We bought a house in 2021 for a great price with a 2.5% mortgage and is 10% of our take home pay. We never really liked the house (wife hates it), but enjoyed the location (midwest town). We are increasingly becoming tired of being homeowners due to the time and money it takes for upkeep. Additionally, we miss living near the mountains and outdoor activities (hiking, camping, fly fishing, etc.). Would it be dumb to sell our house (~100k equity) and rent something out west (don't want to name location) for a couple years? I would take the equity from the sale and diversify for a future down payment. I don't like the idea of renting our house due to the headache it would involve. The area we would be moving to is considerably more expensive (~20% of take home for the cheapest options) and would likely be a 2 bedroom apartment with no garage. What are your thoughts? Has anyone else done this and regretted it?
Is it a dumb decision to sell house with 2.5% mortgage to move west and rent an apartment
byu/Visual_Code432 inpersonalfinance
Posted by Visual_Code432
18 Comments
We each get to spend money in ways that bring us joy.
Funny, we are in a similar boat. Not sure what to do with our 2.5% mortgage. Granted I love hour house, but we are moving, and I’m not sure if I should keep our current home, rent it out, and rent a place where we are moving to (HCOL area, from another similar HCOL area).
My concern is the homes in the area we are moving to are OLD. Built in the 70s and 80s. Some are re-done, but just not sure I want to spend $1m plus on an old home, vs. renting an old home, and never having to worry about upkeep.
Housing is a lifestyle decision before it’s an investment. You can afford the apartment. It’s more than OK to do if it will make your life better.
Find a decent property management company. With a rate that low you’re almost guaranteed to cash flow that place after fees.
I’m doing the same thing as you. My house has a 2.xx% mortgage rate. House is appreciating at a decent rate, cash flow is about $550 after management fees, and I’m building equity on top of that.
All income from the house goes into its own account for repairs and turnover expenses.
It’s not all that much “headache” for a major financial tool that essentially runs itself with little outside input.
Having an ultra low mortgage rate home in a rentable area is a golden ticket.
Edit: expect all the cash flow to be used to cover expenses. Equity is the victory here.
No, not dumb. Go live life.
Please sell your house to actual residents who will appreciate having it (not a private equity leech).
You make more than enough money to not have to worry about it. Do what makes you happy
I have never regretted selling my house to rent an apartment. I hated gardening, I hated maintenance, I hated how many extra rooms there were to clean, I hated being in the suburbs. An apartment fit my personality and lifestyle better, & I can invest my money in other ways
I think it’s kind of a bad decision simply because that 100k will for sure be 200,300,400k in your pocket later. You are just choosing to take that 100k now. But… it’s your life and your lifestyle. I just think you will thank yourself later when you see that extra few hunnit K in the account. HODOR
Idk if it’s dumb, people can make decisions about what they want in life, but you’ll never have as good of a deal on housing as you do now.
You can use your house to make money with a mortgage rate like that. As in an additional income stream, or you could lump sum it.
You should talk to some professionals, realtor, property management company, then a financial advisor and see what your options really look like. Not some armchair quarter backs on reddit.
Do you ever imagine yourself going back after those few years?
If yes, then a property management company can take care of everything for you and give you some extra income.
If not, then drop that chain!
Personally at only 10% of your income, I’d keep it as an investment and find a reputable company to make money from it for me to fund whatever other lifestyle choices I want to make.
The point of money is to spend it on things that make you happy
It sounds like it’s what you want to do, so I don’t think it’s a decision you will regret.
Me and my wife sold our Texas home last year, around the same mortgage and equity, and moved to PNW to rent an apartment. So far it’s been our best decision. The quality of life is so much better and so much less stress not owning a house. I honestly think having my money in some ETF is a better investment anyway. FWIW
Join so many others, like me, who became unintentional landlords.
Built a house 2020, refinanced in 2021. Lived in it two years, decided to move to the mountains. Rent out for big profit for almost two years then I had to move and hired a property manager when original tenants left. Market softened for next tenant but still profits 800 month.
Put the house on the market and give someone who’d love to own a home the chance to buy it. People like you hanging onto their low interest rates for homes they’ve outgrown are part of the problem with the housing market right now.
Rent it out for three years (assuming it cash flows after property management and maintenance costs), at that point if you want you can still sell while claiming the primary residence exemption.
This only applies in areas where home prices are stable or rising of course.
Never sell real estate and especially one that low on paper. Have a leasing company manage it for you. Build wealth and use the depreciation to lower your tax basis.
Why not just take the 10% difference invest it and take more trips