Comment by celestialcheese | Hacker News Reader

Comment by celestialcheese | Hacker News Reader

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celestialcheese

I've got this situation now, and interested to hear your take.

Primary home with ~400k in equity, 400k loan @ 2.7%. Moving and bought a new house, and deciding what to do.

Market is hot, equity up 300k in 3 years.

I always believed in this "don't sell property, you can always generate income" but now that i'm facing this decision, I don't see how to justify keeping it.

Cashflow (factoring in expenses/maintenance/vacancy) from renting would be ~$400/mo. If you include principal paydown, then it'd be ~$2000/mo.

Selling the property, and taking the equity seems like the best option. Either a) rolling it into the new house or b) investing it in nearly risk free muni's. Both of those would net me more than keeping the property with a significantly better risk adjusted return.

If you live in a place with wild property appreciation over the last 4 years (most of the country), then I don't really see how it makes sense to keep a property. What am I missing?

I was in this same situation a few years ago.

Ultimately what it came down to was my own sanity of managing a rental, and I didn't want to be a leech on society. It is important for people to be able to buy houses. I sold it.

Money from the house went into some vanguard funds, a young family got their first house, and I have a lot less stress in my life.

Made this same decision recently.

Leading up to selling the my previous house I had literally every person I talk to tell me I should keep it as an investment. It's in a HCOL city, but it's a townhouse in a slightly rough neighborhood. Great starter home for my family, but not a rental I wanted to manage. Being a landlord in this city is also fighting upstream against the politics.

The money dropped into my account a few weeks ago from the sale. The profit on the sale was not mind blowing, I bought and sold it for a fair price (2018 -> 2024).

Zero regrets.

I believe in making my own decisions that work for me and my family, not just blindly following the crowd. It's working well so far.

Be glad you managed to buy a property at all and were able to capitalize on this.

As part of not blindly following the crowd, I took a risk on a startup back in 2017 and took a huge paycut in the hopes it would pay off down the road.

Not only did that not happen (which again, was part of the entire point of taking a risk), I had pissed all my retirement away to stay afloat, changed jobs to start making good money again, but not before real estate got out of control and I'm basically worse off now than I was a decade ago in relative terms, especially since I was affected by the mass tech industry layoffs last year, was unemployed for months, and then secured a job for far less than before, going from 120k down to 50k annual income, which is humiliating and awful. And to top it all off... I don't have any major assets to speak of aside from some money in a ROTH. I'm at the mercy of landlords.

I've been applying at stuff for nearly a year and, aside from the job I'm working at now that I got through the unemployment office, I'm getting nowhere on the job hunt.

Your profit might not be mind blowing, but in my mind, you're way ahead of folks like me that took a different path.

You might be better getting into contracting for a while instead of fulltime. It has it's downsides and a feast/famine sort of cashflow, but it's a quick way to earn while building new trusted contacts and networks to help reveal more fulltime opportunities in future.

I personally would stay away from the online platforms (although others may attest differently), as they can be a race to the bottom in terms of price.

Instead hit up tech meetups in your area, give some talks, and let people know you're a gun for hire. Write some linkedIn posts in your area of expertise (yes folks that overdo this can be a bit cringe, but a little high effort content will go a long way).

Sorry for the late reply, but you're correct on all of that. Thanks for your input and suggestions. :)

I'm very curious about this too.

My understanding of it is that you have something of great value right now, which is that 2.7% loan.

I think the conventional wisdom on not selling the property has less to do with the cash flow and more to do with having that very cheap debt leveraged such that you "get" the return on the value of the entire property rather than just your portion of equity in it.

But I think individuals, for pretty good reasons, put a higher premium on cash flows in the shorter than on-paper wealth in the longer term.

But I wish I knew the specifics of how to quantify the value of that fixed loan relative to investment returns.

And even if there is a strong quantitative argument for holding onto the property and renting it, I think there is still a strong qualitative argument for "I'm a person with other things to do, I'm not a rental business proprietor".

If you are doing this sort of evaluation do not forget to consider the taxes, which can shift things remarkably based on your jurisdiction.

If one sold the property and invested the rest you will be paying some sort of taxes on the investment returns (at varying rates depending on the investment), while with the property it may be possible that the taxation could be low to nil. By writing depreciation of the property against your rental income it is possible you could pay no tax at all.

Also do not forget to consider various costs associated with the sale of the property.

Do you feel like the market is going to cool massively in the next few years? If you don't see your equity evaporating in the near term, why would you sell now? Let renters pay off the loan for you, drop the $400/month into a money market. If you need cash in the future, you've got 400k basically sitting there ready to go, and if you don't the cash, you've got a savings account someone else is basically putting money into for you.

> Do you feel like the market is going to cool massively in the next few years? I don't - IMO the weight of held low interest rates is going to keep inventory low for a long time.

We've got to live somewhere, and the new house has a mortgage at 7.65%. The principle decrease + cashflow from holding the existing property barely offsets the interest cost on new property.

So I guess the way to look at it is a zero-cost, but potentially highly stressful, bet on the property market appreciating?

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