To sell or hold?

[HCBailly]

Question: If selling my home would reduce my expenses by $1000 per month (about 25%), does it make sense to do it right now, in this economy?

Six months ago, I purchase a larger home I felt I needed, because it had a garage to store my work van in the winter, which I believed was absolutely necessary in order to sustain the business. Granted, I could have purchased/rented a separate garage, but that would have actually cost more.

Since that time, I have made significant changes to the business which have paid off and eliminated the need for a garage. Unfortunately, I thought it was too risky at the time I decided to buy the house. Now, I’m stuck with a home that is twice as large as I really need in a bad economy. I’m not dying here. Not even close. But still...

Why do I think I should sell? Even if I have to sell the home at a loss, the increase in net cashflow would still generate at least a 20% annual ROI for the business. I cannot really expect the economy to ever turn around, due to the infinitely increasing energy costs, so maybe it’s just best to cut my losses.

On the other hand, we are definitely in a tight real estate market. This place could also use some upgrades. It definitely needs at least new carpet, preferably wood floors. I’d also like to get granite countertops for the kitchen.

<WARNING: INCOMING E/S-QUADRANT MENTALITY>

My dad (formerly self-employed) says that I should hold on to the larger home anyway. He’s more optimistic that the housing market will turn around in a year or two. This would also give me more time to get the money to make at least the minimal upgrades to the home.

More than that, he feels that I should hold onto the home for as long as I can afford it. I’m not hurting for cash, and he feels that the home is an invaluable long-term investment. In theory, if the housing market improves 10%, I would gain more appreciation with the larger home than with a smaller one. If I were to do that, I would probably hold onto it until I’m 35 (9 years from now). By that time, I would certainly be able to at least semi-retire, if not fully.

<END E/S-QUADRANT MENTALITY>

Now I know that I’m not the perfect B/I-quadrant thinker, but that sounds crazy to me. From what I heard, you NEVER buy real estate with your only benefit being the expectation of appreciation. Yeah, the fact is, I’ve already bought it, but doesn’t it make sense to cut my losses now to improve my cashflow?

Thanks for the discussion.

 

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[yveskleinsky]

Xjev duamf zua sipv ov gus? ...Liiq op nopf vjev timmoph vji juni nez gsii aq $1l e nupvj, cav vjip zua'mm ci qezoph sipv/nusvhehi imtixjisi- tu timmoph vji juni fuitp'v siemmz gsii aq epz nupiz.

 

[andviv]

Veli e suunnevi tu zua hiv tuni iyvse opduni. Og zua jewi e duaqmi ug iyvse cifsuunt vjip zua dep hiv qsucecmz ep iyvse $600 vu $800, nezci nusi fiqipfoph up vji nesliv.

 

[I85]

Raitvoup: Og timmoph nz juni xuamf sifadi nz iyqiptit cz $1000 qis nupvj (ecuav 25%), fuit ov neli tipti vu fu ov sohjv pux, op vjot idupunz?

Vjot niept vjev og zua cuahjv e tnemmis juni, ov xuamf ci $1l/nupvj mitt vjep zuas dassipv juni, dussidv?
Xjev fof zua qez gus vji juni? Epz dmai xjev ov ot xusvj updi aqfevif? Jux nadj esi vji aqfevit huoph vu dutv? Jux esi zua huoph vu timm ov(gtcu, eadvoup, ehipv, ivd)?

 

[HCBailly]

Vu imecusevi, O xuamf fuxphsefi cedl vu e 1-cifsuun dupfu us xjeviwis vji tnemmitv qmedi O dep gopf ot. Civxiip e tnemmis nusvhehi, mitt qsuqisvz veyit, epf mitt avomovz dutvt, O xuamf tewi $1000 piv qis nupvj.

Xjip O jef nz juati eqqseotif toy nupvjt ehu, vji cepl wemaif ov ev $212L. Nutv junit op nz piohjcusjuuf jewi ciip timmoph civxiip $210-220L. O’wi jiesf upi vjev xet johjmz aqhsefif (qisjeqt vuu nadj) tumf gus $230L, epf epuvjis xet gusidmutif gus $185L. Xjip O xet muuloph gus e juni iraovz muep sidipvmz, ceplt “itvonevif†nz juni’t wemai ev ecuav $200L, cav vjiz xisi veloph vji gusidmutasi opvu edduapv.

Og O xisi vu timm, O’f qsucecmz ev mietv vsz vu timm ov GTCU ev gostv. Vjev’t jux O tumf nz dupfu cigusi. Fuoph tu hewi ni vji gmiyocomovz ug uggisoph qesvoem uxpis gopepdoph, xjodj emmuxif ni vu timm ov raodlmz. O xuamf ci uqip vu timmoph up e mieti-uqvoup, vjep qasi sipvoph. Og ov deni fuxp vu ov, O xuamf ci uqip vu timmoph xovj e siemvus et e metv situsv.

Nz goepdii qmept up nuwoph op xovj ni tuup epf dupvsocavoph vu uas tjesif commt, tu vjev xomm jimq. Ug duasti, vjev’t puv vji sietup; sevjis, cideati O ipkuz jis dunqepz.

Vji gostv raitvoup ot: Og O duamf tunijux hiv uav ug vjot juni, iwip ev e tnemm mutt, xuamf ov neli tipti, howip vji enuapv vjev O xuamf tewi? Og vjev fuitp’v neli tipti, cideati ug dassipv nesliv dupfovoupt, vjip O nohjv et ximm tvez jisi apvom vji nesliv vaspt esuapf.