We are currently living in Atlanta in a large single-family home that was built in 2001. We have a mortgage of less than 50 percent of what our home is worth, and we just refinanced to a 5/1 ARM at 2.75 percent interest. Our son is going to be a sophomore in college this coming school year, and we’ve begun to contemplate whether it makes sense to move to a smaller home, maybe even a townhome.
Our situation is kind of unique in the sense that we may go back to India after four more years in the United States and then live a hybrid life where we spend eight months in India and four months in the U.S. each year.
One idea is to move to a townhome, stay there for three years and then rent it out once we move to India. If we decide to move we’ll need to spend about $25,000 in upgrades. It’s likely the new townhome may also need some upgrades and new appliances.
With keeping all the upgrades and expenses in mind, would it make sense to just stay put for the next three to four years in our current house or should we sell and move? With the equity in the house, we may be able to either buy the townhome outright or quickly pay off the small mortgage that we take out for the townhome.
You certainly packed a lot of issues in one question. We’ll start with your current home and your current loan. You recently paid several thousand dollars to refinance your loan and you have a great interest rate on that loan. So your housing expenses are probably quite low. We imagine the issue is that your large home has other expenses that would be higher than they would in a smaller home or a townhome.
It probably costs more to cool, clean and care for a large home, not to mention paying the property tax bill. As you scale down, your heating and cooling bills should go down as should some of the other expenses of maintaining the home.
Financially, it appears you have the income to support staying or going. Given the cost of moving, and the repairs and upgrades you plan to make in both homes, you have to think about which home you’d rather rent: a large family home or a smaller townhouse.
One issue for you to ponder is why you’d want to be a landlord in the United States if you plan to live most of the year in India. If it’s for the investment in real estate, then you have to evaluate the townhome as an investment and determine if having that investment is right for you. Certainly, if you are living in India, you’re not going to be readily available to handle tenant issues or handle the ordinary affairs of owning a piece of real estate. You would need to hire someone to manage the property and handle those issues that you, as a landlord, won’t be able to handle on the other side of the world.
If you rent your townhouse (or single-family home), where do you plan to live when you do come back to the United States?
From the limited information you have given to us, we don’t know why you would want to go through the expense of handling all the repairs needed to your home only to sell it and then handle all the upgrades and repairs you anticipate in the smaller townhome you might buy. We believe that if you make upgrades and improvements to a home, you might as well stay and enjoy them for a while.
If you make those improvements, yes, you’ll have higher expenses in owning your current home. But you’d be smart to calculate what those expenses are relative to the townhome. If the difference isn’t as big as you thought, you might continue to enjoy your home for the next several years.
Of course, as we said, much of your issues are not financially but emotionally driven. So you have to sit down, write down what you like about living in your home, how a move to a different home would affect you, your wife and your son, how it affects your finances and if the effect on your finances is greater than the benefit you get out of keeping the home.
If, after you analyze your situation, you find that the financial burden of owning your larger existing home is too great and the benefits to you of having a smaller townhome for the next several years are likely much greater, then consider moving.
But we aren’t big fans of buying a townhome now for your future ability to rent it out and become landlords. You’ll need to give that some thought and see if being a landlord is what you really want to be.
No comments:
Post a Comment
If you have questions or a comment about this Blog or our Company please use this section. We will do our best to review and answer within 24 hours.