Another housing question

[toutsuite]

PDQ, may DD.

Backstory: We bought a house in December 2019 sight unseen -overall great deal. It’s an antique, a bit quirky, but one of the largest in the area and fully redone. The lot is large enough to build a second house on it, which we thought my parents would like when they retired full time and moved. Location is spectacular vis-a-vis beach, restaurants, museums etc. and it’s in a desirable seasonal vacation area which allowed us to rent it out all summer with continued reservations through Autumn. We (Surprisingly) covered our mortgage with short term rentals this year and then some.

We bought the house to give our boys “roots” since DH’s and my job has us moving from one country to another every three years or so. This was supposed to be a place of our own we could go on home leave, R&R, and for vacation when we felt like it. However, given Covid, we have been unable to travel and won’t be able to for the foreseeable future, my guess is at least another year but who knows, maybe longer.

Our former realtor contacted us and our house has appreciated considerably over the past 10 months - she sent us an updated CMA. Our management company has also fielded inquiries from families who rented looking for a house similar to ours to buy. These are families looking to move out of big cities (NYC and Boston respectively) and resettle in more of the burbs while working from home and online learning is in effect. The house has a big yard, space for offices for two working parents, and an area that could be an in-law suite for those looking to quarantine or live with larger family units.

Question: Would you sell at this point? If we did, we would easily recover DP, closing costs, all money out into it, plus a decent chunk on top of that. DH thinks from a finance prospective we should since we have yet to step foot in the place and establish an emotional tie. Even though I haven’t been to the house in person, I am attached to the area (spent summers there growing up) and -well- I have this image in my head that this is “our home“ when we are in the US. DH thinks we could take the money earned from this and reinvest it. So MM- Does it make more sense to sell now with an almost guaranteed decent gain, or hold on as originally intended in order to provide the boys with “roots” and the continuity of a location to call home?

[dr.girlfriend]

I don't know that anyone can answer this for you, because it's purely weighing the emotional investment versus the financial investment. It sounds clear that the house is quite a "find" and it's not costing you any money (in fact you have gained money both in rental income and appreciation), so I would be inclined to keep it. It seems unlikely that in the short term you'd be able to buy as fortuitously in the same area, and in the long term who KNOWS what will happen to the market. Will the money you get from the sale increase your financial perspective in a significant way? Just from the tone of your post I don't get the sense that you're hurting financially, so if you're just throwing more money on the pile I would not think that it's worth it. :-D

[toutsuite]

Oct 10, 2020 12:21:54 GMT -5 dr.girlfriend said:

I don't know that anyone can answer this for you, because it's purely weighing the emotional investment versus the financial investment. It sounds clear that the house is quite a "find" and it's not costing you any money (in fact you have gained money both in rental income and appreciation), so I would be inclined to keep it. It seems unlikely that in the short term you'd be able to buy as fortuitously in the same area, and in the long term who KNOWS what will happen to the market. Will the money you get from the sale increase your financial perspective in a significant way? Just from the tone of your post I don't get the sense that you're hurting financially, so if you're just throwing more money on the pile I would not think that it's worth it. :-D

Thank you for that first statement - that is exactly the struggle we are having. We would not be able to buy back into that specific area which is the one I am emotionally tied to. It was a fluke of a find - we are a family of 7 so this was one of the only houses we could find at the time that was big enough to accommodate us and had a yard for our boys that wasn’t outrageously expensive.

DH is worried the real estate bubble will burst post Covid. From my optic, even if that happened, we bought it for the long haul so I’m of the mind so what? DH is concerned about hidden costs with an older home and depreciation if the real estate market imploded. He also grew up having to count every literal penny so for him, he is always looking for a way to capitalize in the now.

The money gained from the sale would help push us into financial independence sooner than planned. This doesn’t really change our investment or savings strategy at all - we both enjoy our jobs and plan to continue working -assuming nothing happens and we can- for at least another 15+ years.

[dr.girlfriend]

toutsuite ,Don't know how to reply without quoting so I'm just doing this.

I think it's probably true that this specific real estate bubble (people suddenly able to live in "resort towns" due to virtual work/school) may burst if we return to a pre-COVID world, but I would hope that in that circumstance the economy would stabilize and you wouldn't see a huge downturn otherwise.

It sounds to me like you really want to keep it and just need to convince DH. Maybe a long-term rental (e.g., renting it out for a year or so to one of those families who wants to make a change) is a good start? I can imagine that there are others who have the financial wherewithal to rent instead of buying and also maybe don't want to commit to buying in case things return to pre-COVID, but are looking for a longer-term situation.  Maybe even refinancing would be a good way to increase your profit margin if rates are still super low and depending on the rate you had.  There is also a lot of things you can get insurance riders for like the "service lines" (e.g. sewer, buried electrical cables, etc.) and "major systems" (e.g. heat, a/c) for not that much a year...we added these for about $250 total a year.  Maybe that will help your husband with some of his concern about major repairs?

ETA:  It's interesting that you mention your husband's upbringing.  My DH also grew up in poverty, and he had some baggage around home ownership, because the one time his family owned they got foreclosed on and he basically came home from school to find all their stuff out on the lawn.  I'm sure his mom had more warning and just didn't share her concerns with him, but he basically saw renting as more "secure" than owning.  Not saying that's what's going on with your husband, but interesting how your upbringing can really impact financial decisions so much later in life.  My husband ended up kind of the opposite -- he's very laid-back about money, and is happy to let me handle things.  I grew up very financially secure and yet I'm the one who always wants a solid efund, etc., and when we met my husband only had $14 in his bank account.  :-D

[aprilsails]

If this house is located in the area where you ultimately want to end up I would hold onto it. Other than tying up some of your capital it doesn’t seem as though it will be difficult to cover carrying costs with rentals, and large houses are always in demand from an AirBnB perspective.

If there’s nothing similar in the area I would keep it. It may or may not be the best decision financially, but it doesn’t sounds as though you would hurt for making that decision.

I also live in an area with insane home appreciation due to Covid (20-40% year over year) and we’re just flabbergasted. We bought our house to stay for the long term so we’re not moving, but we could pocket $200K easy compared to when we bought our house 2 years ago. I figure it’s nice while it lasts but it doesn’t really exist.

I had family cottages growing up and they are super important to our family. To some extent that is my home base, so I can identify with your desire for that fixed place. Sounds like a great house too.

[toutsuite]

Oct 10, 2020 13:41:17 GMT -5 dr.girlfriend said:

You are spot on - I want to keep it while he sees an opportunity to sell and make a decent gain. I don't think it will be hard to convince him to hold it since that was our original intent - but I did want to hear others' perspective in case my thoughts were flawed.

I think my husband could totally relate to your husband's situation. What he went through has definitely played a role with many of his choices as an adult. I have seen his upbringing influence him a lot with his investment style. He tends to prefer conservative, guaranteed returns and is generally against anything with too much risk. In this situation, he sees the bottom line buying into the area at a fortuitous time and rather than playing the long game, would rather cash out now for more control. I don't think it will be hard to get him back on board but the validation helped. 😊

[toutsuite]

Oct 10, 2020 13:52:44 GMT -5 aprilsails said:

If this house is located in the area where you ultimately want to end up I would hold onto it. Other than tying up some of your capital it doesn’t seem as though it will be difficult to cover carrying costs with rentals, and large houses are always in demand from an AirBnB perspective.

If there’s nothing similar in the area I would keep it. It may or may not be the best decision financially, but it doesn’t sounds as though you would hurt for making that decision.

I also live in an area with insane home appreciation due to Covid (20-40% year over year) and we’re just flabbergasted. We bought our house to stay for the long term so we’re not moving, but we could pocket $200K easy compared to when we bought our house 2 years ago. I figure it’s nice while it lasts but it doesn’t really exist.

I had family cottages growing up and they are super important to our family. To some extent that is my home base, so I can identify with your desire for that fixed place. Sounds like a great house too.

Yup this area was always my home base and summer stomping grounds. It's where the whole extended family would get together for reunions, bonfires on the beach, clam bakes, fishing, cycling, game nights, etc. So some of that nostalgia is definitely playing a role but I also feel like I identify myself as a New Englander because of my tie to this place that still has most of my family there. My kids are very much third culture kids and I want them to be able to identify with a place in the US when asked "where are you from.". Sounds silly but as we continue to move around, I want them to have that answer and same feeling that there is a place they can always call home.

[dr.girlfriend]

I don't think it's silly to want to give your kids a "home base," and honestly...you can't take it with you. Spending money on something that is important to you, potentially giving your family good memories, and keeping a good investment all at the same time sounds like a win-win. Not to be too morbid, but I've had a real change in perspective over the last few years as several people I know have died unexpectedly in their 40s. Plan for the future in a responsible way, but don't forget to live for the present, even though COVID has kind of thrown a wrench in those works.

[carrotsmakemefat]

I’d want to keep it. You buy for location and this has that! If you can’t get a similar house I’d maybe rent it as you have been and make more money off it with an intent to move in at some point.