[quote=bibsoconner]Thanks for all the comments and advice so far. To answer some of the questions. Yes, I have another home to live in (in San Diego). As I said, I realize it’s a lucky problem to have. I’m in my late 40s.
The decision to have a property manager is probably a good one for me. I’m not particularly handy, and my job takes up a great deal of my time. Quite frankly, I’d rather play catch with my kids than change a light bulb on my own house. I really don’t want to deal with problems from renters. That might well be a point for selling, rather than renting.
I’m paying 8% to the property manager. Frankly, I thought that was a fair deal. Others were asking 10%.
We’re going the renting route right now, but could easily change. I’m getting nervous that it is not renting after being on the market for about 20 days, although things seem to be heating up now (we did a price reduction from 3400 to 3100). My basic research indicates that there is not as much demand for 3+ bedroom houses in the >$3000 range. There’s just a smaller segment of the population that needs that. And those folks that can afford >3000/month can entertain the ideas of owning something. That’s why I was floating the idea of selling and perhaps getting a couple of small houses/condos. Although knowing myself, I probably would not get around to the buying part…
Property taxes are about $4000/yr by the way.
Dave[/quote]
Given some of the additional details you provided..
If I was in your situation, most likely I would sell and pocket the $300k cash tax free, and put it to use for something else for a couple of reasons..
1. There’s absolutely no chance you will move back into this home for nostalgic reasons. You already have a move-me-up primary home…
2. If you’re worried about possibly losing out on more appreciation, well look at it this way..
a) If property values continue to go up, you have your current primary home to get another capital gains tax exemption on.
b) If property value goes down, you cashed out the first one, mitigating the “paper loss” on your newer primary. Besides, you can take comfort that your primary home isn’t earning income anyway if you’re living in it so you shouldn’t care…
It’s the nice thing about having a primary home now and being able to dispose of the old one.
As a wise RE guy once said to me.. “It’s not about whether you win or lose. You already won.. It’s about how much you are winning by…”
3. Where I might consider keeping the home is keeping it to let my kid(s) inherit it..But that’s a long time out, and we don’t know what our government is going to do with estate taxes moving forward both at the federal and state level.. If in doubt, just look at what’s going on right now in New York…
The headline is misleading, because it’s not really 164% increase total… But the point is, taxman is coming to tax the crap out of your estate if not sooner, definitely later. So, maybe leaving everything in an estate isn’t such a great idea.
4. If you’re bent on being a landlord, and cashflow is what you want, maybe you can do some research into finding something like a 1/1 or 2/2 that cashflows comparable, but doesn’t require you to put the entire $300k. You might then have something leftover to spread the risk to another asset class.
Disclaimer.. I’m doing this, others are doing this.. And finding good property in SD that cash flows well at this point (in the areas I want to do this in is getting really challenging)….
5. 4% is currently what some high quality companies are paying with a dividend yield. So while I don’t recommend putting everything into stocks, it might not be such a bad idea to spread your money out among real estate, some stock, and something else, or just hold onto some emergency cash…
Altria for instance is paying around 5% dividend…
And there’s plenty other “boring” companies that are doing 4-5%… My problem is that historically, I have the opposite problem. I’m way too heavy in stocks, around 80%+ allocated into stocks a few years ago.. I wanted to move money out of the stock market into cash and something else other than stocks..
My ultimate goal that I’ve been working out is to more readily distribute my net worth between 40% stock, 40% rental property and 20% cash.
Disclaimer: don’t listen to me for financial advice. In fact, people usually find out doing the opposite of what I say works out better 🙂
