Dilemma - buy our own condo or go back home

[Sharon Supera]

Hello BiggerPockets community,

I’m grappling with a significant real estate decision and would appreciate your insights. Here’s the situation:

We own a detached home with 2 units, consisting of a legal 2-bedroom basement and a 4-bedroom, 3-bathroom upper floor. Purchased 14 years ago for $500,000, the property is now valued at $1,500,000. We rented it out 6 months ago due to our need to move to a more accessible condo for a family member with a recent physical disability. The current rental income is $5,300/month, while our mortgage is $1,500/month, property tax is $600/month, property management costs $200/month, and maintenance expenses are currently unknown.

We've utilized a HELOC from this property, amounting to $300,000, for renovating the basement and investing in a preconstruction condo and another property in a different city. Currently, we're renting a condo for $2,600/month, and while we wish we were putting that money towards our own condo, our funds are tied up in the preconstruction condo and the out-of-city rental property. Unfortunately, we can't sell the preconstruction condo as it won't be completed until 2027.

Given our situation, we need the accessibility of a condo for our family’s needs, and the idea of returning to our home is daunting, both for maintenance and our compatibility with living alongside tenants. I don’t have funds for a condo down payment unless we sell the other property to free up cash.

My dilemma is whether to keep the house and wait for the market to reach $2 million, go back and live in it, or explore other options. I would greatly appreciate any suggestions or recommendations you may have.

Thank you for your valuable insights!

[KC Pake]

Quote from @Sharon Supera:

Hello BiggerPockets community,

I’m grappling with a significant real estate decision and would appreciate your insights. Here’s the situation:

We own a detached home with 2 units, consisting of a legal 2-bedroom basement and a 4-bedroom, 3-bathroom upper floor. Purchased 14 years ago for $500,000, the property is now valued at $1,500,000. We rented it out 6 months ago due to our need to move to a more accessible condo for a family member with a recent physical disability. The current rental income is $5,300/month, while our mortgage is $1,500/month, property tax is $600/month, property management costs $200/month, and maintenance expenses are currently unknown.

We've utilized a HELOC from this property, amounting to $300,000, for renovating the basement and investing in a preconstruction condo and another property in a different city. Currently, we're renting a condo for $2,600/month, and while we wish we were putting that money towards our own condo, our funds are tied up in the preconstruction condo and the out-of-city rental property. Unfortunately, we can't sell the preconstruction condo as it won't be completed until 2027.

Given our situation, we need the accessibility of a condo for our family’s needs, and the idea of returning to our home is daunting, both for maintenance and our compatibility with living alongside tenants. I don’t have funds for a condo down payment unless we sell the other property to free up cash.

My dilemma is whether to keep the house and wait for the market to reach $2 million, go back and live in it, or explore other options. I would greatly appreciate any suggestions or recommendations you may have.

Thank you for your valuable insights!

Hi Sharon,

Your situation presents a complex decision matrix, and it's good you're seeking different perspectives. Let's break down your options considering the various aspects of your situation:

Keep the House and Wait for Appreciation: This option banks on the real estate market continue to appreciate. If your property reaches $2 million, you'll realize significant capital gains. However, there are risks involved, including market fluctuations and the ongoing costs of maintaining the property, along with your HELOC obligations. Additionally, it does not address your immediate need for an accessible living space.

Return and Live in the House: Living in your property eliminates the rent you're currently paying, and you'd still benefit from rental income from the other unit. However, you mentioned the challenges of living alongside tenants and the house's incompatibility with your family's needs due to a physical disability. Renovations for accessibility could be an additional cost.

Sell the Property: Selling could free up a significant amount of cash, allowing you to pay off the HELOC and potentially purchase a condo that meets your family's accessibility needs. The downside is losing a valuable asset that generates rental income and potential future appreciation.

Exploring Other Financial Options: You might explore refinancing options or other financial instruments that could allow you to access the equity in your property without selling it. This could provide the necessary funds for a down payment on a condo. However, it would increase your debt obligations.

Consulting with Professionals: Given the complexity and the high stakes involved, consulting with a real estate financial advisor or a mortgage broker could be beneficial. They can provide tailored advice based on a detailed understanding of your financial situation, real estate market trends, and tax implications.

Consider Market Trends and Timing: Keep an eye on the real estate market trends, especially in the areas where your properties are located. Timing can significantly impact the returns on your investments.

 
Best wishes and good luck with your decision,
KC