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OT - selling house in current market? (US)


racemize
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I've been thinking about this a lot, and figured getting opinions from the value board isn't a terrible idea.  Here's my situation:

 

My wife and I bought a fairly nice house in the 2009 area as there seemed to be a disconnect between medium/average priced houses (where we were) and higher priced houses (which we bought).  At the time, it seemed that higher priced houses had dropped in value more than lower priced houses, so we sold our house at a slight loss, hoping that the new house would be gotten at a relatively better price.  Also, we wanted a nicer house, so we didn't mind upgrading at a loss either.

 

The new house has now appreciated a fair amount and the housing market in our area (Austin) has heated up (limited supply, 99.9% occupancy in the area, I think 150 people moving in to Austin per day, multiple offers on houses, etc.).  In addition, we've decided that downsizing/simplifying would be nice and would like to move into the downtown area (we would rent, not own) for a change in lifestyle.  If I've got my numbers right, I think the house has appreciated ~23% since purchase, or yielding a net return on money put in of about 50%.  Here's my list of pros and cons (or rather pros and pros):

 

PRO (keeping the house):

interest rate of 3.875% over 30 years is nice and is relatively cheap monthly cost

gaining equity with every month of payment

the house is cheaper by about 1k a month than where we would rent (these three are all different aspects of the same point)

house is a nice inflation hedge, should that become an issue

nice diversification of assets/capital (otherwise would be all on my capital allocation skills in the market, and I'd suddenly have a lot more capital to deploy in the current market, which I don't feel great about)

it is a nice house, with high quality fixtures and such

the quality of fixtures/interior in downtown apartments is a little less nice

 

 

PRO (selling the house):

house maintenance sucks! 

droughts in central texas kill everything (grass, trees, etc.) and it appears this summer is going to be awful

downtown living sounds really nice, and let's us walk everywhere (my wife works downtown)

downsizing and getting rid of a bunch of stuff would be great

we are planning to move away at some point, so this would let us be a little more flexible on the timing

selling the house in a heated market is better than a non-heated market and we know we will do it at some point in the next few years

I work from home, so I could have a nice view of downtown while I work, also nice balcony at night

 

 

 

 

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Would you be protected by some sort of rent control in your market should inflation kick in?  That would be my concern in your scenario.  Walking everywhere sounds nice.  I despise driving to get small stuff and no drinks at dinner when driving home.  Go for the lifestyle man!

 

Unfortunately, no rent protection here!  I'm quite torn on the whole thing--giving up some finances for lifestyle is hard on my brain!  I know I'll do this switch at some point, but I'm having trouble deciding if now is that point.

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My personal opinion is that one should never view their primary residence as an investment and analyze it in those terms.  It's nice to make some money and all that but to me that's just gravy. If you want to move downtown and its feasible to do so, do it. The fact that you walk away with a few bucks from your house is a bonus. But to view it in terms of it being an inflation hedge, etc is over thinking it. Life is short. Do what would make you and your wife happy and be grateful you are in a position to do so.

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Would you be protected by some sort of rent control in your market should inflation kick in?  That would be my concern in your scenario.  Walking everywhere sounds nice.  I despise driving to get small stuff and no drinks at dinner when driving home.  Go for the lifestyle man!

 

Rent control in Texas? That sounds so un-American. (I have no clue)

 

But it seems like the choice is pretty clear, go for the downtown place.

 

 

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If you estimate the cap rate you are getting if you rent it out (assuming say 11 month occupancy, netting out other expenses, etc) and see how attractive the house might be as an investment. If it does not appear to be too undervalued you might want to avoid the whole "landlord" experience.

 

Vinod

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Thanks for the answers everyone--I should have clarified, I don't have any interest in being a landlord (I don't like maintaining my own house!), so that's out. 

 

However, to get some measure of value for rent, I estimate gross rent yield to be ~6%-8% (annual) of what we could sell it for.

 

Lifestyle is the real choice here, but it is made difficult since we also like the house and will be downgrading a bit in interior quality, but gaining a lot in less measurable benefits.

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Money buys happiness!! if the move downtown would make you happy and I'm sure your wife would enjoy not having to screw with traffic go for it.  If you can make a little money selling your house it's just icing on the cake. 

 

Best thing about renting... When the AC goes out they have it fixed wittin 24 hrs and you don't have to foot the bill.

 

Since your not planning on staying in the area get the price you want and then go for it.

 

My strong advice is do not rent your current house.  It's alot more work and a great big pain in the ass.  Unless you really want to go out there every time the toliet is backed up bc the renter don't know how to plunge the toliet.  Seriously you will have to deal with alot of dumb shit.

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With regards to being close to downtown...

 

I worked within a mile of my office for 4 years and it was such a HUGE improvement on quality of life. I could leave the house or office whenever I wanted without having to worry about getting stuck in traffic or dealing with parking.

 

When I moved this last time around I was really hesitant to move anywhere where I had to go back to commuting by car. Luckily we were able to find a place that is only 15-20 ride on the light rail to my office and I just use that time to read investing books :)

 

So not sure what your Wife's commute is like now or what traffic and parking are like in Austin, but in Seattle I would need to pay $20-$30 a day to park and deal with all the traffic BS.

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Since we donot know how old are you or what is your preference in raising family.

 

But, to be on the safe side , in general schools and safety are better in suburbs versus any US downtown for that matter. May Austin is exception, since more high tech jobs are there.

 

In Los Angeles , downtown would be ghetto place to live , unless you are single.

 

But, do concur with you on activity though in local market here in southland. We purchased in July 2011 home in decent suburb in LA. At that time home was foreclosed by bank and was on market about 6 months. No competition what so ever.

 

Now , in same city if you list a home today after 25% of appreciated values, people are willing to buy without ever looking or inspecting them. Homes move to pending status on the same day as they list as no inventory on market. For what we see, Mostly people are chasing the missing interest rate boat.

 

Thanks and rgds.

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With regards to being close to downtown...

 

I worked within a mile of my office for 4 years and it was such a HUGE improvement on quality of life. I could leave the house or office whenever I wanted without having to worry about getting stuck in traffic or dealing with parking.

 

 

Yeah, this is really driving it, plus not having to deal with hassles when you go out at night.

 

We currently are 2.5 miles from downtown, which is just enough to be annoying (we often walk it, but it's far enough to not be too fun if it is late at night).  In any event, the traffic isn't terrible, it takes ~15 minutes I guess, since we are close already.

 

On the children front, that's also out, so no constraints on big size or school districts.

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As long as you really wouldn't miss being in a house/neighborhood, it wouldn't be so bad living downtown. :) 

 

Especially if you work from home, and your wife would be walking to work.  That will have a huge effect on your quality of life.  And if you're thinking about moving out of Austin in a few years, it might not be such a bad idea to sell into this market, which is definitely a seller's market. 

 

If you wanna discuss more Austin-specific considerations, feel free to PM me.

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I'm with everyone else, go for the quality of life.  If you want to be closer to the nightlife and you value that then go for it. 

 

I worked from home for a while then was "promoted" and had to start going into the office more.  I put promoted in quotes because while my role became better the quality of life negatives outweighed any career positives.  Being able to start working at 6:30, running at lunch, and being done at 4pm and ready to play with the kids at 4:01pm is much better than anything a job could offer.  Now I get up at the same time and get home at 5:30, losing 1.5 hours a day to sitting on a bus or wasting fuel in traffic.

 

 

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Guest deepValue

I'm also looking at condos in downtown Austin. I work from home and want a view and a rooftop pool and proximity to 6th street etc, but the current availability is pretty meager... I'm thinking of just moving into the Driskill :)

 

Nobody wants to leave Austin and plenty are still coming in... Good luck finding a place to suit your needs.

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Rent the house you own and pay the rent downtown with the money you get from it.

 

+1  -  In the SF bay area in this mornings SF Chronicle there was an article about housing sales. A year ago the medium time to sell was 33 days. Now it's 12 days. Many multiple offers and a number selling within 24hrs. If it hasn't already started in Austin it will soon. It might be a nice payoff soon with rental income in the meantime

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