All Forum Posts by: Todd S.

So I'm sitting on maybe $300-$400k of equity at the moment in my primary residence that I purchased in 2012.  Originally put 20% down and appreciation has been quite absurd since.

If I refinance and pull $250k cash out I can get the same interest rate I currently have (more or less) on a 30-year fixed or a slightly lower rate if I go with a hybrid ARM such as 7/1, etc. I currently have a 30-year fixed at 3.75%.

I don't have a specific need for the cash right now...which is my dilemma, but I see the value in "diversifying" and getting a decent chunk of my money out of my one "investment," my primary residence. Maybe this thinking is wrong, I don't know.

Assuming I cash out, I'll still have 20% equity in the property (80% LTV on the new loan), which to me is plenty of exposure and cushion. I'm not retiring soon nor am I planning to stay in this property...I'm already outgrowing it. I could, however, rent it seemingly for the long term and still come out ahead each month with the higher loan amount post-cash out, so affordability wouldn't be an issue.

No plans to buy real estate at the moment because I think it's overheated in most markets, especially those I'm familiar with, but if the money did land in my account today, I'd probably invest in a conservative mix of mutual funds, stocks, bonds, etc. with the hopes of at least beating my mortgage rate.  You'd think a 4% return would be attainable, right?

Another benefit is that I can refi now while it's NOT a rental and get a lower rate (and more cash out), and I'll get a larger interest write-off with the larger loan amount, possibly offset by investment gains elsewhere.

Just curious what others think of this, or what you would do in a similar situation. I know most people would prefer to have a plan for the money before paying to cash out, but I also don't like sitting on this much equity, even if I don't have a specific plan.  And I can't really sell at the moment because I don't have anywhere else to go.

For the record, I don't want a HELOC because that's not guaranteed money if the bank decides to pull/reduce the line.

Lastly, is there any truth (benefit) to having a higher mortgage payment on a rental and thus less profit to report, which equates to better tax treatment, or is it that just nonsense?

Thanks for your input!

 That's certainly a thought but I think the price of RE is very high at the moment...and I don't know if I want to manage a property from a long distance.  Additionally, I like the idea of getting my profit tax-free...maybe I'm getting hung up on that but it'd be nice to take ~$150k or so tax-free wouldn't it...and I could use that, not cash-out, to invest in other properties in the future if/when prices do normalize.

Thanks.

Thanks for all the responses.  I didn't think I'd be losing money long-term because I can probably rent for $800 profit per month less any expenses/vacancy/repairs and I'd be socking away $500+ in principal each month too. 

Are you factoring in the tax deduction as a huge money-saver?

I actually assumed everyone would tell me holding made a lot more sense, but maybe that's not the case.  Or maybe I only received input from folks who like to turn faster profits and move on to the next investment.

Not sure what I'd do with the money to be honest.  I wouldn't want to turn around and buy something at the same lofty heights when I sold seeing that that's the basis for selling to some extent.

I'd probably rent something and feel out the market, maybe invest the cash in stocks/bonds/etc. 

Thanks again.

I purchased a condo in 2012 for around $425,000.The property is now worth around $600,000, maybe a tad more.

The local rent is roughly $3,200+, while total housing costs are ~$2,400 per month, factoring in mortgage, taxes, insurance, and HOA. No advanced deprecation or anything is involved.

Question is; do I sell now or hang on to it and rent? I don’t see the property appreciating much more anytime soon. My general thought is that home prices are overheated and the building itself is getting older, built in the ‘60s. It's in a great area with high demand and that will never change. So over time the price will certainly increase, but I can’t see it selling for more than $650-$700k in the next 5-10 years, at best. 

If I sell now I can take the profit tax-free thanks to the exemption for owner-occupied properties held for two+ years in the past five.

Thought process is that ~$175,000 in profit would be taxed at 15% as long-term gain (I believe, correct me if I'm wrong) if I don’t get the home sale tax exemption and keep renting for more than three years, thereby nullifying the exemption.

I suppose I could rent for a year or two to test the waters and still sell after and qualify for the occupancy exemption, right, since I still would have owned for two of past five years in that case? Is this true even if I rent and buy another owner-occupied property during that time?

Is it worth the potentially limited upside? Renting leads to wear and tear, vacancy-related costs, I may need to put in upgrades as the current stuff gets older. Should I just book my gains and wait for another downturn? Or do I hold onto the unit in a very popular area and rent at a decent profit? Assume I don’t need the cash proceeds at the moment, can find another place to live, and don't want to live in the unit much longer.

Thank you for any and all input!