Sell the house or try to keep it?

[beach bum]

My family and I willl have to relocate in order for me to attend law school in the fall. We already have a beautiful home that we love at the beach. Given the current market conditions should we try to sell it or try and find a way to keep it? Can you get enough student loans to pay for a mortgage for 3 years on top of everyday living expenses??? This is something we are struggling with and I may not go to law school because of it. Thanks for any input if you may be experiencing something similar.

[greenie]

my husband and I are selling our place... and we'd be willing to take just enough so that we don't LOSE money on the condo.  yeah it sucks to lose on an investment, but law school is another investment, so we're moving from one to the next.  some people rent and some people sell, it's a personal decision.

[christianlawyer09]

my husband and I are selling our place... and we'd be willing to take just enough so that we don't LOSE money on the condo.  yeah it sucks to lose on an investment, but law school is another investment, so we're moving from one to the next.  some people rent and some people sell, it's a personal decision.

But see, you're not going to lose money on an investment.  You're going to lose money on the sale of your home.  Housing is not an investment.  That's the lesson that everyone needs to take away from the last few years.  Historically, bank CDs offer about the same rate of return as a house - just above inflation.  And if you are like most people, you spend more "fixing up" and decorating their home than you realize, and so whatever gain you make from a sale is greatly eaten up by that excess spending.  You just don't realize or feel it because you spent the money over a long period of time. 

beach bum, I feel for you, but sometimes you just have to cut your losses and move on.

[greenie]

my husband and I are selling our place... and we'd be willing to take just enough so that we don't LOSE money on the condo.  yeah it sucks to lose on an investment, but law school is another investment, so we're moving from one to the next.  some people rent and some people sell, it's a personal decision.

But see, you're not going to lose money on an investment.  You're going to lose money on the sale of your home.  Housing is not an investment.  That's the lesson that everyone needs to take away from the last few years.  Historically, bank CDs offer about the same rate of return as a house - just above inflation.  And if you are like most people, you spend more "fixing up" and decorating their home than you realize, and so whatever gain you make from a sale is greatly eaten up by that excess spending.  You just don't realize or feel it because you spent the money over a long period of time. 

beach bum, I feel for you, but you are realizing that "using other people's money" comes with a huge cost - the cost of your freedom.

your correction of me is true - housing is not really an investment anymore in this market

and this may sound stupid but susie orman says "people > money" - if it's going to come between you and your goals and your freedom, then just let it go.

[TimMitchell]

I'm in the same situation, it most likely isn't worth it to try and keep the place. I'm selling my regular house now, I couldn't imagine trying to keep paying the mortgage for three years in addition to law school debt. Say your mortgage is 1500 a month, three years of law school = 54K spent, assuming you can't rent it out. If it's a beach house I'm assume your mortgage is even more than that. Sell it, even if you have to take a small loss, you'll be able to buy a better one in three years.

[DCLabor25]

IF you can sell, I would.  It's just not worth the headaches.  But, that can be a BIG if.  In some areas, it's just impossible to sell right now -- I live in the Wash DC area and I know that we could simply not sell our condo right now for what we need.  We live in a really nice area of northern virginia, but even here there are foreclosures and those REALLY do drive down the prices.

The good news is that the tax code does have a lot of built in incentives that make renting more profitable.  You get to write off all of your costs, including depreciation which is a paper loss.  You can then count any rental loss against your regular income, dollar for dollar, which means that you save money in taxes.  In short, you might not lose that much money if you can't sell.

Now if you CAN'T rent it or sell it, that is quite a problem....

[Addendum Boy]

Me and my wife just bought a home. I am applying for the 08-09 cycle. We plan on grinding it out. Mind you, we have no kids, so it is a hell of a lot easier. I will work here and there during law school, couple hours per week and basically ride her salary. We will also have a good sized nest egg saved up by then, Sept, 2009, so that of course makes it easier. My decision to go to law school was the biggest factor when we were looking at houses because my income is going to dwindle drastically come Sept, 2009.

[Speedzie]

I'm too lazy to read the thread, so forgive me if someone already said this...

Be aware that you'll have to pay capital gains tax if you sell your place and don't buy another one of similar value within a year, or maybe 2 I forget.

[Matthies]

my husband and I are selling our place... and we'd be willing to take just enough so that we don't LOSE money on the condo.  yeah it sucks to lose on an investment, but law school is another investment, so we're moving from one to the next.  some people rent and some people sell, it's a personal decision.

But see, you're not going to lose money on an investment.  You're going to lose money on the sale of your home.  Housing is not an investment.  That's the lesson that everyone needs to take away from the last few years.  Historically, bank CDs offer about the same rate of return as a house - just above inflation.  And if you are like most people, you spend more "fixing up" and decorating their home than you realize, and so whatever gain you make from a sale is greatly eaten up by that excess spending.  You just don't realize or feel it because you spent the money over a long period of time. 

beach bum, I feel for you, but sometimes you just have to cut your losses and move on.

As some who has spent their entire career investing and making money from real-estate to the point that its paid my salary for the last 10 years I categorically disagree with this. The ROI on real estate  beats anything you can get from your bank. The problem is people buy with their hearts, not their minds. That house you love in that neighborhood of big lawns on the edge of town 25 miles away from downtown that you put 10% down on with an interest only  ARM so you could afford the payments, then took out the equity when it went up in value was not an investment. It was bad financial planning.

This is an excellent market to BUY in. But you have to be smart, anyone looking to buy now should stay away from the suburbs, gas prices are killing that. We are seeing the end of track homes built an hour from where you work. Downtown revitalization started the trend, now’s a great time to get in while the getters cheap. Buy intercity, gentrification, close to downtown, close to mass transit with at least 25% down on a 15 year fix. Only buy as much as you can easily afford. Properties in the inner core of cities are increasing in value even now, about 14% for my place 1 mile from downtown core since Jan, most of the loss in value is coming in the suburbs which where over built and designed for cheap gas guzzling SUVs. People are downsizing, people are moving closer to work, the burbs are dying.

As to the house you want to keep. What’s the going rental rate in the neighborhood, can you cover your mortgage, or most of it, by renting it out? Down size for yourself, live like a student for three years in a small cheap apt, rent the house out to keep it.

[Matthies]

I'm too lazy to read the thread, so forgive me if someone already said this...

Be aware that you'll have to pay capital gains tax if you sell your place and don't buy another one of similar value within a year, or maybe 2 I forget.

The two year capital gains rule changed in 1997. Under the new rules you can sell your primary residence and pay no taxes on up to $250,000 of profit if your single, $500k if your married. Also you no longer need to re-invest that gain into real estate, ever, you can do whatever you want with it, you can if you wish, use it to pay for your law school education and as a down payment on a new smaller/cheaper place. That’s what I did.