Relocation / selling vs investment?

Question

Hello everyone! I'm new to this website and excited to learn from all of you!

We currently live in Houston, TX but we will be relocating to the Seattle/Bellevue area this summer for work. I own my primary residence in the Houston area (~$700k - 5 bedrooms, 4 and 1/2 baths, 3,500 sq. ft.) and a small rental property (1,500 sq. ft., $1,900/month). I don’t have a mortgage at the moment in the US. My family consists of my wife and three kids, and I’m currently the sole earner. Property taxes on my primary residence are quite high ($17k/year).

With the upcoming move, I’m considering a few options:

• 1. Sell our house (~$700k) and purchase a new one in the Seattle area. However, prices for a comparable 5-bedroom home in Washington are significantly higher, likely around $1.5M or more, which would mean taking on a new 30-year mortgage with 6+% interest rate and limiting new investment opportunities.
• 2. Sell our house (~$700k) and invest in 2–3 smaller rental properties in the Houston area, a market we’re familiar with. We can probably find small rentals for $250-300k each. Possibly using mortgage/home equity loan on one unit we own to buy an extra one.
• 3. Rent out our current house (likely $5k/month) and use a home equity loan on the primary residence or similar financing to purchase a home in Seattle.
• 4. Rent out our current house (likely $5k/month) and rent a home in Seattle (around $5k/month).

Right now, I’m leaning towards option 2, but I’d love to hear your thoughts or suggestions! My goal would be to build an investment net with passive income, de-risking the fact that I am the only earner.

Daniel Tanasa · Answer

Hello Jon,

Renting a 3500sqft house comes with a few challenges. The tenants at that price points tend to be more picky and will require more attention than a tenant in a 1500sqft home would. There isn't really a lot of people looking to rent a 3500sqft house and that may translate in longer vacancies. I like option 2 to diversify the investments in 3 smaller rental propertires, 3/2 around 1500 sqft, in good school districts which will open the biggest pool of tenants.

Then you can rent in Seattle for 1 year or 2 to make sure you want to be there for a while and decide what area you want to live in and eventually buy something there if you decide you will stay.

You're in a good position, you just need to figure out which option works best for you.

Good luck!

Let me know if I can help with anything.

Allan C. · Answer

I've done corporate relo a handful of times. Your relo benefits will likely govern this decision more than other factors. The sale and acquisition closing benefits are real and material.  The other benefit to verify is if you have loss protection. Buying in a high COLA with loss protection is a no-brainer in my book, but only if you expect to relo again. I've done it with every relo and benefitted substantially.

I have also taken the relo rental option a few times as well, both as renter and as owner. It was beneficial when I owned in high COLA and felt bullish about appreciation. Since you purchased your primary recently and in Houston, I personally am bearish on your appreciation potential. So the question is whether your house is a good rental investment long term. That is for you to model and assess. I personally do not prefer to hold high cost SFRs as LTR investments.

Everyone here is going to give you a different opinion. FWIW, I would sell the Houston primary for sure. If you have loss protection and expect to relo again, I would buy in Seattle. If no loss protection and likely relo again, I would rent in Seattle and buy several investment properties.

Btw, you should really consider getting a mortgage on your primary. You're giving up some good tax benefits since you're in the tier of taking itemized deductions. Also the opportunity cost of not deploying your capital in an investment vehicle yielding more than 7% is high.

Jon D. · Answer

I love the feedback received so far and certainly appreciate the time everyone has provided to share their views and experiences.The relocation benefit the company will provide is also unique as they will possibily cover the closing costs in case of a sale (not sure if its in its entirety though) or provide 2 years of property management if we decide to rent. I still need to verify this.

I do not have a MLS yet on that area but:

1. closing cost of the primary residence would probably be around $48k with 6% realtor commission on a $700k sale price.

2. Property management at 12% on a rent from $3000 to $4000 / month will likely be $8640-$11520 for two years?

The current rental probably cash flows at around +$400 since there is no mortgage, no property management company (it's a new build). So adding 2/3 equivalent properties that will have the opportunity to appreciate in the future, without mortgage, was the idea behind option 2 (+ renting out something in Seattle)

Gregory Schwartz · Answer

I did number 2 with no regrets. I used the proceeds of the primary residence I owned in NC to grow a portfolio of value add buy and hold here in College Station. If you're looking to scale it could be worth while to sell and re-distribute that equity with the help of some save leverage.

Morgan Tondre · Answer

With your goal mentioned at the bottom, I would suggest either option 3 or 4. Not 2 for the same reasons @Donald Hatter mentioned actually!

Jon D. · Answer

1. We had good capital gains on our first new property so we were able to inject that in our current primary residence reducing mortgage amount. We prefer no debt (we are not from the US originally). Having no obligation allows us to invest more (or at least it feels like).

2. Our current house was bought in jan 2022 and our rental in dec 2023. Without a mortgage, this decreases the risk of a rental vacancy and improves cashflow. Yes the goal is to buy a few more properties when we can, eventually. If we don't relocate, we will likely buy a new one using a home equity loan or such in a LLC (likely).

3. We bought our first rental in dec 2023, this was to test the waters of being a landlord in the US. We are thinking of adding more in the future depending on the relocation plans.

Buying a new property in Seattle will mean a new mortgage for 30 years and very likely incur a high DTI with high monthly payments. We would need a 4br minimum but preferably 5br. I don't think we will be able to afford a 1.5M+ mortgage without a huge down payment (sale of our house).

I feel this would be going backwards as we would focus on one property preventing us to do other things.

@Donald Hatter thank you for the responses and offer. Will keep in mind !

Drew Sygit · Answer

@Jon D. some questions, the answers may help you better focus.

1) Why did you pay your primary mortgage off in the first place?2) You have one rental now, what's your goal of buying more?3) Why haven't you bought more rentals before now?

In your opion #2, would that require you to rent a home in Seattle?

Jon D. · Answer

Thanks! note if we sell the primary residence, it is very likely we will not need mortgages to buy smaller rentals as we would use that mostly.

Though I take your point on keeping it. our house was a new construction (3 years old) though so possibly low maintenance risk to keep for a rental.

Also note that my company will possibly either cover closing costs if we sell or provide property management for two years if we rent. The house is in Woodforest though so rentability might be lower as well increasing vacancy risk due to high rental costs.

Relocation / selling vs investment?

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