Thinking Of Selling The House And Renting

[yakers]

DW & I are thinking of selling the house and either renting or possibly buying a condo if we found one we really liked. Youngest son is away at college and I retired last year. From a non fiscal perspective we want the freedom to travel without worrying and maintaining a house. For a big trip last year we found a house sitter. There are real pluses and minuses. We are in California and our property taxes are low, if we were to buy in California again just the property taxes would go up from $2K to $5k for anything we are likely to find. And that tax money is 'lost' every year with nothing to show for it, unlike, say, a home improvement. On the plus side the property tax is deductible for us. And I assume rentals factor in current property taxes. We like our house, DW has an award winning cactus garden. But the house is old and has many years of deferred maintenance. I don't like sinking a lot of money in it. I have now started some repairs but I did not plan my retirement around 'This Old House' activities. The condo I once lived in was really great but I know finding a similar set up is difficult.
I am trying to sort out the financial and non financial issues. On the financial side if we sold the house for $450k how would we invest it so that the investment produces enough to cover our housing cost and enough gain to try to match the gain in owning a house (over time, I know the real estate cycle here can be 10 years). I am not sure if the investment should be in REITs to match home ownership or some other type to generate income. I expect to live long enough that I want to have housing costs covered. We have a trailer that we would have to pay to store some where.

On the non financial side, If we were to rent we would have to get rid of a lot of stuff, a good thing but a serious undertaking. We would be more free to travel and change neighborhoods but would be subject to more neighbors and probably regular increases in rent. Actually the non financial side is pretty compelling but I am trying to seriously figure out if there is a way to gain financially or at least mitigate the costs of this move. It does look like there is nothing cheaper we can do than stay where we are but I would like to know the cost of staying or going if our emotions push us toward moving.

 

[FUEGO]

It's always interesting to see what $450k gets you in different parts of the country...

 

[ProspectiveBum]

Very charming house, I like it a lot.

I haven't experienced it myself, but have a couple of co-workers who have become disenchanted with condo living. The biggest reason for their dissatisfaction is because of large assessments levied by the HOA for large-scale repairs and maintenance. You've preferred to defer maintenance on your current home, but from the sound of it, you wouldn't be able to do that in a condo.

If you're wanting to travel more, and like Southwest-y stuff (as I gather from your home), you could probably find a much cheaper home in Arizona/Nevada/New Mexico, and make that your base camp.

Edit: If you'd rather stay in CA, and either you or DW is 55+, you can transfer your current tax basis to another property in the same county under Proposition 60. Proposition 90 allows you to transfer you tax basis to a home in one of the counties that accepts transfers. More details here.

 

[Moemg]

Very nice house! I have also been thinking of selling my house .The market is still pretty slow in Florida and I have no interest in having my house on the market for several years .I would love to sell my house and rent on the beach or across from the beach for a year or two while I'm looking for the next place . Florida also has the tax breaks for long time residents so even if I downsized my taxes would probably stay the same . The thing that I would fear is another year like last year which would wipe out a huge chunk of equity from my house if I invested the money from the sale of my house .I think I'd rather sell my house for $650,000 . Buy another house in the $350,000 range and invest the rest . The extra investment return could pay for some nice vacations .

 

[aaronc879]

It's always interesting to see what $450k gets you in different parts of the country...

It sure is. It looks like that house could fit in the family room of a house that costs $450K around here.

 

[ProspectiveBum]

It sure is. It looks like that house could fit in the family room of a house that costs $450K around here.

Yeah, but I'll bet those cacti haven't seen much snow in their lifetime.

 

[unclemick]

DW & I are thinking of selling the house and either renting or possibly buying a condo if we found one we really liked. Youngest son is away at college and I retired last year. From a non fiscal perspective we want the freedom to travel without worrying and maintaining a house. For a big trip last year we found a house sitter. There are real pluses and minuses. We are in California and our property taxes are low, if we were to buy in California again just the property taxes would go up from $2K to $5k for anything we are likely to find. And that tax money is 'lost' every year with nothing to show for it, unlike, say, a home improvement. On the plus side the property tax is deductible for us. And I assume rentals factor in current property taxes. We like our house, DW has an award winning cactus garden. But the house is old and has many years of deferred maintenance. I don't like sinking a lot of money in it. I have now started some repairs but I did not plan my retirement around 'This Old House' activities. The condo I once lived in was really great but I know finding a similar set up is difficult.
I am trying to sort out the financial and non financial issues. On the financial side if we sold the house for $450k how would we invest it so that the investment produces enough to cover our housing cost and enough gain to try to match the gain in owning a house (over time, I know the real estate cycle here can be 10 years). I am not sure if the investment should be in REITs to match home ownership or some other type to generate income. I expect to live long enough that I want to have housing costs covered. We have a trailer that we would have to pay to store some where.

On the non financial side, If we were to rent we would have to get rid of a lot of stuff, a good thing but a serious undertaking. We would be more free to travel and change neighborhoods but would be subject to more neighbors and probably regular increases in rent. Actually the non financial side is pretty compelling but I am trying to seriously figure out if there is a way to gain financially or at least mitigate the costs of this move. It does look like there is nothing cheaper we can do than stay where we are but I would like to know the cost of staying or going if our emotions push us toward moving.

Hmmm - sooo you are thinking Kaderli's? Mfg home as base camp in say Arizona community and perpetual tourist life style? Or maybe an RV/ or boat and something in-between full world travel or a little bit of both.

And then there's pssst - Wellesley for that extra cash from selling the house.

heh heh heh - Kansas City post Katrina - an' vistin' - so far New Orleans(a lot), Nags Head, Portland/Seattle, Mexican cruise(Pacific side), in and around Chattanooga - mainly Alabama/Georgia and Arizona near Sierra Vista.

And Florida - Port Canaveral. And Mississippi - and and lest we forget - Texas!

 

[FUEGO]

It sure is. It looks like that house could fit in the family room of a house that costs $450K around here.

Yeah, that was my take too. $450k buys a mcmansion here for the most part.

On the finances though, I know it used to be that in urban California you could rent a place for 1/3 the price to buy it. As in a place with mortgage, taxes, insurance at $4500 a month, you could rent for $1500 a month. This was around the peak and a sign to me that prices would not go up forever. If this ratio of buy-to-rent costs is anywhere near the same today, it certainly seems like renting a smaller condo or apartment could bring the monthly cost down if one had a mortgage.

I take it Yakers has no mortgage but would have $450,000 cash to invest in something that could spin off 4% per year, or $1500 per month. Would this provide an adequate amount to rent an acceptable condo/apt in you area or nearby? Typically mid-level and high end apartment/condo complexes have nice common areas that include gym, pool, sporting facilities, etc. And since you share one or more walls, heating/cooling costs are typically more modest per square foot vs. a single family unit.

From a non-financial perspective it certainly looks appealing. It is something I think I would like to give a shot once ER, particularly if the kids are out of the house. While working, house maintenance and upkeep is certainly a chore, and I don't guess it will get easier even when I have 168 hours per week.

PS - tell your neighbors to the right "congratulations" on their marriage!

 

[FANOFJESUS]

If it were me I would move to the midwest buy for 50k invest the rest. House taxes would be around $500 so nothin to worry about. The midwest also has lower state taxes so more savings there. What kind of income do you have? Maybe NV or TX would be better? I would weigh all the options. If you are going to move make the move pay $$$.

 

[dex]

I moved from a 3K sq ft house + basement to a 2700 townhouse for some of the reasons you gave. I'm now thinking of downsizing again to a small house or apartment living. Georgia makes the decision easier than CA.
In your place I would look at 55+ apartment living.

 

[Nords]

DW & I are thinking of selling the house and either renting or possibly buying a condo if we found one we really liked.
I am trying to sort out the financial and non financial issues.
On the non financial side, If we were to rent we would have to get rid of a lot of stuff, a good thing but a serious undertaking. We would be more free to travel and change neighborhoods but would be subject to more neighbors and probably regular increases in rent. Actually the non financial side is pretty compelling but I am trying to seriously figure out if there is a way to gain financially or at least mitigate the costs of this move. It does look like there is nothing cheaper we can do than stay where we are but I would like to know the cost of staying or going if our emotions push us toward moving.

I think the fundamental issues are "control" and "emotions". Moving from a home to a townhome/condo/apartment can mean giving up a lot of control in exchange for spending more money and doing less yardwork. And you may find that emotionally you prefer to live in a place that's filled with good memories.

Alongside those considerations, I think money comes in a distant third...

And now I need to go catch up on my yardwork, housework, and home improvement!

 

[CuppaJoe]

... From a non fiscal perspective we want the freedom to travel without worrying and maintaining a house.... We are in California and our property taxes are low, if we were to buy in California again just the property taxes would go up from $2K to $5k for anything we are likely to find. And that tax money is 'lost' every year with nothing to show for it, unlike, say, a home improvement. On the plus side the property tax is deductible for us. And I assume rentals factor in current property taxes... The condo I once lived in was really great but I know finding a similar set up is difficult....

On the non financial side, If we were to rent we would have to get rid of a lot of stuff, a good thing but a serious undertaking. We would be more free to travel and change neighborhoods but would be subject to more neighbors and probably regular increases in rent. Actually the non financial side is pretty compelling but I am trying to seriously figure out if there is a way to gain financially or at least mitigate the costs of this move. It does look like there is nothing cheaper we can do than stay where we are but I would like to know the cost of staying or going if our emotions push us toward moving.

Regarding regular increases in rent, the June Calif. ballot has yet another proposition to terminate rent control statewide. Some areas still have it, when I move I choose accordingly. Interesting, I've never heard the argument that property taxes are lost with nothing to show for it; that's what you hear about rent, that you gain no equity. Where I live, certain ballot measures are "passed through" to tenants but the amounts I pay don't add up to much, usually about a buck or two a month additional for just one year.

Yakers, I'm wondering how important that garden is to your DW? I've seen some of my neighbors compensate by tending one tree with a few plants around it, which is typical for the city streets. I keep a fuschia in a gallon container on the fire escape; it actually draws hummingbirds to entertain the cat.

 

[HFWR]

And now I need to go catch up on my yardwork, housework, and home improvement!

What is this "catch up" of which you speak?

 

[Martha]

I take it Yakers has no mortgage but would have $450,000 cash to invest in something that could spin off 4% per year, or $1500 per month. Would this provide an adequate amount to rent an acceptable condo/apt in you area or nearby? Typically mid-level and high end apartment/condo complexes have nice common areas that include gym, pool, sporting facilities, etc. And since you share one or more walls, heating/cooling costs are typically more modest per square foot vs. a single family unit.

My sister lives in Carson, California, a burb of LA. She pays about that in rent a month for a decent, but small and not fancy apartment. It would rent for about half that here. It is not near as nice as Yaker's pretty house. Her complex does have a pool and gym. But she hears the guy above her have wild sex.

 

[FinanceDude]

But she hears the guy above her have wild sex.

 

[FUEGO]

My sister lives in Carson, California, a burb of LA. She pays about that in rent a month for a decent, but small and not fancy apartment. It would rent for about half that here. It is not near as nice as Yaker's pretty house. Her complex does have a pool and gym. But she hears the guy above her have wild sex.

There are downsides to everything I suppose. If I were to do apartment/condo living, it would probably be something like a "townhouse" around here - shared walls on either side but you have a 2-3 story unit with no neighbors on top or bottom. And recently built mid- and high-end places locally have focused on better soundproofing between units to combat one of the frequent arguments against condo living - neighbors are too close and noisy. Or the top unit in a building. Neighbors on top are noisier than neighbors on either side or below you.

As to location specific costs, it really does depend on the location. I know when I looked a few years ago at some areas in California (LA and SD come to mind), the buy/rent ratio was 3 to 1 meaning buying costs 3x what renting would. I would suggest checking out rental rates on acceptable condos and apartments in the area where yakers wants to live. I know $1500 around here would get you a moderate 4 br house in a decent to nice area, or a niiice 2-3 br condo downtown, or a very nice 4 br townhome/condo a little further out (I honestly have not seen any apartments with rent that high, but they may exist somewhere locally).

 

[CuppaJoe]

.... I know $1500 around here would get you a moderate 4 br house in a decent to nice area, or a niiice 2-3 br condo downtown, or a very nice 4 br townhome/condo a little further out (I honestly have not seen any apartments with rent that high, but they may exist somewhere locally).

In my neighborhood you won't see anything for $1,500 either. Even studios start at around $1,700-$2,100.

 

[FUEGO]

In my neighborhood you won't see anything for $1,500 either. Even studios start at around $1,700-$2,100.

I just checked craigslist locally. Out of the first 100 entries for rent, 4 exceeded $1500. $1700 for a 5 BR 3500 sf house, new construction, in a nice n'hood, a 4 BR new construction 2800 sf on an acre for $2000, a 4 br new construction single family house in a tony neighborhood downtown for $1700, and $3200 for a 5 BR 4400 sf mansion on a couple acres in probably the swankiest part of the swankiest town around (also selling at $800k).

It really is amazing what your dollar buys/rents in different parts of the US.

 

[CuppaJoe]

I just checked craigslist locally. Out of the first 100 entries for rent, 4 exceeded $1500. $1700 for a 5 BR 3500 sf house, new construction, in a nice n'hood, a 4 BR new construction 2800 sf on an acre for $2000, a 4 br new construction single family house in a tony neighborhood downtown for $1700, and $3200 for a 5 BR 4400 sf mansion on a couple acres in probably the swankiest part of the swankiest town around (also selling at $800k).

It really is amazing what your dollar buys/rents in different parts of the US.

Yes, it's nice to know there is a lot of room for tightening the budget by moving. The last time I looked at a listing from Craigslist which sounded reasonable (just a few blocks from here), it was a dump. Looking for another place is a lot of work, took me three months the last time I moved.

 

[MasterBlaster]

We are in California and our property taxes are low, if we were to buy in California again just the property taxes would go up from $2K to $5k for anything we are likely to find. And that tax money is 'lost' every year with nothing to show for it, unlike, say, a home improvement.

If you didn't already know...

In California you can transfer your (Proposition 13) tax base to another property provided that you are over 55 years old (or are diabled). There were a number of state propositions passed over the years allowing this.

Propositions 60, 90, and 110 are constitutional amendments approved by the voters of California. They provide for the transfer of a property’s base year value from an existing residence to a replacement residence, under certain conditions, for qualified persons over the age of 55 or persons of any age who are severely and permanently disabled.

1. Both properties must be located in the same county, unless the county in which the replacement residence is located has an ordinance that allows intercounty base year value transfers.
2. As of the date of transfer of the original property, the transferor (seller) or a spouse residing with the transferor must be at least 55 years of age, or be severely or permanently disabled.
3. At the time of sale, the original property must have been eligible for the Homeowners’ Exemption, or entitled to the Disabled Veterans’ Exemption.
4. Generally, the replacement dwelling must be of equal or lesser value than the original property.
5. The replacement dwelling must have been acquired or newly constructed within two years of (before or after) the sale of the original property.
6. The owner must file an application within three years following the purchase date or new construction completion date of the replacement property.
7. The original property must be subject to reappraisal at its current fair market value. Therefore, transfers of the original property that are excluded from reappraisal (e.g., most transfers between parents and children) will not qualify.

here's a document that formally describes all of the rules:

http://www.boe.ca.gov/proptaxes/pdf/lta06010.pdf

 

[haha]

Her complex does have a pool and gym. But she hears the guy above her have wild sex.

That's gotta be worth something?

Ha

 

[tuixiu]

Mfg home as base camp in say Arizona community and perpetual tourist life style?

Hell you don't even need a mfg home these days, go buy a relatively nice one for $60k in Queen Creek or Maricopa.

 

[tuixiu]

Moving from a home to a townhome/condo/apartment can mean giving up a lot of control in exchange for spending more money and doing less yardwork.

We moved from a bigger house to a smaller townhome, and one thing I noticed when looking closely at the breakout of our HOA dues is that a lot of things are much cheaper paid for as a community. Trash pickup, water, insurance on exterior, landscaping, etc. all are cheaper than what I was paying at our house. It's a little harder to quantify things like roof maintenance or to justify on things like a community pool I rarely use.

The assessment thing can come down to luck and maybe some research. I know some people get dinged regularly for special repairs, exterior painting, etc. while others manage to live years in a condo community without a special assessment.

Overall I agree with what someone said about a place that is two stories with only shared walls. Noise can come thru a good firewall but it's a lot more likely to be thru floors and ceilings, having noone sharing vertical space is huge.

 

[FUEGO]

We moved from a bigger house to a smaller townhome, and one thing I noticed when looking closely at the breakout of our HOA dues is that a lot of things are much cheaper paid for as a community. Trash pickup, water, insurance on exterior, landscaping, etc. all are cheaper than what I was paying at our house. It's a little harder to quantify things like roof maintenance or to justify on things like a community pool I rarely use.

Way back when I was a condo owner I noticed this too. New roof, exterior painting, and some other exterior maintenance tasks on a 1200 sf unit was something like $1800 per unit (special assessment). No way I could contract it out that cheaply if I were to do the same on a 1200 sf single family house.

Similarly, a full tear out, repiping, and drywall repair job to replace polybutylene was assessed at $2000 for identical condo units from the same builder in the next town over. From talking to people that have done this in similar sized single family houses or condos, we are talking $4000-6000 for the same scope of work.

Landscaping is a no brainer. It would be $65 per month for basic services on my fairly modest single family house. I think it was $10/month or so at our condo (with admittedly much less yard per unit - 0.09 acres at condo vs. 0.31 ac currently in single family house).

Right on about the distributed maintenance costs for some stuff you don't really care about. Drainage issues for some units on the other side of the development that cost $30,000 to fix was something like $200 per unit, even though it didn't affect me at all. Similarly, $50,000 or so for parking lot asphalt rehabilitation and restriping is something that is usually paid for by the municipality and property taxes, but with a private road network to maintain in the HOA, we were stuck with the tab.

Special assessments are a fact of life in many condo developments but can be minimized by higher monthly HOA dues to boost the reserve (6 in 1/2, half dozen in the other here though). And single family homeowners have "special assessments" all the time - roof repairs, painting, siding, driveway ashpalt/concrete work, fence repair/replacement/installation, landscaping, structural issues, etc. Something is always coming up.

 

[Nords]

What is this "catch up" of which you speak?

Well, I'm relatively young, I have a lot to learn...

My sister lives in Carson, California, a burb of LA. She pays about that in rent a month for a decent, but small and not fancy apartment. It would rent for about half that here. It is not near as nice as Yaker's pretty house. Her complex does have a pool and gym. But she hears the guy above her have wild sex.

So does she pay extra for the sound track? Or does she cheer along with the rest of the crowd?

Special assessments are a fact of life in many condo developments but can be minimized by higher monthly HOA dues to boost the reserve (6 in 1/2, half dozen in the other here though). And single family homeowners have "special assessments" all the time - roof repairs, painting, siding, driveway ashpalt/concrete work, fence repair/replacement/installation, landscaping, structural issues, etc. Something is always coming up.

IMO condos with smaller associations (fewer than 100 units) are a colossal PITA-- the gene pool is too shallow for professional management and there's too many petty tyrants. Far better to be a condo renter than a condo owner.

It's taken me years to realize that homeowner's associations are actually insurance companies. They exist to suck money out of your pocket, and in exchange they promise to maintain your property value. Their finances are usually difficult to comprehend and they always seem to want more money for less service. Depending on the quality of the company and their exclusions, you may or may not get your money's worth. They're certainly not your friend, although they'll happily accept your volunteer labor, and they can be a tireless enemy.

A condo where we used to live 20 years ago has put their newsletters online. One of them discussed their recent "assessment" issues, including the cost of a professional animal-control contractor to trap the wild raccoons rampaging through the property. I would've been more sympathetic if that column hadn't been right next to their ad for the upcoming community BBQ...