Would you sell or keep?

[MH]

Okay.. Recognizing it’s dangerous to ask this audience, here’s my dilemma: We own a 3/2 in Oceanside that we bought in ’98. Its been rented out since we moved in ’00; after tax its probably doing a bit better than breaking even (month to month its a slight cash drain, but not to a large degree). Prop mgr (also an agent) suggests keeping it for at least another year because he thinks the market will be slightly better by then (stop laughing!). If we boot our renters and do some minor maintence (paint and carpet primarily) he thinks we’ll get 475-500 for it.

I’m a Marine with roots in SoCal so we will certainly return and retire to SD county but more than likely not to that house (too small). We’re locked in to a 30 yr fixed and enjoy the prop 13 advantage of paying tax of about 1/2 of appraised value. I’m headed to Special Ops command in Tampa for 3 years and won’t need the cash for a down payment until at least ‘2010.

I have not pulled out the equity along the way so after paying the ransom…er, commission, we’d have a pretty decent chunk of change to invest until we need it. But, those transaction costs (improvements, closing, loss of rent, capital gains) and the opportunity costs (losing Prop 13 advantage, the low interest rate, the option to move back in if we wanted) are all factors.

Thoughts?

[Tone]

MH,

What does your loan look like? You say its 30 years. Have you refied to a lower rate when interest rates dropped earlier in this decade? How much would you net if you sell? How much did you pay for the property?

Without knowing too many details I’d suggest (and I’m no expert – I just play one on the internet) that you sell. The property is a negative cash flow, you think its too small to move back into, and prices are not going up anymore.

With a 30 year loan you are not paying down a significant part of the principal and the equity in your home is likely to drop over the next three years (maybe dramtically – who knows). You could sell and stick your equity in a CD (at the least) and have it grow but keeping the home will only have the equity shrink with price declines or even inflation if housing prices simply flatten out.

But beware, the only houses selling now are ones that are fixed up. My house is completely remodeled and it recently went into escrow with several offers. Other less expensive houses (not upgraded) in the same neighborhood have languished on the market since last year.

Good luck.

[Tone]

MH,

What does your loan look like? You say its 30 years. Have you refied to a lower rate when interest rates dropped earlier in this decade? How much would you net if you sell? How much did you pay for the property?

Without knowing too many details I’d suggest (and I’m no expert – I just play one on the internet) that you sell. The property is a negative cash flow, you think its too small to move back into, and prices are not going up anymore.

With a 30 year loan you are not paying down a significant part of the principal and the equity in your home is likely to drop over the next three years (maybe dramtically – who knows). You could sell and stick your equity in a CD (at the least) and have it grow but keeping the home will only have the equity shrink with price declines or even inflation if housing prices simply flatten out.

But beware, the only houses selling now are ones that are fixed up. My house is completely remodeled and it recently went into escrow with several offers. Other less expensive houses (not upgraded) in the same neighborhood have languished on the market since last year.

Good luck.

[no_such_reality]

If you have good reliable tenents and the house is nearly cash flow positive and nets a positive after income taxes, why would you sell?

If you have along term lock on your interest rate, your job secure, keep the house and let the tenant pay the loan off for you.

More importantly, you bought in ’98, that’s still basically the bottom of last cycle.

[no_such_reality]

If you have good reliable tenents and the house is nearly cash flow positive and nets a positive after income taxes, why would you sell?

If you have along term lock on your interest rate, your job secure, keep the house and let the tenant pay the loan off for you.

More importantly, you bought in ’98, that’s still basically the bottom of last cycle.

[ocrenter]

agree with nsr, oceanside’s bottom has already dropped, unless that property is a real stand out, you may not get the prices you want. and if the tenants are good, you are risking losing them as well.

something to think about

[ocrenter]

agree with nsr, oceanside’s bottom has already dropped, unless that property is a real stand out, you may not get the prices you want. and if the tenants are good, you are risking losing them as well.

something to think about

[Chris Scoreboard Johnston]

Chris Johnston

You should never sell that property, that is a great investment

[Chris Scoreboard Johnston]

Chris Johnston

You should never sell that property, that is a great investment

[NotCranky]

I tend to agree with no-such-reality, That could be some nice retirement income and equity for you. That income on top of a miltary pension you would be in good shape. On the other hand you might sell it buy it back cheaper have better cash flow and pay it off faster. I Would say that given the information you have provided you are about as close to being on the fence on this issue as it comes. When in doubt keep it!
If you are going to have a hard time coming up with a down payment in the future why don’t you either refi-and get some cash out or shop for best heloc you can get and don’t use it unless you get a really great opportunity. Probably sounds like bad advice but you don’t want to get locked out of a true buyers market for lack of down payment. Keep in mind though, that a lender is going to knock 25% off the rent you are earning so to a lender that house is cash flow negative and hurts your ability to qualify for a new house later.Get rid of it!
Capital gains is a real deal killer. These posters are saying market has dropped significantly already. Keep it!
I would keep it.
It depends on your total financial picture. Smart of you to ask around though.
Best Wishes,

[NotCranky]

I tend to agree with no-such-reality, That could be some nice retirement income and equity for you. That income on top of a miltary pension you would be in good shape. On the other hand you might sell it buy it back cheaper have better cash flow and pay it off faster. I Would say that given the information you have provided you are about as close to being on the fence on this issue as it comes. When in doubt keep it!
If you are going to have a hard time coming up with a down payment in the future why don’t you either refi-and get some cash out or shop for best heloc you can get and don’t use it unless you get a really great opportunity. Probably sounds like bad advice but you don’t want to get locked out of a true buyers market for lack of down payment. Keep in mind though, that a lender is going to knock 25% off the rent you are earning so to a lender that house is cash flow negative and hurts your ability to qualify for a new house later.Get rid of it!
Capital gains is a real deal killer. These posters are saying market has dropped significantly already. Keep it!
I would keep it.
It depends on your total financial picture. Smart of you to ask around though.
Best Wishes,

[(former)FormerSanDiegan]

If it were me, I would keep it.

[(former)FormerSanDiegan]

If it were me, I would keep it.

[blahblahblah]

Keep it! It sounds like a gem. It might also be a nice place to live when you get older and need to lower your expenses. That prop 13 tax is gonna look great in 30 years…

[blahblahblah]

Keep it! It sounds like a gem. It might also be a nice place to live when you get older and need to lower your expenses. That prop 13 tax is gonna look great in 30 years…

[Author]

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