want to miss out on not having to paying taxes on the sale. Something you will have a problem with if you wait too long.
We're at the top of another real estate cycle, cash out, collect your profits invest the proceeds to leverage your cash position. If your market experienced 10+% increase year over year that's the sign of a bubble. This market frenzy is about to burst, there are signs written over the walls. People with a household names are advising to proceed with maximum caution in 2015...