Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 08-28-2014, 07:50 PM   #21
Moderator
rodi's Avatar
 
Join Date: Apr 2012
Location: San Diego
Posts: 8,817
What is the rent vs own calculation. You don't have HOA or Mello Roos so it's just mortgage, insurance, and taxes.. some of that is dedutible (and interest.) Assuming you're in a fixed rate mortgage, you've locked in your housing costs (except insurance). That's not true if you rent.

CA is a big state - where you are will definitely impact the likely appreciation. From a SoCal perspective - there's more appreciation in a beach house in Del Mar than in a house in El Centro. But unless there's another major collapse because we get caught up in mortgage backed securities... I don't see either case collapsing away your current equity.

But - if your mortgage is significantly higher than comparable rent - I'd sell and rent.
__________________

__________________
rodi is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-28-2014, 10:26 PM   #22
Recycles dryer sheets
 
Join Date: Apr 2010
Location: Silicon Valley
Posts: 198
For what it is worth (about what you paid) I am in the don't sell camp unless you are sure you are 100% sure that you never want to return to the Bay Area.

I would also add, don't sell if there is a downturn in Bay Area real estate prices. I have heard plenty of talk to expect one of the "regular" dips in 18-24 months. I would also recommend anchor bolts and not to sell if there is an earthquake... wait for the rebound.

You have done the hardest thing... buying at the right price, I guess you must have timed it just right (6 years ago is pretty close to the peak). A bit of fixed interest leverage and up to $500k of tax free capital gain is like magic!
__________________

__________________
SVHoper is offline   Reply With Quote
Old 08-29-2014, 01:11 PM   #23
Full time employment: Posting here.
 
Join Date: Jul 2013
Posts: 568
All good points! @rodi, I did the calculation and it basically said I'm making out like a bandit by NOT renting. My mortgage+taxes+insurance is about $100 more than what I'd pay in rent for 2bd apartment in this county. House rentals are significantly more.

Market timing wasn't perfect when I bought the house, it was on the decline but hadn't hit the rock bottom but hind sight is usually 20/20 so I'm not complaining. I know some people who bought their houses in the late 90s for $400k in this area and they're now worth $1MM+ - pretty crazy.
__________________
dvalley is offline   Reply With Quote
Old 08-29-2014, 07:25 PM   #24
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
All excellent points.

The one thing that I'd add on why not to sell is the transactions cost.
You didn't mention the selling price so I am going to estimate that is between 600-800k based appreciation in the Bay Area, but it could easily exceed $1 million.

You have to figure 6-7% commission, closing, and fixing up costs on your existing property. So that is between $36000-$56,000, which is a huge cost associated with unlock $200K

Then you have to add the expenses of moving, paying a cleaning deposit, and security deposit which in all likelyhood you will lose most of. Now if you put the money into the next Tesla than you'd come out ahead, but other wise it it is huge hurdle for stock returns to compensate for all the lost money in transaction costs.

I would say that once you have $500K in equity gains it is worth considering selling to unlock the equity, and take advantage of the $500K capital gains exclusion for home ownership.

But in general, while there a many valid reason to sell a house, financially it seldom makes sense.

Transaction cost matter for buying also. It is entirely possible that somebody who is currently renting but has plenty of money to make a large down payment or even buy a house for cash maybe better off renting, because rents/prices are relatively low in the Bay Area.
__________________
clifp is offline   Reply With Quote
Old 08-31-2014, 04:17 PM   #25
Dryer sheet wannabe
 
Join Date: Nov 2013
Location: seattle
Posts: 17
Quote:
Originally Posted by dvalley View Post
Sounds like we have a unanimous agreement on this one, I really appreciate your guys' time and insight. While $200k is a big chunk to me (at this stage) but in reality it's a small portion of where I need my portfolio to be, to be able to ER. I don't include home equity when I normally look at my networth but adding it in sure makes the numbers look healthier! Just funny accounting I guess
I see no reason to not include home equity in your net worth calculations. Your home is an asset, why not count it? Half of my net worth (home equity for my paid off home, and some farmland) is outside of my investment accounts, so I certainly prefer to include these assets when I calculate my net worth.
__________________
gowgow is offline   Reply With Quote
Old 08-31-2014, 04:29 PM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,615
Quote:
Originally Posted by gowgow View Post
I see no reason to not include home equity in your net worth calculations. Your home is an asset, why not count it?
Sure. The problem is when people use their net worth number, multiply by 4%, and decide they have enough for retirement. That won't work if a big chunk of the net worth is the house,
I guess some people like to track their net worth purely as a scorekeeping exercise, and that's fine. But knowing net worth doesn't tell a person much about their ability to retire.
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is online now   Reply With Quote
Old 08-31-2014, 06:37 PM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,441
Quote:
Originally Posted by gowgow View Post
I see no reason to not include home equity in your net worth calculations. Your home is an asset, why not count it? Half of my net worth (home equity for my paid off home, and some farmland) is outside of my investment accounts, so I certainly prefer to include these assets when I calculate my net worth.
Including your home in your net worth is totally proper, but unless you plan to sell your home and use the proceeds for your retirement it would not make sense to consider it part of your retirement assets. Lots of threads on that.
__________________

__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Should I sell my house without an Agent? Cloverissweet FIRE and Money 23 02-08-2013 09:46 PM
Has anybody taken home equity to invest floatingdoc FIRE and Money 29 01-26-2011 09:42 AM
Cashing out home equity to invest in Mutual Funds ADJ FIRE and Money 83 05-10-2007 01:16 PM
Can you invest in a private equity/VC fund? Olav23 FIRE and Money 4 01-10-2007 06:48 AM
Invest your home equity? dimwit FIRE and Money 6 08-16-2005 06:14 PM

 

 
All times are GMT -6. The time now is 09:31 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.