Valbridge looks like they have several dual designated appraisers and an office in Modesto.

I'd avoid Hillis for reasons I won't post publicly.

Here's a great way to search for designated appraisers: https://ai.appraisalinstitute....?webcode=aifaasearch

So, there would be the proper professional to ask about our local market and give the most educated guess on where it is going in the next 5 years? Essentially I’d call and ask for a paid consultation? Is that the right verbiage?

There is a lot of math to your question and all the relevant factors have not been shared. Getting good Advice is only possible if the advisor has all the info. Since I don't, I did a little research and made some assumptions. I hope the assumptions are close and provide some insight.

$175k mortgage in 2009 assuming average interest rates then and no refinance means your monthly mortgage payment is probably less than $1,000. If you are getting rent for less than $1000 for the next five years guaranteed, I am concerned many factors associated with the location that may add costs that you have not considered. But for the sake of this analysis, lets assume the mortgage payment and the rent payment are both $1,000 per month. If the real number is different, you can do the math in this analysis with the real numbers.

Modesto, CA average home price is about $444k. So your house is average for the area. The area saw a 21% increase in home values in the last 12 months. Lets assume that does not continue and home values return to the national average growth of about 4%.

The rent seems like a sweetheart deal at 1k per month, considering average house costs, but that is still $60k over the five years you will rent. That is a guaranteed loss in the math problem.

If you kept the house and the housing market cooled, I doubt you would lose 15% of the home value over today's selling price.

So if you sold, and you invested the 300k in profit, could you overcome the 60k in rent costs and make better than the 4% return keeping the house would have generated?

If we assumed the house does not increase in value, your investment of the 300k would have to generate a 20% gain in 5 years after taxes just to cover the rent. Depending on your tax bracket, probably a 6% or better return is needed to overcome the cost of the rent. You would have a very difficult chore to outperform a 6% return on the investment without more risk than the home ownership presents. You would need a aggressive portfolio to outperform keeping the house, and that would require significant risk of loss in a short time frame.

The $450k house appreciating at only 4% (compared to the current 21%) and your mortgage balance going down by about $40k is a dramatically better outcome.

I do wonder how you have only paid down your mortgage by $25k in 13 years. $175k purchase price; $450k current value; sale proceeds of $300k; current mortgage balance of $150k. I hope you have refinanced the mortgage to lower interest rates than the 2009 rates.

I think selling is a bad idea if the motivating factor is "investment" returns. If there are other concerns, like quality of life living near relatives, then you need to place a value on them. I am still not sure those things would outweigh the value of keeping the house.

I hope this helped.

quote:

Originally posted by thumperfbc:
So, there would be the proper professional to ask about our local market and give the most educated guess on where it is going in the next 5 years? Essentially I’d call and ask for a paid consultation? Is that the right verbiage?

Here's the thing about professionals in the area you're seeking: it's not like you're asking medical advice on how to treat or diagnose a medical condition. It's not even like asking a lawyer about the legal ramifications of a situation. You're asking the opinion of where the market will be in five years. Heck, a lot of real estate professionals got soaked in the 2008 housing market debacle as they were also among those holding 3 or more houses to flip.

What you are considering is something I was considering in 2006 but personal situations moved me opposite to what I wanted to do - sell and rent for a while. Instead, family considerations moved me to buy a bigger house instead.

I don't know now whether the housing market will correct. But if I were you and feeling the same way you do, then I would lock in your gains. Your loss in any future increases in your home value can be balanced by the peace of mind that you've locked in your gains. You can also balance how much more do you think your house will appreciate versus how much it can go down.

As for where to put the money, you want to look for a vehicle that won't ride with the stock market or the housing market because you might as well not sell your house. I would put portions of it in inflation protected investments like VTIP (Vanguard Short-Term Inflation-Protected Securities ETF), and I would buy individual 5 year government securities. The reason for the individual government securities is that you know you'll get the full face value at maturity. You're not wanting to hit a home run with the money right? You're just wanting to set it aside and at the same time protect it from inflation. Otherwise, you could go to Vegas and place everything on one roll on number 17 on the roulette table.

quote:

Originally posted by armedprof:
There is a lot of math to your question and all the relevant factors have not been shared. Getting good Advice is only possible if the advisor has all the info. Since I don't, I did a little research and made some assumptions. I hope the assumptions are close and provide some insight.

$175k mortgage in 2009 assuming average interest rates then and no refinance means your monthly mortgage payment is probably less than $1,000. If you are getting rent for less than $1000 for the next five years guaranteed, I am concerned many factors associated with the location that may add costs that you have not considered. But for the sake of this analysis, lets assume the mortgage payment and the rent payment are both $1,000 per month. If the real number is different, you can do the math in this analysis with the real numbers.

Modesto, CA average home price is about $444k. So your house is average for the area. The area saw a 21% increase in home values in the last 12 months. Lets assume that does not continue and home values return to the national average growth of about 4%.

The rent seems like a sweetheart deal at 1k per month, considering average house costs, but that is still $60k over the five years you will rent. That is a guaranteed loss in the math problem.

If you kept the house and the housing market cooled, I doubt you would lose 15% of the home value over today's selling price.

So if you sold, and you invested the 300k in profit, could you overcome the 60k in rent costs and make better than the 4% return keeping the house would have generated?

If we assumed the house does not increase in value, your investment of the 300k would have to generate a 20% gain in 5 years after taxes just to cover the rent. Depending on your tax bracket, probably a 6% or better return is needed to overcome the cost of the rent. You would have a very difficult chore to outperform a 6% return on the investment without more risk than the home ownership presents. You would need a aggressive portfolio to outperform keeping the house, and that would require significant risk of loss in a short time frame.

The $450k house appreciating at only 4% (compared to the current 21%) and your mortgage balance going down by about $40k is a dramatically better outcome.

I do wonder how you have only paid down your mortgage by $25k in 13 years. $175k purchase price; $450k current value; sale proceeds of $300k; current mortgage balance of $150k. I hope you have refinanced the mortgage to lower interest rates than the 2009 rates.

I think selling is a bad idea if the motivating factor is "investment" returns. If there are other concerns, like quality of life living near relatives, then you need to place a value on them. I am still not sure those things would outweigh the value of keeping the house.

I hope this helped.

Thank you for the perspective. Your number assumptions are off because you are correct, there was a refi in there. Couple years ago we extracted some equity to have a new roof, new Windows, and new HVAC installed. We also converted to a 15 year at 2.5% mortgage at that time. So, current loan balance is 198 and monthly mortgage is a few dollars shy of $1800.

Rental price is 1600.

That all being said, your line of thought is something I need to consider more and get a amortization table from the bank… I remember doing similar math when we decided to switch to a 15 year mortgage and essentially making that move increased our relative equity, in April 2027 (projected retirement date) by 75,000 vs the time of calculation (fall 2020).

Another worry: whose to say that rent remains at 1600. The landowner says having the right renter is more important than money, but things can and do change… liquidating our house means we may become dependent on the flow of the market later on, and if we get forced to look for a new rental at some point, that could hurt. Valid concern.

I just can’t shake the feeling that our house is not worth what someone would pay right now and that it can’t last. The person we bought it from paid somewhere around 350 just a few years before we paid 175. It’s hard to shake that memory.

Nobody has a crystal ball, even you pay to have that information>
The big risk of parking a lot of money is inflation. Anyone that lived through the Jimmy Carter years may remember what sound like good market returns but they still didn't pay anything like the losses of high inflation.
To add insult to injury, you pay taxes on much of the invested money too, even if it is sometimes tax deferred.

We are in the middle of living a very similar situation. Have our profit that we intend to use for repurchase sitting in a CD at Ameritrade. Yes it's not earning crap but it relatively safe and liquid.
We are renting in a location we intend to leave as soon as family situation allows. Hoping for a nice little pull back where we'd like to land later.
Our entire goal was to mitigate downside risk.

quote:

Originally posted by thumperfbc:

quote:

Originally posted by armedprof:
There is a lot of math to your question and all the relevant factors have not been shared. Getting good Advice is only possible if the advisor has all the info. Since I don't, I did a little research and made some assumptions. I hope the assumptions are close and provide some insight.

$175k mortgage in 2009 assuming average interest rates then and no refinance means your monthly mortgage payment is probably less than $1,000. If you are getting rent for less than $1000 for the next five years guaranteed, I am concerned many factors associated with the location that may add costs that you have not considered. But for the sake of this analysis, lets assume the mortgage payment and the rent payment are both $1,000 per month. If the real number is different, you can do the math in this analysis with the real numbers.

Modesto, CA average home price is about $444k. So your house is average for the area. The area saw a 21% increase in home values in the last 12 months. Lets assume that does not continue and home values return to the national average growth of about 4%.

The rent seems like a sweetheart deal at 1k per month, considering average house costs, but that is still $60k over the five years you will rent. That is a guaranteed loss in the math problem.

If you kept the house and the housing market cooled, I doubt you would lose 15% of the home value over today's selling price.

So if you sold, and you invested the 300k in profit, could you overcome the 60k in rent costs and make better than the 4% return keeping the house would have generated?

If we assumed the house does not increase in value, your investment of the 300k would have to generate a 20% gain in 5 years after taxes just to cover the rent. Depending on your tax bracket, probably a 6% or better return is needed to overcome the cost of the rent. You would have a very difficult chore to outperform a 6% return on the investment without more risk than the home ownership presents. You would need a aggressive portfolio to outperform keeping the house, and that would require significant risk of loss in a short time frame.

The $450k house appreciating at only 4% (compared to the current 21%) and your mortgage balance going down by about $40k is a dramatically better outcome.

I do wonder how you have only paid down your mortgage by $25k in 13 years. $175k purchase price; $450k current value; sale proceeds of $300k; current mortgage balance of $150k. I hope you have refinanced the mortgage to lower interest rates than the 2009 rates.

I think selling is a bad idea if the motivating factor is "investment" returns. If there are other concerns, like quality of life living near relatives, then you need to place a value on them. I am still not sure those things would outweigh the value of keeping the house.

I hope this helped.

Thank you for the perspective. Your number assumptions are off because you are correct, there was a refi in there. Couple years ago we extracted some equity to have a new roof, new Windows, and new HVAC installed. We also converted to a 15 year at 2.5% mortgage at that time. So, current loan balance is 198 and monthly mortgage is a few dollars shy of $1800.

Rental price is 1600.

That all being said, your line of thought is something I need to consider more and get a amortization table from the bank… I remember doing similar math when we decided to switch to a 15 year mortgage and essentially making that move increased our relative equity, in April 2027 (projected retirement date) by 75,000 vs the time of calculation (fall 2020).

Another worry: whose to say that rent remains at 1600. The landowner says having the right renter is more important than money, but things can and do change… liquidating our house means we may become dependent on the flow of the market later on, and if we get forced to look for a new rental at some point, that could hurt. Valid concern.

I just can’t shake the feeling that our house is not worth what someone would pay right now and that it can’t last. The person we bought it from paid somewhere around 350 just a few years before we paid 175. It’s hard to shake that memory.

I found an amortization schedule and done the math... between now and the projected month of retirement we would pay off another $65k of principal...

So, if I am not mistaken, that means that a price drop, at the time of retirement, of 15% or less means we would be financially better off staying put, as it relates to profit.

If prices at that time are more than 15% below what they are now, we would have made more profit by selling now.

Of course, that doesn't take into account any money made on interest on potential profits extracted now... which goes back to the original question in this thread.

I need to do more research on how I Bonds work as that seems like a potential safe place to start parking money, were we to move forward, while still making 7ish percent (for now).

I was a cross-country landlord for seven years and lost $500/mo every month when absolutely nothing went wrong. That was $42k negative and it hurt. Again, that's only what I lost in rent vs. mortgage payment. New garage door opener, shower drain leak, garbage disposal and on and on made it worse. And I couldn't write it off until I sold, due to our income being too high. I had some good tenants and one who skipped out in the middle of the night, leaving the place a mess. I would not be a landlord again for all the money in the world. And it's way worse now that CDC has decided they have this magical power to allow tenants to skip on rent and landlords and courts can't do anything about it. Hell to the no. I'd rather burn money in my fireplace to keep warm than lose it due to deadbeat tenants and all the headache that also entails.

I would be very careful. Everything is a shell game these days. I would take some comfort in what you know, vs what you think you know. If it seems to good to be true. Than it is. A house of cards can come down in a heartbeat.

quote:

Originally posted by thumperfbc:
So, there would be the proper professional to ask about our local market and give the most educated guess on where it is going in the next 5 years? Essentially I’d call and ask for a paid consultation? Is that the right verbiage?

A properly qualified and experienced real estate appraiser should be able to give as good of advice as is possible, as to expected trends in a specific market (of which they are qualified to speak to) in the future. Consulting is one of the things they do.

The MAI appraiser wouldn't be the person to talk to where to park money, only IF your specific property is likely to be worth more or less in a specific timeframe. Prospective Market Analysis is something real estate appraisers do. My company does them frequently, for our markets.

The idea that improved real estate always appreciates is a fallacy. Real Estate Appraisers, including my firm, called the 2008-2009 "crash", and we've been calling this next one for some time. Our specific market area is different than yours, you actually have a LOT more data to reach upon to draw conclusions. It's just finding the right person who is qualified to make the call. It's not easy putting real numbers on the future, but the good MAI appraisers are right more than they aren't. I see it every day.

People don't like to hear things that go against what they want to hear. Examine bias, and seek out qualified and competent professionals who've identified and minimized their bias. We do charge quite a bit for such a market analysis, and 5 years is a significant length of time. With that said, there are nearly always historical trends and indicators that exist when proper analyzation of un-biased data is performed.

I have no skin in this...I don't get a kick-back for making a recommendation. In the appraisal world, we don't pass finders fees or share in such practices. An appraiser's prospective market analysis is just one piece of the pie you're looking at. You'll still need at the very least a competent CPA and probably a lawyer to assist in the total decision. About the only profession, I wouldn't waste a second or a dime on, would be a sales agent or broker.

quote:

Originally posted by AKSuperDually:

...clipped....

Sir, I sent you an email.

Received and replied good sir.

quote:

Originally posted by thumperfbc:

quote:

Originally posted by thumperfbc:

quote:

Originally posted by armedprof:
There is a lot of math to your question and all the relevant factors have not been shared. Getting good Advice is only possible if the advisor has all the info. Since I don't, I did a little research and made some assumptions. I hope the assumptions are close and provide some insight.

$175k mortgage in 2009 assuming average interest rates then and no refinance means your monthly mortgage payment is probably less than $1,000. If you are getting rent for less than $1000 for the next five years guaranteed, I am concerned many factors associated with the location that may add costs that you have not considered. But for the sake of this analysis, lets assume the mortgage payment and the rent payment are both $1,000 per month. If the real number is different, you can do the math in this analysis with the real numbers.

Modesto, CA average home price is about $444k. So your house is average for the area. The area saw a 21% increase in home values in the last 12 months. Lets assume that does not continue and home values return to the national average growth of about 4%.

The rent seems like a sweetheart deal at 1k per month, considering average house costs, but that is still $60k over the five years you will rent. That is a guaranteed loss in the math problem.

If you kept the house and the housing market cooled, I doubt you would lose 15% of the home value over today's selling price.

So if you sold, and you invested the 300k in profit, could you overcome the 60k in rent costs and make better than the 4% return keeping the house would have generated?

If we assumed the house does not increase in value, your investment of the 300k would have to generate a 20% gain in 5 years after taxes just to cover the rent. Depending on your tax bracket, probably a 6% or better return is needed to overcome the cost of the rent. You would have a very difficult chore to outperform a 6% return on the investment without more risk than the home ownership presents. You would need a aggressive portfolio to outperform keeping the house, and that would require significant risk of loss in a short time frame.

The $450k house appreciating at only 4% (compared to the current 21%) and your mortgage balance going down by about $40k is a dramatically better outcome.

I do wonder how you have only paid down your mortgage by $25k in 13 years. $175k purchase price; $450k current value; sale proceeds of $300k; current mortgage balance of $150k. I hope you have refinanced the mortgage to lower interest rates than the 2009 rates.

I think selling is a bad idea if the motivating factor is "investment" returns. If there are other concerns, like quality of life living near relatives, then you need to place a value on them. I am still not sure those things would outweigh the value of keeping the house.

I hope this helped.

Thank you for the perspective. Your number assumptions are off because you are correct, there was a refi in there. Couple years ago we extracted some equity to have a new roof, new Windows, and new HVAC installed. We also converted to a 15 year at 2.5% mortgage at that time. So, current loan balance is 198 and monthly mortgage is a few dollars shy of $1800.

Rental price is 1600.

That all being said, your line of thought is something I need to consider more and get a amortization table from the bank… I remember doing similar math when we decided to switch to a 15 year mortgage and essentially making that move increased our relative equity, in April 2027 (projected retirement date) by 75,000 vs the time of calculation (fall 2020).

Another worry: whose to say that rent remains at 1600. The landowner says having the right renter is more important than money, but things can and do change… liquidating our house means we may become dependent on the flow of the market later on, and if we get forced to look for a new rental at some point, that could hurt. Valid concern.

I just can’t shake the feeling that our house is not worth what someone would pay right now and that it can’t last. The person we bought it from paid somewhere around 350 just a few years before we paid 175. It’s hard to shake that memory.

I found an amortization schedule and done the math... between now and the projected month of retirement we would pay off another $65k of principal...

So, if I am not mistaken, that means that a price drop, at the time of retirement, of 15% or less means we would be financially better off staying put, as it relates to profit.

If prices at that time are more than 15% below what they are now, we would have made more profit by selling now.

Of course, that doesn't take into account any money made on interest on potential profits extracted now... which goes back to the original question in this thread.

I need to do more research on how I Bonds work as that seems like a potential safe place to start parking money, were we to move forward, while still making 7ish percent (for now).

More info = better math.

$1800 mortgage payment x 60 months = $108k in payments and $65k reduction in the $198k you owe on the house. Mortgage balance in 5 years would be $133k. Total actual cost is $43k. I am assuming you take the standard deduction and don't get a tax benefit from the interest.

$1600 rent payment assuming it does not go up = $96k

$96k is more than $43k by $53k. This is your new delta that your proceeds have to overcome for you to break even.

Current mortgage balance is $198k your assumption is you can sell your house for $450k-$475k. Lets assume you get the $475k. Realtors average fee is 5%, about $24k. There may be other closing costs but this is the only one we know for sure. $475k-$24k=$$451k. $451k-$198k mortgage = $253k. This is your investable profit.

Your hurdle to break even is still $53k. Your investment balance in 5 years has to be $306k or 21% more than is it now.

The math problem did not change much.

Assumptions that have to come true for this to be a good idea.
1. Your investment fund has to return better than 5% every year after fees and taxes
2. Your rent cannot increase over the next five years
3. Your house cannot appreciate over the next five years
4. Your house cannot depreciate over the next five years
5. You have to actually move in exactly five years
6. You have to retire in five years and not have some incentive to delay that decision
7. 2022 year to date return for both stocks and bonds are down dramatically, it is unrealistic to believe that trend is going to change in the short term. But for this to be a good idea, you have to invest a $253k lump sum and have the markets change direction the day after you invest.
8. You have to have the emotional discipline to not react emotionally to poor market movements over the short term. Behavioral finance studies tell me that this is very hard. And the foundation of this question is your feeling that your house is not worth keeping because of the market.

All of these coming true is unrealistic. I would venture to say that there is a good chance none of them actually happen. For example, if the economy crashes in 2027 would you retire or maybe wait another year for things to improve? If housing prices drop in CA, would you be moving someplace where housing prices have not also dropped?

I know you are struggling with the current value of your home in light of what you paid. You bought at the absolute best time for home prices in the last 50 years. The real estate market crashed in 2008 and didn't start recovering until mid 2009. If you look at the previous owners investment - $350k and today's value $475k, the house has not over appreciated over the last XX years - lets assume 2005-2022 as an approximate time frame. The actual growth including the anomaly of 2008 and 2021 is about 3% which is very close to the national average for home price appreciation over time. It is practically impossible to time any market and ultimately that is what you are thinking about right now.

IBonds are really popular right now with that 7% return (soon to be 9% is my guess) but they are very limited. $10k per person per year. Yes you could buy one for you, your spouse, your kids, etc. but the name on the bond owns the bond, so the kids could conceivably take the money and run. Although that is unlikely, if you buy $10k for a kid over the next 4 years, the $40k total plus interest will be well over the amount that can be given back to you in 5 years without gift taxes. Also, the fine print is that current IBonds have a guaranteed interest rate of exactly 0%. Inflation has to remain high for your bonds to continue to perform. If inflation remains high, what do you think your home value will do?

This is a big decision that will have a long term impact on your wealth. I hope some of the information I have shared will help you make a good decision. If you sell, please don't buy an annuity that promises you a great return...

I hope this helps.

You can buy 2 year US Treasury notes that yield around 2.75%, from Schwab or Fidelity. A 3 year CD from Navy Federal pays 1%.

Amazon stock went down 14% today.

I like the idea of living on the same dirt road as my sister, so the kids can play together. Strong family ties are absolutely priceless.

Of course, I don't know your sister...

Depending on your time horizon, dollar cost averaging into the market could be a great idea, with a globally diversified portfolio of funds.

Stocks, ETFs, and mutual funds seem to be the only products people for some reason hate buying when they go on sale. Clearly, individual stocks are very risky and could go to zero, but well diversified investments may decline from time to time but are unlikely to ever go to zero.

Don't do that if you've got a short time horizon, though.