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Selling the House to Travel - What to Do with Proceeds?
Old 10-15-2018, 04:35 PM   #1
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Selling the House to Travel - What to Do with Proceeds?

Hi - I've been thinking that our home provides some diversification for our assets (HCOL area). However, next year, we are thinking of selling our home, and travelling full-time for 1-3 years.

What would you recommend to do with the proceeds (~$350K) that we'll need in 1-3 years to buy a new place? CDs? REITs? Bonds? I want something that is unlikely to lose value, or I won't be able to afford to buy a new place for cash.

Alternately, we've thought about renting the place out, or letting it sit vacant; the monthly carrying costs are about $1K.

Thanks!
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Old 10-15-2018, 04:38 PM   #2
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Rent it.
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Old 10-15-2018, 04:45 PM   #3
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The answer depends on where you want to live when you move back. Do you want to live in the same area or move? Then rent or sell.

If you want to stay in the area but sure you want a different house then it becomes tougher. Maintaining a rental can be bothersome. And I wouldn’t consider a house in the 300s a hcol unless you’re near the low end of the market.
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Old 10-15-2018, 04:49 PM   #4
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Rent it.
Don't rent it out if you plan on selling it in the next 10 years. If you do, it changes your homeowner exemption and you will end up paying taxes when you sell the house.
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Old 10-15-2018, 04:49 PM   #5
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The answer depends on where you want to live when you move back. Do you want to live in the same area or move? Then rent or sell.

If you want to stay in the area but sure you want a different house then it becomes tougher. Maintaining a rental can be bothersome. And I wouldn’t consider a house in the 300s a hcol unless you’re near the low end of the market.
We intend to sell it and move to another island. It's a 800 sf condo. Thanks!
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Old 10-15-2018, 04:50 PM   #6
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Agree.....rent it

DH and I are also thinking about doing it.
When we return from travel in 2020, then we can decide whether we still want to live in big house or sell it.

Our zip code has seen steady appreciation in past 10 years and we want to avoid risk of not be able to afford similar housing.

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Old 10-15-2018, 05:00 PM   #7
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Be sure to read your condo CCNRs to determine if renting is even an option for you. Also, talk to your home owner's insurance carrier to understand any issues if you rent your condo. Assuming that those matters are fine then, maybe, you can find a high-quality renter where keeping your condo is an option. While your home values can go up so can mortgage interest rates which may suppress real estate appreciation.

Since you intend to live in a different community when you return I would sell and invest the proceeds in interest paying bonds/notes.
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Old 10-15-2018, 05:22 PM   #8
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I wouldn't want to be an absentee landlord. Do you have a manager you can trust? What about interviewing tenants? Even if you are able to interview the first one, what if they move and you have to get another tenant?

I wouldn't want to rent a place I had pretty definite plans to sell. A rental is less attractive to buy than owner-occupied, you have to worry about renter damage and neglect, and you'll have to sync up when you come back to the lease. Selling while it's being rented doesn't work all that well either as the renter has no motivation to make the place show worthy.

By renting, you can lose your CG tax advantage when selling.

I wouldn't want to leave a place vacant just to sell it later. It makes no sense financially, and things can just break down in your absence.

So I'd definitely sell, and probably just invest in CDs or MMs, at least to the extent that I planned on buying the next place for.
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Old 10-15-2018, 05:29 PM   #9
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I'm thinking about traveling around the world also, but my wife is reluctant to sell our house. If we sell, we will not come back to the same place.
Insurance and taxes will be about $11,000 a year. House is about $620,000, probably will get us $550,000 after the cost of selling.
If I do sell, I will put in a 50/50 portfolio.
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Old 10-15-2018, 06:32 PM   #10
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I wouldn't want to be an absentee landlord...
By renting, you can lose your CG tax advantage when selling. I wouldn't want to leave a place vacant just to sell it later. It makes no sense financially, and things can just break down in your absence. So I'd definitely sell, and probably just invest in CDs or MMs, at least to the extent that I planned on buying the next place for.
Thanks! Yes, it makes the most sense to sell...only problem is if local real estate skyrockets while I'm gone. Thanks!
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Old 10-15-2018, 06:34 PM   #11
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I...my wife is reluctant to sell our house. If we sell, we will not come back to the same place.
Emotional attachment...it's a little of what I have...I've been on Oahu for the past 14 years, and 5 before that...transitions are hard. It's hard to imagine life without the place you've lived in for so long. Even if it doesn't make sense!
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Old 10-15-2018, 06:40 PM   #12
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A good time to research the estimated housing market. Lots in the news about this these days.

https://www.thestreet.com/investing/...rket--14725691
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Old 10-15-2018, 06:48 PM   #13
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Read a book called "Home Sweet Anywhere" by Lynne Martin. They sold their home and traveled for years. It is interesting reading.
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Old 10-15-2018, 06:59 PM   #14
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A good time to research the estimated housing market. Lots in the news about this these days.

https://www.thestreet.com/investing/...rket--14725691
Thanks! I've been following the Hawaii markets...days on market are increasing a little, and I've noticed an uptick in price reductions recently on Hawaii Island. However, the addition of luxury condos has moved the median and average prices up. In some luxury markets, interest rates don't matter, as buyers tend to buy with cash. Kona real estate has been through many cycles. I think what may be different this time is the number of baby boomer retirees moving into the area. Thanks!
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Old 10-15-2018, 07:34 PM   #15
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I am getting my primary residence ready to put on the market in the spring. We are going to be traveling the next 4 yrs or so. I intend to put the proceeds into cds in anticipation of purchasing another residence sometime in the future. I do have other rental real estate exposure in the same market and these funds are a small part of our net worth. The issue for us is we don’t know where we want to settle
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Old 10-15-2018, 07:54 PM   #16
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We sold. Traveled for over 5 years. Bought somewhere else. Invested proceeds in a balanced fund which did well, but I think we used other assets when we bought a new house, so I can’t really advise on investing it.
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Old 10-15-2018, 08:35 PM   #17
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Have a Vacant home? - beware your home policy may not cover if you are away for an extended period (weeks to months depending upon the insurance company).

Sharing something I learned this year while prior home was on the market for 4 months after we moved out. Once you move out (or go South for the winter) most insurance companies consider the house vacant and coverage under your policy is limited at best. (Insurance company would cover me for 30 days only). If you don’t inform them and they find out it was vacant when damage occurred, your claim may not be covered. In such cases, a “Vacant home policy” is needed yet few companies offer such policies. The “cheapest” policy I could find was with Foremost at 3X cost of regular policy and it did not include personal liability provisions. Prior home was in a very low crime, medium to higher income rural-suburban zoned area where neighbors would shoot any vandals.

I specifically asked several insurance companies if same issue comes up with Snowbirds or when folks take extended vacations. Companies varied from 2 to 4 weeks until home is considered “vacant”.

With respect to the topic of this thread. Sell or Rent, but don’t leave vacant!
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Old 10-15-2018, 09:15 PM   #18
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I don’t want to leave house vacant because squatters might come in. I saw something like that from a UK owner.
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Old 10-15-2018, 10:41 PM   #19
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Thanks! I've been following the Hawaii markets...days on market are increasing a little, and I've noticed an uptick in price reductions recently on Hawaii Island. However, the addition of luxury condos has moved the median and average prices up. In some luxury markets, interest rates don't matter, as buyers tend to buy with cash. Kona real estate has been through many cycles. I think what may be different this time is the number of baby boomer retirees moving into the area. Thanks!
I'd sell and take advantage of your home owners capital gains exclusion. The rent to price is so low here (less than 3% for my house), that by the time you pay your condo fees, a property manager (required by law for absentee owners), taxes and insurance, I bet you could do just as well taking the money and sticking in a CD. In addition, there are rules about converting, your primary residence to a rental and they are complicated by taking the homeowners capital gain exclusion.

Price appreciation is always a risk, but I'm with you if anything I see softening of the market in Honolulu, but my track record on predicting prices here isn't great.

One thing you might want to consider as way of hedging against neighbor island prices continue to go up is to invest a portion in the money in Hawaii focused REIT. The only one I'm aware of is Alexandar and Baldwin's ALEX. Unfortunately, the performance has been awful, but there may be others.

Which island?
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Old 10-16-2018, 12:05 AM   #20
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We were ready to move. We knew we wouldn’t be returning. No way did we want a piece of property pulling us back. It would have felt like an albatross around iyr necks while we wanted to play gypsies.

But we were always planning for at least 5 years. A shorter time, and with intention to return, we would probably have done things differently.
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