To sell house or not?

[joel2125]

I have not made much progress on this issue for a few years niw. Here are the details and I would welcome any input.

Kids are now all moved out and house in 4500 sq ft. Wife and I own a second home that is far cheaper to live in at 1800 sq ft. Current mortgage is $420k at 2.375% 30 year. Second home paid off rented on Airbnb/Vrbo net profit last year $13k. House sale would generate $1.1 to 1.2million in equity after taxes etc. Market is brisk so timing might be good to sell. House costs me $42k/yr taxes and all house related expenses. Subtract rental income it comes to about $30k/yr expenses. Would be moving closer to kids as they moved close to second home. Overall a fiscally conservative move except for inflation. So my question is should I sell given that real estate is a decent hedge against inflation and if I do, how should I invest the proceeds? Im thinking just dollar cost average it into a total market index fund 75% over half a year or so and 25% into ??. I have analysis paralysis! Money has 15 plus year time horizon. Also growing tired of maintaining the place. Thanks. J

 

[Sunset]

Sell, you are renting it at a huge loss each year.

Hopefully it is within the 3 yr limit of when you moved out to get the tax free portion. (last 2 out of 5 yr rule).

Sell while you are at the peak, as interest rates going up will dampen house prices.

 

[mrfeh]

Hell yes - sell ASAP.

 

[Stormy Kromer]

Not telling you what to do, but I'll tell you what I just did.

I owned two homes, one near family and the other (more valuable) in tourist country. We lived in the latter for the past 5 years.

We wanted to be closer to my aging mother and didn't want to own two homes. We sold the more valuable one in tourist country and moved closer to family. It is a very comfortable home and easy to maintain. We didn't want to own two houses, sooner or later one is going to need a roof, furnace....$$$$$.

We sold the higher valued one and invested the proceeds in Vanguard Total Stock Index and will leave it there long term. Financially I think this will keep up with, or beat housing inflation, with no real estate PITA.

It has been almost a month now and I can tell you its a relief not owning two homes.

 

[pb4uski]

You really have two separate decisions, 1. Whether to sell the big house and 2. If you sell, what to invest the proceeds in.

I would sell the big house as it doesn't really fit your needs anymore and IMO when it comes to housing less is more... less to take care of and keep clean.

On the second part, you could consider a bond or CD ladder and either a direct investment in equities or equity LEAP calls.

 

[RunningBum]

Buy TIPS if you want an alternative inflation hedge to the stock market.

It never makes sense to me why someone who is fully invested (with stock funds and real estate) DCA's back in when they sell another investment. The market isn't waiting for you to invest and then tank. It may do that, but it may also keep growing for a year or two while you tiptoe back in and then crash, which means you've missed a lot of the growth so you got hit even harder when it crashed. Do whatever you want, but realize that DCA is an emotional action, not a logical one. If you had all that money in the stock market now, would you sell some and then average back in?

 

[finnski1]

Sell, you are renting it at a huge loss each year.

Hopefully it is within the 3 yr limit of when you moved out to get the tax free portion. (last 2 out of 5 yr rule).

Sell while you are at the peak, as interest rates going up will dampen house prices.

I can't tell for sure from the OP but I read it as the main house that they are living in now is the one costing $42k.year in taxes and maintenance not the rental one. The rental is actually profitable. The question is whether to sell the big house not the rental. If it were me. I would sell the big house and move mostly because I am retired and wouldn't want the 2 houses to look after.

 

[nobody]

Where do you want to live? More important question than the money.

I sold a couple of years ago and moved out of a lower cost of living place to a higher cost of living place. All of my friends are are now 9 hours away. Why did I move, I had to be near the mountains and away from the heat, humidity and insects of the midwest. I don't regret it, financially not the best decision.

 

[pacergal]

If it were me, I would sell and move closer to my kids.
Invest the proceeds to meet your current investment statement plan, no reason to change, unless you feel the need to change your entire plan to something else.

 

[JRon]

Sell big house and move closer to kids. Look for real estate investment with limited involvement. We have been invested in an apartment company for over 20 years and in a reit that owns apartments and office/retail buildings. Both have been very good investments.

 

[Souschef]

If it were me, I would sell and move closer to my kids.
Invest the proceeds to meet your current investment statement plan, no reason to change, unless you feel the need to change your entire plan to something else.

The problem with moving close to kids is what happens if they get an out of town job offer? You are now in a place where you do not know anyone.

 

[joel2125]

Thanks for that. As they say, control the limbic system (emotions) or you are going to be poor. The responses are consistent!

 

[RobbieB]

I would sell the big house now while the selling is good.

 

[joel2125]

All in at once, right decision 80% of the time. Your point is well taken. That pesky 20% gives me pause so I usually chicken out and invest 50% right off then DCA. So far its been a mistake ie should have gone all in. To your point, waiting for the dip is a loser. Thanks for the advice.

 

[MarieIG]

I didn't see what OP's wife wants to do. More important than anyone here.

 

[joel2125]

I didn't see what OP's wife wants to do. More important than anyone here.

Good point. Her mother is elderly and lives up the hill from the second house. She wants to move up there!