So now that the Super Bowl is over, people’s thoughts have returned to the spring realty market. Specifically, is this a good time to sell? Most everyone agrees that it is still a good time to buy. So the only remaining question is, is it a good time to buy and sell?
At brunch the other day a friend said she thought she could sell her place for break even but Cannot bring herself to do it because she paid “all that money for it.” I said “that’s because you’re thinking of it like Microsoft stock — you bought at $50/share and now it’s $25/share and you just know it can go back up to $50 a share”.
She completely agreed with my assessment yet she is also going to continue to be a reluctant landlord. She and her spouse they were discussing keeping the condo into retirement.
If this were last year, I’d say sell as soon as you are at a point where you won’t bring money to the table, even if you don’t get a dime back. However now that the market is starting to improve, it might be prudent to hold on to your property assuming you have a stable renter that doesn’t have the drama llama as a pet.
It’s really an algebra problem:
Let X be your mortgage, which principal decreases by $4K/year. Let Y be you Property Value which rises by 3% per year. At what point are you:
- no longer underwater?
- Able to sell and get some cash back after transaction costs (note: not necessarily profit)
- Able to sell for more than you bought?
My wife and I think that by the time we even reach #1 with her South Loop condo, we will be so close to paying it off that it would be fine to keep it as an in-town or a dorm room for our future kids could live if we are lucky enough to afford UIC tuition when they are college age.
My SB prediction was sort of correct. I did pick the Ravens and technically we had overtime in The form of a 30+ minute delay though Ray Lewis was mostly ineffective. So you should completely follow my advice for the rest of your life, which should last about a Weekend before something I recommend kills you.
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