Should I sell or rent my primary house

Question

Hi, newbie here. I have a house around north seattle(Greenwood/Greenlake) area. I did all the calculation and know that this is definitely not a good rental investment.... (I.e cash flow is about neutral. Big equity locked in the house....) But if I sell it now, I’ll probably take a 20-30k loss after cost(not even considering the part I lost If I invested the downpay in index fund). Also, if I sell, what’s next? I didn’t find good area for rental investment around seattle area. Should I cash out and wait for the market correction?

Also, my protofolio is heavily on real estate in King county(two other property  and over 50% of my asset).

I know after I think through the whole situation, it is obvious that I should sell.... but I have emotional attachment to the first primary house and also feel bad that I made a wrong decision, hoping that this house will appreciate more later...

Please throw any ideas. I think I mainly want to have more courage to sell it and take the loss now.

Michael Haas · Answer

Something isn’t adding up Cece- How has the house not appreciated enough to cover the selling costs over 5 years? Greenwood is up around 35-40% 2015-2020 if I remember right.

John Barrett · Answer

@Cece Steoger over paid is unfortunately one of the more difficult things about a property to overcome.  Given that prices in the Greenwood area of Seattle do seem to still to still be rising, you do have the option of waiting things out as others have stated.

This strategy is not without risk but really the cost will be the opportunity cost of not moving your equity into some other investment that could generate a higher risk adjusted return. I would suggest that you focus on investment options that are available currently.  It's easy to get caught up in all the possible options of things you could "potentially invest in".

FOMO is real, it's just not a viable investment strategy.

John

John Barrett · Answer

@Cece Steoger This looks like a sunk cost situation to me. You cannot go back and change the decision you made previously.  What you can do is learn from the choice you made, understand why you chose what you did and what you could do differently going forward. This is in no way to say your previous decision was bad. It's always possible to do everything correctly and still end up with a bad outcome.

I would start by mapping out all options for your property (keep, keep & refi, sell).  I would specifically be looking at any tax implications.  If your house will generate a loss upon sale, is there any investments with large capital gains that you could off set(consult your tax professional). As @Dave Skow has mentioned, rates are really low and that could be an easy way to position this property to cash flow better in the future. You just need to be clear that appreciation / rent growth strategies are speculative.

As cashing out an waiting for a market correction, I think this is the riskiest strategy for most investors.  While possible to time the market, it almost always fails. Very few people are able to buy into the market during times of high pessimism and lending is also harder to come by.  If you plan to sell, I would identify your next investment first.  Use all the lessons learned from what you didn't like about your previous purchase and move forward with confidence.

Best of luck,

John

Emery Parks · Answer

@Cece Steoger do you need the cash from the property? If not, seems like a neutral cashflow property is not a terrible option, or what makes you think holding onto it is a bad option?

Dave Skow · Answer

Cece - hi there ...if you decide to keep the  property - you might consider refinancing it as rates are  likely lower than when you  bought it and  that  would allow  the  cash flow  you see from the property  improve  if you rent it int he future

James Miller · Answer

Landlords have 0 rights in Seattle and it's only going to get worse. Last year a rent control bill was drafted, at the state level, and this is a long legislative session year so its likely to pass considering the number of renters far outweighs the number of investors. And this rent control bill wasn't slightly reasonable like the one in California, I can't remember the exact verbiage but it was scary.

Already in Seattle you cant denied based on the criminal background, and you can't evict in the winter because apparently all the snowflakes dancing on capitol hill get cold at 40 degrees ABOVE zero.

Cece Steoger · Answer

Thank you John! I think you point out the key here! I'm just picturing myself making a better investment decision somewhere else.... But didn't realize those are based on the data I see for the past... It is more important to learn from this experience and move on. Thank you!

Cece Steoger · Answer

I realized I replied in the wrong way LOL

Unfortunately, I bought in 2017.... The highest point :(  I was in a bidding war and was too stupid to bid with high price :(

Should I sell or rent my primary house

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