Sell or rent out primary due to move

[Morgan Alema]

Debating on what to do with my current primary home as a job is taking us out of state. I currently own a home in Seattle (Queen Anne) that has appreciated roughly $1M since we purchased it nearly 9-years-ago. After taxes and selling costs we should net roughly $700-850k depending on final sale amount. We could take that equity and purchase a more expensive home in an equally desirable neighborhood in our new city and push the leverage. Possibly even purchase something that needs some renovations - new kitchen, baths, flooring. 

However, with our current low interest rate and rental rates for our neighborhood we could also cash flow appropriately $1000 per month, keep it and allow for further appreciation over the next three years until we would need to sell to capture section 121 tax exclusion. My current home is in excellent condition and will sell rent very quickly. However, as we approach an election year I’m wondering if the time has come to say goodbye and move these funds on to another home. If rates were lower then I would do a cash out refi for the next purchase. 

Another scenario is that we buy something in the new city at a much lower price point and use other funds. 

[Melanie P.]

This is a great story for poeple on the coasts thinking of investing in Detroit or Ohio -- a million reasons to invest closer to home. Viewed another way the house generated $9,400 per month in appreciation over the last 9 years. 

I am not convinced the next few years will show great amounts of appreciation to make it worth tying up that much capital to earn $1,000 per month in cash flow. You know your market. If there is additional appreciation it will make the hold worth the effort. 

Adjusting to a new city is hard enough without changing your standard of living. Would you be bothered if friends/family visited and saw a different type of living situation? If you want similar neighbors, conveniences, etc. plus the prestige of living in a tony neighborhood sell and continue living as you are accustomed. 

[Theresa Harris]

Do you plan on moving back to Seattle?  I'd be tempted to sell and invest that money elsewhere.  Yes you have a low interest rate, but there are other ways to invest your money (that are less work) especially when interest rates are higher (or back to normal).  How are you going to manage the place and can you be certain you will be able to get the tenants out in 2-3 years with the current laws in WA?

[Andrew Freed]

@Morgan Alema - If I were in your shoes, I would prefer to sell, scoop up at least $250-500K of tax free money since it was your primary residence, buy something modest in your new city, and leverage the rest into cash flowing assets, be in real estate or businesses. Start creating some cashflow and passive revenue. Appreciation is great, but appreciation doesn't pay the bills. I think you would position your future self a lot better if you transitioned a good amount of that equity into some cash flowing assets so you can set yourself up for an early retirement. 

[Drew Sygit]

@Morgan Alema depends on what your goals are!

You appear to have a Class A property that will be fairly easy to manage (even DIY!) and will build appreciation and equity (via tenant paying your mortgage) until you sell.

Selling in 2-3 years for 121 Tax Exclusion is probably best, though.

Anything else will depend on your investment goals. 

Buying better cashflowing properties typically means Class B or C properties, which means more tenant & maintenance issues. Many investors think they can DIY manage these, but panic when things go wrong, costing themselves more than a PMC would have cost.

Weigh everything and, "you do you":)

[Henry T.]

Hi. It's me. Your happy funtime Seattle landlord. Get the heck out and don't look back. Do you know what being a landlord in Seattle entails?  It's the worst place in the world.  AND certainly not a place for beginners. Let a nice family buy it and move into it. Your asking price will get bid up 15 percent. Take your winnings and go go go! 11,000 landlords quit Seattle in 2022 and you want to sign up? Why?  IF you don't know the reasons for that exodus you are in for trouble.

https://www.seattlegrassrootslandlords.org/

[Adam Bartomeo]

You need to find a way to tap into the equity without slaughtering the cow. You want to milk it (cash flow) and for it to reproduce (take out the equity and buy an investment property). this is the fundamental way to truly grow wealth in real estate.