I will counter each of your arguments. They are the same old ones I hear over and over again, about why you couldn’t possibly sell your house and rent.
First, selling a house is the only tax-free gain I know of. Take the $500K capital gains tax exclusion ($250K for a single person), invest the profit in a CD yielding 5%, and then buy back in when your house is worth half. Heck, you could pay cash for the house in 5 years! Where else can you earn $500K and not pay any taxes on it. I think the government wants us all to sell our homes 🙂
Second, if you stay put, and need to sell for some reason before prices go back up (12 – 15 years?), you would lose all that paper profit. It won’t be there in 5 years.
Third, this is the easiest opportunity to cash out. How many years does you have to save, nice and slow, into that retirement plan, to get the same amount of money you can get by selling your house? In our case, it was about 25 years of saving that equalized our housing profit.
Fourth – the kids argument. I’ve heard that same lame line over and over, that renting is bad for kids. Why? Rent a house in a great location w/ a pool. That’s what we did while we were building. For 2 years we lived in a very desirable area of Poway, called Green Valley. Unfortunately, after we sold the house we built, it was January, and the rental choices were less, so I didn’t get the prime property I wanted. The realtor, who helped me find a rental, told me there’s always a lot more to choose from around the summer, a time when people move. We may stay put, or move in the summer. Either way, wherever we end up by the end of summer, is the house we’ll stay until prices bottom out.
Also – consider that realtors and mortgage brokers have been pushing ARMs because “most people only live in their homes for 2-3 years anyway”. Ok, so owning a house for 2 years is great, but renting for 2 years is not??
My old neighbor, an upwardly mobile professional, has been moving his kids and wife across the country every 2 years, since his kids were born. When things went downhill at Gateway, his Senior VP job wasn’t looking so good anymore and he went back to Chicago. They just completed their 6th new-city move. Oh, and they were homeowners each time. Are their moves sanctioned as a higher quality of moving, because they owned their homes? Would their moves be disdainful and harmful to their kids if they had been renters instead?
The people who say that kids need the stability of the same house: if you had a job offer in another city, would you forego it because you don’t want your kid to live in a different house?
Kids don’t know whether you own or rent, unless you tell them they can’t paint their room. Lighten up – spend a thousand dollars painting their bedrooms. Chances are the landlord will appreciate your nice paint job. (More women list painting as the #1 reason they couldn’t possibly rent. How shortsighted! Paint is much cheaper than the alternative of losing $500K of housing profit. Take the emotion out, people.) For stability, keep them in the same school. From my experience of moving, I found that kids are not even fazed by the move if stay in the same school. I moved twice in Phoenix, and 4 times in SD, keeping the same school. I saw that the kids were excited about each move. My kids find it exciting and wonderful to move. Kids are move like dogs in that regard, always looking for an adventure. If they have to change schools, it can be stressful for a few weeks, so you can avoid changing schools if you wish. Again, mobile career people have kids who change schools frequently.
Fifth – “moving is a pain, I have pets, I have guinea pigs, it’s too much work to pack them all up”. If you give that argument, you probably aren’t in the military. Moving takes a couple weeks: packing and unpacking, getting situated. Definitely hire a moving company to help you out. Yes, it’s a pain, but so is going to the dentist, cleaning out the fireplace, and running up a mountain. Oh, and the dog survived just fine.
Bugs, someone who bought pre-1997 for $200K has an even better reason to sell: take the profit. It’s the oldest investment mantra: take your profits while they’re there. Take the capital gains exclusion, and pay cash for your house in 5 years. You won’t even care what the interest rates are.
I can’t figure out why anyone is still holding on to rapidly depreciating assets. The only reason would be emotional attachment.
If I handed you an envelope with $300K inside, would you take it? Yes. If I told you, this envelope is yours, but you have to move? Now – different story. The thought of moving is not worth several hundred thousand dollars to some people. I’m just mesmerized by this, I can’t figure out why not. Am I superficial, to put a value on a physical structure, to be willing to sell it?
What makes you all so attached to your homes, that you are willing to work 5-10 years of your life to save the money that you could make by just selling your house? I am seriously wondering.
I know this is long, but I hope I covered all the lame arguments about why it’s impossibly difficult to rent. I won’t bore you with all the commentary on the advantages of renting, but here’s a list:
1. no property taxes
2. no maintenance fees. Call landlord when something breaks.
3. renters insurance costs less than homeowners insurance
4. earthquake insurance costs less on a rental (yes, make sure y’all have that earthquake insurance)
5. if you’re just getting into the market, rent is much cheaper than a mortgage
6. I can afford to rent in neighborhoods where I can’t afford to buy
7. No money spent on the constant improvements. No ongoing projects.
8. Husband has more free time, since he’s not gardening, fixing, building, improving, and being a guy in his castle. More time to work on hobbies and spend w/ family.
9. No ties to a depreciating asset.
10. No mortgage, no debt. Financial freedom.
The only reason that I personally would stay in my house is if the house is almost paid off, or paid off. I might still cash out, but would have to handle the adjustment from zero mortgage payments to paying rent.
