Should we sell our condo in CA to cash out equity, pay off debt, and rent until we save up to buy again later?

Question

Our mortgage balance is $270,000 with $50,000 in a HELOC. With the market the way it is, we feel we need to sell now or we might find ourselves stuck in our condo for a very long time. By selling our condo for $360,000 (that might even be wishful thinking), we can use the profit to pay off debt and free up about $1200 of monthly expenses that can be put toward saving up for a house later down the line. Of course, we'd have to go back to renting and lose out on tax benefits, but saving $1200 a month sounds pretty good to us, too. We feel by selling and paying off a considerable amount of debt, we can have a fresh start and strengthen our credit so that we can purchase later down the line. What do you guys think?

To add some details in response to an answer, we've been in our condo for 3 years now and paid $293,000 for it, so we wouldn't be paying any capital gains tax on it. We've made some improvements, like paint the walls, install laminate flooring, updating fixtures, and installing a new garage door. We plan on updating a little bit more if we decide to sell.

Answer 1

From the numbers you gave, you're looking at about $18,400 at the very most in cash out of the sale. That's if you sell at $360k, pay a 6% commission, and have no other closing costs or buyer concessions. If you were forced to sell at $340k, you'd be about $400 in the hole at the end of it all so you don't have a lot of wiggle room in this.

How long you have been in the property and what you paid for it are going to be major considerations as well since there may be tax consequences to deal with. If you lived in the home for less than 2 years, you'll be facing capital gains taxes that will eat into cash available coming out of the sale. Depending upon what you paid for it in the first place that could be a significant amount.

Without knowing what you paid for it in the first place and the value of any improvements and how long you've owned it, it's not possible to say if this will be a good idea or an invitation to disaster.

Answer 2

A. I own two houses one of which I live in the other I rent. It is next door so if it needs repairs I don't have far to go to do it. If you can get out from under the other house and make a profit that is what i would do. Renting property is a crap shoot. You get good renters this time and a bunch of morons the next that do more damage then they pay rent when they decide to pay it and trying to evict someone is worse then pulling teeth and takes months to do legally. Go with the bird in the hand and don't get into the slum lord business. They will call you all hours of the day and night when things break and if you hire a management company there goes your profit and you still have Taxes and insurance. And if they don't mow the yard guess who gets mailed the citation. You!! Good Luck!!

Answer 3

You shouldn't rent because it may cost you more in the long run in taxes. Perhaps meet with a CPA to discuss if it is a viable solution. However, if you have equity in your condo, there may be a way to use the equity to free up your monthly obligation and lower your payments. Or perhaps, it could even be beneficial to sell and buy another prop without HOA's. Speak with a mortgage consultant or if you'd like I am in CA and could help you too. Please feel free to email and we can discuss your options.

Answer 4

I think that sounds like a good idea if you can change your habits. If you can change your lifestyle and stay away from debt I think it sounds like a good plan. If you continue to go into debt you will find yourself in the same position.

Answer 5

I will buy the house Contact me before you get the home equity loan ASAP I'm serious!

Answer 6

Don't rent