All Forum Posts by: Michael Hearn

Hi @Sara Klaus - Thanks for the message and I'd like to connect with you this morning, if possible, to get more insight on the topics you raise. Are you available?

Thanks @Nicholas L. & @Bradley Buxton! I can definitely give you some more info and, you're right, the comparison is rent vs sell (and use the money in the best way possible!). I guess I could even put some of the untaxed proceeds into a 529 for college and never be tazed on it at all. I was thinking it would go to the new mortgage bec that'd guarantee a 7+% return. I digress...

To answer your questions -- Our mortgage, including taxes and insurance, stands at $2,600/month and we were able to rent it for $3k the past 6 months. The extra $400 went to cover city utilities and the costs of getting it ready to rent. In prep for selling or renting, we just had to put a new roof ($18.5k) on it bc the old one was shake and we were told it'd be uninsurable. A new HVAC will be due in next 10 years ($18k) and other repairs/maintenance/appliance replacement ($6k). With the updates and the nice neighborhood, I think we could get a little higher than $3k rent, but not much more in the near term. I'd plan to manage it myself, as I know it very well and it's a few blocks away. I think it could fit into our lives if I had confidence that it was the right financial move - hence the focus on numbers right now. Thanks!

Hi BP Universe! We have a big decision to make -- should we sell or rent our first home? I think this is going to be a hot topic for many given that the big driving factor is the low rate we have on the old house (2.7%) compared to our new house (7.1%). We have tried reaching out to numbers of local CPAs in the Sacramento area to have them help crunch the numbers and haven't had any luck at all. If you have someone in CA to refer, please do! 

Here's the scenario -- we lived in our first home (3/1) for 15 years and during the pandemic cash-out refinanced at 2.7% 30-year fixed (have 28 years left), knowing we'd need to spend a lot to either rennovate or use as down payment if we moved. After years of looking, we finally moved to a bigger house in the same older and desireable neighborhood but with a much bigger loan and interest rate. We rented the old house for the past 6 months to give us some time to think and now that time's up and we still don't see a clear answer. We could sell the old house and net at least $175-200k (after costs of selling -- this is a hot market) and would put that toward the new mortgage (reducing our monthly payment and interest costs).

Alternatively, we can rent it at an amount that covers mortgage, taxes, and insurance, but not much more than that. It's an older home, so we've also had to recently sink $20k into things like a new roof and miscellanous repairs. As a result, it seems the value is really just very long-term and if we sold it in the future, any repairs and taxes would cancel out much of the gains (depending, of course, on the pace of appreciation -- who knows what that'll be?). Together, our mortgage debt on both houses would be just over $1m which seems really risky to us, but we've also never been "in" real estate before and thought about leveraging debt like this. 

We are nearing 50 years old and have kids that'll be going to college in 5-10 years, so it's hard to commit to a 30 year plan that locks up funds without having someone to help crunch the numbers for us. We will want to retire at a decent age and also want to help the kids with college. I've tried and spent a crazy number of hours doing research on taxes and assumptions, but it's such a big financial decision that we don't feel comfortable navigating it on our own. We also know this is likely the only time we will be in this position and don't want to miss the opportunity.

Thanks for any advice you can share!