Newbie question: what would you do to solve this?

[Jen K.]

I'm new here as of today, so please bear with me...;) Still learning the lingo and trying to grasp some of the strategies I've been reading about.

I'd like to have some help getting pointed in the right direction so that I'm sure not to miss something specific that might help with my current situation.

My husband and I own a townhome that we'd love to sell. It's too small for our growing family and we just need something that better fits our lifestyle. The townhome is great and has a lot going for it, but our neighbors and their foreclosures have really done us in. We bought it for $13X,XXX eight years ago and a foreclosure just sold two weeks ago across the street for $88,000. Ours is nicer, is updated, etc....but we know we can't compete in this marketplace and still walk away with cash for the next house. It's also making us sick that we would leave this house with practically nothing to show for it as opposed to the nearly $58,000 in equity we would have had just a few years ago.

We want to maximize what we can get out of this townhouse now and possibly in the future (by maybe hanging on to it as a rental) but we really don't know what to do as far as the house we live in next. Do we look for a lease option and live in it and let both houses increase in value (hopefully) over the next couple of years? Do we purchase on a contract for deed? Something more creative that my newbie brain can't fathom yet? =)

I guess my question is....what would you do if you had a piece of property that had dropped significantly in value that you didn't want to sell or live in? What would be your personally favorite technique to not sell or live in it and still find a more suitable place to live and why?