dgreen
Footballguy
Thanks. I definitely appreciate you bringing this up because "I may not like it" never even crossed my mind and it's something I should consider.That's at least what I'd do. I'd rather eat 6 months of rent to ensure I was making the right decision. I like to visit the city (nyc in my case) and the thought had crossed my mind about living there, but I came to the conclusion that I'd rather just visit a couple of times a month. Besides nearly twice the living costs, the idea of living in an apartment where you have less space and privacy and now you're dealing with a landlord and neighbors didn't seem worth it.We'd be staying in the DC area where we've lived our entire lives, so not as big as if we moved across country. But, it is a good point that we could be one year into it and hate it and then not have a house to go back to. I've also been looking at an apartment building in a urbanish area near us in the suburbs. I don't think there'd be as much risk moving into that place than if we moved into DC.I'd agree with this. Just like when moving to a new area, you really need to immerse yourself for an extended period of item before knowing for sure that you'll truly like it. What city were you thinking?Sounds like you need to split the baby - keep the house and rent for a year. Then see if it's what you really want before you sell.My wife and I have a desire to live more of a city life once our kids are all out of the house. We've lived suburban life for a long time and we both look back and wish we had lived in the city before kids. We're nearing that point as our youngest kid is about to graduate HS.
I'm not looking to make the decision that maximizes my financial bottom line, but I also don't want to do anything that causes big damages. Here are some things that impact the financial aspect of this.
I have no concerns about retirement. I can retire in 8 years. I fully expect my pension and TSP to provide solid income. Add in SS for me and my wife and a small 401K from my wife and we're good there.
We own a house. I'd say we currently have at least $350k in equity. We have a sub-3% interest rate and our mortgage is under $1700/month. It's a nice financial situation.
An apartment that we'd want will probably be $3,000+.
In order to keep that low interest rate and mortgage, and the tax deduction, we could rent our house. I think that would return around $3,000/month. However, I think there are a ton of things we'd need to improve about the house to make it a good rental, so it would take a while for monthly profits to pay off those things and we'd need to make sure we're prepared for any upcoming big things like a furnace, windows, roof, etc that I know aren't too far off in the future. While I'm comfortable with my retirement picture, we don't have a lot of cash savings. Keeping the house and renting it would also allow us to keep the mortgage interest deduction (although it's value isn't what it used to be with such a high standard deduction) and gains from the housing market.
If we sold the house, that $350k would be under the $500k limit for married capital gains, so it would be ours tax-free (at least from what I understand from my little bit of research). So, the question there becomes what to do with that money. Could that be invested in something that isn't took risky but gives good enough returns to counter what gains we would have seen by keeping it invested in our house? A 5-year CD would give us about $75k gains. But that would be taxable, right? I could split out some of it to fund Roths for both us. My TSP is almost all traditional. I started Roth TSP really late and haven't contributed much to it. My wife is 50+ and I turn 50 at the end of this year. So, we could direct $8k/year into a Roth IRA for my wife and I could do $30k/year through Roth TSP once I turn 50. Are there other good vehicles for tax-free earnings? Another thought I've had is that I could pay land somewhere for retirement, but we don't know where we want to retire. I guess we could even but some kind of vacation home that also serves as an Airbnb, but that sounds like a hassle.
We both really want a lifestyle change. That's the primary motivation. Maybe I've made the mistake of looking at apartments online and getting excited about doing something new. But, even little things like getting new appliances so often has become annoying to me. With apartment life, that $3000 refrigerator can be a vacation instead. That room that needs to be painted can be a nice dinner out.
Anyway, interested in any thoughts. I lean towards selling the house and investing the capital gains, but I think the idea of the importance of home ownership is so strong that it makes it seem like a horrible decision. Am I crazy? Anyone else done something like this? In reality, we probably aren't ready to do this once our youngest starts college this Fall because we have our middle child who still have a couple years of college who will also need a place to live during breaks. The difference between a 2BR and 3BR apartment is pretty big and makes this a lot less likely. Our oldest is about to graduate college and is engaged, so we don't need a room for her. We've talked about how we can just get kids nearby hotel rooms when they come visit, which is much different than them needing a place to live for a couple months.