Buying house - which scenario make sense?

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goshenBogle
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Buying house - which scenario make sense?

Post by goshenBogle » Mon Feb 11, 2019 8:48 am

I am retired, living in condo, looking for single family house. Two scenarios to pay for house:

(1) Get a short term mortgage (less than 15 year?), then sell the condo, and use proceeds from condo + part of portfolio (if condo sale < house price) to pay off the mortgage immediately. Thus the mortgage would be paid off in one year or less so interest payments are minimal.

(2) Sell part of portfolio to pay for house in cash, then sell condo, and reinvest condo sale in portfolio. With this scenario, would pay capital gain on portfolio sale.

Comments?
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cheese_breath
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Re: Buying house - which scenario make sense?

Post by cheese_breath » Mon Feb 11, 2019 9:08 am

Are you assuming the condo would sell quickly? Seems both of your scenarios have you owning both house and condo for awhile. I'd suggest...

(3) Sell the condo and rent until you find the house you want.
The surest way to know the future is when it becomes the past.

barnaclebob
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Re: Buying house - which scenario make sense?

Post by barnaclebob » Mon Feb 11, 2019 9:28 am

There are other types of loans if you want only need the money short term.

What are the gains on your portfolio or how would selling investments impact your taxes?

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Watty
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Re: Buying house - which scenario make sense?

Post by Watty » Mon Feb 11, 2019 10:16 am

I would really try to avoid having two properties at once. There are lots of things that can go wrong and even if the best case you would be under a lot of pressure to accept a low offer on the condo. A potential buyer will see that you have moved out and figure that they can make a lower offer.

Paying for some place to live temporarily after you sell the condo for a good price could actually save you money compared to having an empty condo for several months then eventually selling it for less than you hoped.


Whenever you buy or sell a house the closing date is negotiable and you can often figure out a way to rent one of the propertys for a short time to allow you to move directly from one property to the next. This actually works out more often than you might think since the other buyer or seller is also juggling the closing dates for their property. For example whoever buys your condo may be renting an apartment now with a few months left on the lease so they might love to delay taking possession of the condo for a bit so they don't have two places at once.

That is a lot different than making an offer on a house that is contingent on the sale of your condo.
barnaclebob wrote:
Mon Feb 11, 2019 9:28 am
There are other types of loans if you want only need the money short term.
+1

There are bridge loans just for situations like this.

You can also get a home equity loan on the condo as long as you have not listed it for sale yet.

You may also be able to get a margin loan on your taxable investments.

barnaclebob
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Re: Buying house - which scenario make sense?

Post by barnaclebob » Mon Feb 11, 2019 10:19 am

Watty wrote:
Mon Feb 11, 2019 10:16 am
I would really try to avoid having two properties at once. There are lots of things that can go wrong and even if the best case you would be under a lot of pressure to accept a low offer on the condo. A potential buyer will see that you have moved out and figure that they can make a lower offer.
Knowing a seller has moved out could mean they have enough money to support two properties for several months and are therefore not in a hurry to sell. It all depends on the market. The most desperate people are those who find a place then have a contingency that they need to sell their old place to close on the new one. Either way I definitely wouldn't pay (or even give reduced rent) for someone to live in my condo while i try to sell it.

adamthesmythe
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Re: Buying house - which scenario make sense?

Post by adamthesmythe » Mon Feb 11, 2019 10:47 am

cheese_breath wrote:
Mon Feb 11, 2019 9:08 am
Are you assuming the condo would sell quickly? Seems both of your scenarios have you owning both house and condo for awhile. I'd suggest...

(3) Sell the condo and rent until you find the house you want.
Maybe a bad idea. OP might end up with a choice between an expensive short-term rental or a penalty to terminate a lease early on a regular rental. Do not underestimate the cost in time or money of short-term rentals.

#1 makes the most sense, unless a bridge loan with reasonable terms is available.

This may depend on the local situation. If condos sell slowly, or if cheap short-term rentals are available this might change the decision.

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goshenBogle
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Re: Buying house - which scenario make sense?

Post by goshenBogle » Mon Feb 11, 2019 6:56 pm

Thank you all for your input. My decision:
(1) Short term or bridge loan to buy the house. Never thought of this - should work.
(2) No problem for me to own condo and house at same time. In my condo development, most units sell within 2 weeks. There is already a waiting list of buyers.

Thank you all.
Retired and loving it!!!!

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