advice needed: sell the house now, or rent it out?

[cantab]

We own a good house in a desirable part of San Diego, purchased for about 700K, now worth about 1100K. The mortgage of 500K is five year fixed at 2.125%, since I refinanced 1.5 years ago when rates were lowest.

I will be starting a new job in a far away city. The relocation benefits are generous. We can choose either 24 months of free property management (value maybe 10K) or assistance with selling the house. The assistance includes paying a 6% realtor fee, so total value is maybe 70K. Assistance is structured to be tax-free.

There is a 50% chance that we will return to San Diego in one to three years time. We don’t want to be priced out of the market at that time, which is possible if prices boom here in the next few years.

We will know whether or not we return in less than three years, so whether or not we sell now, the capital gains will be tax-free under the “live in the house two of the last five years” rule.

The question is, should we sell now and take advantage of the 70K savings, or keep the house? Are there any major considerations not mentioned above?

[livinincali]

Seems kind of simple to me. Do you expect appreciation in excessive of the assistance benefit 3 years down the road. If yes, keep the house and use the rental income to rent in this far away city. If not then sell now. The over 1.4-1.5 million market is pretty slow but things are pretty good in the 1.1 million dollar range so you can probably expect some appreciation but I wouldn’t expect 10-20% per year meaning you’d get priced out.

[SD Realtor]

I always encourage people to keep properties if it works out for them to do so. Long term accumulation of real estate is a nice goal, especially if there is a possibility of keeping the home for a longer term.

[Coronita]

deleted…

Never mind… I don’t know what I would do…

Personal decision…. I guess… No right or wrong way to skin it…

[NotCranky]

Sell it with an option to buy it back.

[spdrun]

If you can rent it out to decent folk at a profit or at a wash, then keep it. If it will cost you more than a few hundred $ per month and you can sell it at a profit, then consider selling.

[DataAgent]

Take your profits and run!

[sdsurfer]

I’d keep it. My parents and their parents always tended to do well buying and holding long term and it always blew my mind when they told me what they paid for it, but it was always followed up with the ol..”that was a lot of money back then though!”. It is so easy to get swept up in the short term and end up ripping the golden gooses head off when there are many more golden eggs to be laid. I’m sure someone will tear me a new one for saying so, but I wanted to tell you what I would do if I was in your shoes.

I just think that no matter what numbers, charts or people say. Demand will stay strong in San Diego because want to live in here regardless the cost to do so. I have so many friends that have threatened to leave a number of times and never seem to do so.

Additional considerations:

Did you enjoy the process of buying the home? Would you want to do it again in 1-3 years if you move back?

Is the new job good enough to justify having an investment property in SD for potential tax advantages?

Also…I would not worry about the tax free aspect on your gains. If you decide to sell after you move you can just 1031 exchange the gains into another property to avoid the taxes anyways.

Good luck with your decision, but that is what I would do and consider!

[UCGal]

I guess my questions would be about what your plans on for housing in your new location.

Since it might be temporary (since you might move back here) – does it make more sense to rent. (Transaction costs on short term ownership can kill you.)

If you plan to buy where you’re going – do you have the downpayment/credit bandwidth to finance the new purchase without selling your existing house.

My gut says that if you plan to come back to San Diego, hang on to it.

[paramount]

Sell.

Be honest with yourself, are you realistically coming back? Once you leave SD, it’s hard to do a “u-turn and return.”

Besides, the rental market in that price range is very weak. I think.

[hmc]

Do not leave SD. Job is secondary.

[scaredyclassic]

i have no idea what to do. id be too scared to keep it, but im kind of nervous about selling it.

[livinincali]

[quote=spdrun]If you can rent it out to decent folk at a profit or at a wash, then keep it. If it will cost you more than a few hundred $ per month and you can sell it at a profit, then consider selling.[/quote]

It’s a 5 year loan at 2.125%. The carrying costs are about $10K a month. You won’t rent it out for that but you could just use the rental income to rent in the other city.

[spdrun]

I didn’t read this as a 5-yr amortization period. I read it as a loan with a 30-yr amortization period (or perhaps interest only) where the rate resets after five years.

In the 30-yr case, I’m getting $1879/mo through the end of the 5-yr period.

[SD Realtor]

All all of the short term fixed rate loans are amortized over 30 years to make a reasonable payment. A 15 year fixed rate mortgage is generally amortized over 15 years but the 3/5/7/10 year notes are usually not.

If it were my home and I realized at least a 50% chance of returning I would refi it into a longer term at a fixed rate while I still lived there and then convert it to a rental.

Alternative to that I would keep the current loan and then revisit the refi choice over the next 2 years but that choice will become less appealing because you don’t live in the home anymore and will not get as good a rate on the refi. That is unless rates drop in the future but that seems unlikely.

[Author]

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