Cash out and new house

[agallant80]

Would you live in a house that you did not like because the property values were going up and up and up or would you cash out and buy something that you wanted to live in. My current situation I live downtown and the property values keep on going up. With that said the house is small, 100 years old, all kinds of city noise, petty crime (really small stuff), one bathroom, no driveway and a very small workshop. I am tempted to take the money and run to the country where I can have a 4 car garuage, 5 bedroom, 3 bathroom etc.

My only concern is that my generation does not have pensions just a 401 and IRA accounts. Staying in the house if the property values keep on going up will mean lots of money when I sell when I retire but that is 30 years away and my crystal ball is not working today.


Thoughts?

 

[southkogs]

Re: Cash out and new house

IMHO - we've gotten too far down the road of living in an investment as opposed to living at home. I understand using the value from real estate to secure future income, but you could also shift investment in other directions (lotsa' different formulas for success are available). But for me, I'd be more concerned about "home" first, and investments second.

Besides, a lot can happen to a city in 30 years dropping your values back down. Can I interest you in a nice little home in East Detroit?

 

[rbh]

Re: Cash out and new house

If I had been on the ball 20 years ago I would have invested in a 4 plex, lived in one and rented the other three out.

 

[bajaunderground]

Re: Cash out and new house

Being in the Real Estate biz for 12 + years, it's cyclical...homes will increase and decrease based on many factors. The number one is location. As a whole, home values typically increase over time. If you're not happy with where you live, then you should put the home for sale and find a place that meets your needs. I understand the need for some security for the future, take some of the proceeds and invest in other items (consult a local investment banker or financial adviser). Real Estate is a great investment, but diversity is even better (IMHO).

I tell clients that are on the fence to write out the pro's and con's to selling their current home and if the pro's outweigh the con's then put it up for sale and start looking in areas that meet their needs...conversely, if the con's outweigh the pro's...you get the idea. This is not a static list, it can be dynamic and change with many events...kids leaving home, big business, job opportunities, etc....


These are merely opinions and should be taken as such. While most of us can relate to your situation, it is unique to you and consulting local professionals as to your options is the best way to get the facts about possibilities.

For me personally, there's no amount of money one could pay me to keep me living in an area I'm unhappy with...besides, you could then park the nice BL on your property and save the funds, should you move to a home that accommodates such luxuries!!

~bRett

 

[dingbat]

Re: Cash out and new house

You can have your cake and eat it too. Pick the right area and you can live in the middle of no-where, "theoretically", and still have your home value go thru the roof.

25 years ago, we bought 30 acres of farm land in a small farming community 30 minutes from downtown Baltimore and 40 minutes from downtown Washington, DC. Two horse barns, log hay barn, 30 x 60 equipment shed, a second 2 car garage, pool, etc. Completely surrounded by Park and land preserve. A little piece of heaven in the middle of the Baltimore/Washington Metro area.

Twenty five years later, the 3 acre zoning put in place by the county 15 years earlier ensured the "exclusivity" of the area and the close proximity to Baltimore/Washington Metro area attracted the area's wealthy Professionals and Executives. Baltimore's version of Potomac Md. for those that know the DC/VA/MD area. The equity in the home is 5 times the mortgage value.

I put 15% of my salary in a 401K over the past 30+ years. The house is nothing more than an insurance policy at this point.

 

[QC]

Re: Cash out and new house

Is there any way to keep it as a rental?

 

[Bayou Dave]

Re: Cash out and new house

3 years ago I left the city areas and moved to the country. A whole lot more for my money and no city taxes. The value has gone up but not as much as similar houses 15 miles closer to the city. I drive 15 miles to the closest grocery store, and Domino's doesn't deliver out here. Lowe's is 20 miles away and the boat ramp is 22 miles away. BUT, I would do it all again in a heart beat.

 

[agallant80]

Re: Cash out and new house

Yeah I am starting to think the the home value could be something to help hedge against inflation but not to look at it as an investment seeing as my crystal ball is not working lately. As for rental I don't want to be a landloard. Too much hassel. I have a few friends that do it and it is a PITA.

 

[bruceb58]

Re: Cash out and new house

I put 15% of my salary in a 401K over the past 30+ years. The house is nothing more than an insurance policy at this point.

Same here. I have investment real estate but I would probably never rely on the value of my actual home for retirement.

I really like where I live. If I didn't, I wouldn't be living here.

 

[alldodge]

Re: Cash out and new house

Real estate for the most part is a very good investment. Lived in small house in a starter neighborhood until the wife and I retired. The house was doable for what I wanted to do and as you not much crime at all. We could have moved and bought a house further away, or in a higher end location but we never needed much more then what we currently had. Anything we needed we would just buy, and some of the stuff we just wanted. Put what ever we could in index funds and 401k. Never lost money in the stock market because we never sold anything. So now were retired and figure in another 10 years we may want to use some of the investment money, so 5 years before it comes we'll move it into bonds and such.

So to answer your question, no I would not live in a house I did not like, or one which did not meet my needs. Put everything you can away you don't need and when you retire you will be use to living off less and wind up getting more; and that's when the party really starts.

 

[bruceb58]

Re: Cash out and new house

I understand not being a landlord. I have rental properties and they can be a pain at times. My parents have one that I also take care of but they have an agency that manages 95% of it for a 10% fee which is pretty reasonable. The secret to being a successful landlord is doing good screening of tenants. Unfortunately, my latest tenants in one house I own are pains in the butt. My own fault for not screening better.

 

[agallant80]

Re: Cash out and new house

The issue where I live is there are lots of people who have money to rent but not to buy. These renters are mid 20's making about 60K. They make enough money to pay the rent but they don't have enough sense to not trash a rental. The people in the neighborhood that do rent out houses (landlords) hate their renters. They are kids that have no clue. Trash the house, don't clean it after moving out then show up at their door yelling about security deposit.

 

[alldodge]

Re: Cash out and new house

I have one rental left and before I got in the biz a guy which had several told we, "one is as much trouble as a hundred". Well never got close to a hundred and now down to only one, but they are a pain. Major +1 on screening. Bad part about renting one you previously could have sold and kept the money id capitol gains. We decided to rent the wife's condo after getting hitched, and she had it prior to me for over 10 years. Rented it for 3 years and had to pay capitol gains when sold.

 

[aspeck]

Re: Cash out and new house

Real Estate is going up in value in MOST places. So as long as where you want to move is decent, not in the middle of a junk yard or ecological disaster, you should be fine, that way. If you can sell and move to a nicer, larger house and manage to not increase your mortgage, that is even better! Lowering the mortgage is even better yet! Nothing says comfortable retirement more than entering it with no debt to worry about!

 

[lncoop]

Re: Cash out and new house

not in the middle of a junk yard or ecological disaster, you should be fine, that way.

Art, why did you have to bring my daughter's room into it?

 

[bruceb58]

Re: Cash out and new house

IBad part about renting one you previously could have sold and kept the money id capitol gains. We decided to rent the wife's condo after getting hitched, and she had it prior to me for over 10 years. Rented it for 3 years and had to pay capitol gains when sold.

The rules starting 1n 1997 are that if the home was your primary residence for a total of two of the previous 5 years, you can exclude $250K($500K if married) of the gains. You may have sold this before this rule started but a good thing to keep in mind for anyone else considering this.

 

[alldodge]

Re: Cash out and new house

The rules starting 1n 1997 are that if the home was your primary residence for a total of two of the previous 5 years, you can exclude $250K($500K if married) of the gains. You may have sold this before this rule started but a good thing to keep in mind for anyone else considering this.

Yep

 

[Grub54891]

Re: Cash out and new house

You say you live down town. Is it close/next to other businesses on the main drag? I've had relatives that had places like that,valuable well kept older homes. The city decided that the homes were in the business district,they wanted the land for bigger businesses,think sub sandwich shops,gas stations. Well they condemned the property,paid little for the place,kick you out. City government at it's best.
I'd keep it under a watchful eye before something happens,if thats where you are at.
Grub

 

[kahuna123]

Re: Cash out and new house

My opinion for what its worth. Sell it and buy something cash. Get out of all your debt. At some point in the not too distant future I really believe the dollar is going to take a big hit.

I had a chance during the boom to sell mine and walk away with $400K. But all I could do was buy the same house for the same money I sold mine for and triple my taxes and insurance.