How to monetize primary residence to enable a move?

[Andrew Prince]

How to monetize primary residence to enable a move?

Hi all, I’m considering making a big move on my primary residence and have several options before me. I’m hoping the brain trust here can help me see the up and downsides and direct me to some relevant resources. Thanks in advance, I know it’s a lot of text..

Background: My family lives in a paid off house in HCLA (Seattle) near the site of a site of a future light rail station (open 2022). Nearer the station apartments have been going up like crazy, our street has been recently up-zoned to 3 story residential commercial. Most re-development on similar streets tend towards townhouse/big box homes. We’re trying to move out of seattle to be closer to family. In that community we own a home that might be a little small for us but would be fine to live in for a few years. It is currently cash flowing $400 a month with great renters. My goal is to monetize the Seattle house to help enable a move, the problem is that I can’t find work in my field there without taking a 30% plus pay cut and doing less desirable work. Short term commuting would be an option while the Seattle house shakes out. I make about $65K a year and am in this fortunate position due to inheritance. My wife has higher earning potential but is focusing on being a mother right now. The job market where we want to move is terrible, and I’ve managed to specialize my job skills in a pretty small niche. I’d like to increase my income by leveraging the seattle house, or use it as a leap pad to flip houses.

The house is paid off with a zestimate of $780K. We’ve received a cash offer of $850k through a broker. It’s a 3 bed 2 bath 1940s house with 1450Sft on a 4500Sft lot. It would be a fine rental if we were to keep it, needing a little work to get it ready and a new roof and paint in a few years it would rent for around 3k a month. If we did a lot more work we could probably sell on the market for above the 850K offer.

Here are some options I’m considering but am open to anything:

1. 1.Take out a loan on the Seattle house to buy a fix and flipper in our desired community and make that my full time job. I’ve done one (mostly) successful flip on weekends before I had a family, as well as lot of remodel work. I think I could make this option pay. It shouldn’t be hard to get around a 500K loan, which could be covered by renters in Seattle. Downsides, leave a stable job, great health insurance, how to pay the mortgage on the second house while the flip is in process, my wife might stop working also because we’re trying to have a second kiddo. Then again, more family to help with childcare in our desired community.
2. 2. Sell the Seattle house and wrap the proceeds into a fix and flip as well as a new home for my family in our new community. Same downsides as before, but no loan payment. Other downsides, losing future appreciation of Seattle house. A bit of a stretch to buy two more houses. Tax implications?
3. 3. Take out a loan on the Seattle house and redevelop the lot ourselves and then sell. Big box houses in our area seem to sell for $1.5 - $2.2. I don’t know how feasible this is. I don’t know how much capital one would need or how big of a lot you need to do townhomes.
4. 4. Partner with a neighbor or two to sell as a block. I think there is at least one neighbor who would consider this. The broker who I spoke with said this wouldn’t really change the offer from his developer, but I’d like to learn more about this. It seems like if a developer could get a bigger block of properties together, it would increase value.

Any thoughts on this would be greatly appreciated, and better yet if anyone could direct me to some resources to learn more about how to do DD on the various options. I really don’t know much about the tax implications and the feasibility of redeveloping the Seattle house either. Thanks!

TLDR: How to monetize a paid off home in HCLA to enable a move to an area with uncertain job prospects?