We’re moving! We are putting our condo on the market and moving to our rental duplex next month. It’s not a huge change because we’re moving just 2 miles away and the size is about the same. However, this is causing all kind of anxiety for Mrs. RB40. She hates moving with a passion. Luckily, she’s going along with it this time and she’s been doing the bulk of the packing and organizing. I really hope this works out because this move is mostly my idea. Today, I’ll share my thought on moving from a condo to a house.
Here is a quick recap of this duplex. We acquired this duplex in 2014 with the 1031 exchange. We sold our old rental home and put the money into this duplex to defer capital gain tax. At the time, I planned to move into the property in a few years so we can take advantage of the home sales exclusion rule. Basically, homeowners can sell their primary residence and avoid paying taxes on $500,000 (for married couples) of the capital gains. This is a big tax break if the value of your home increased over the time you live there. We’ll still have to pay taxes on the depreciation taken when we sell, but that’s another story. Anyway, we purchased the duplex with the goal of moving into it at some point.
Now it’s 2019 and I’m ready to move. Why now? There are many factors. I’ll go over them and list the pros and cons of moving from a condo to a house. I’ll also figure out if this move will help us reduce our monthly housing expense. It should, but I haven’t crunched the numbers yet. BTW, we’re moving into one unit of the duplex. Currently, the other unit is still rented out.
Why move this year?
It’s always difficult to move so we’ve been putting it off. However, this year is the year we need to make the move. Here are some reasons why we are moving and consolidating our properties.
- The real estate market is softening. I think we need to sell our condo while we can. If we wait any longer, the condo market will soften even more. Like many cities, Portland had a construction boom over the last few years. There will be many condos and apartments coming online this year.
- The interest rate is going to keep rising. It’s still very low historically so we’d better sell now. Homebuyers might be less willing to buy when the interest is higher.
- The landlord laws have been getting stricter in Portland. For example, landlords must pay the relocation assistance ($2,900 to $4,500) if they raise the rent more than 10%. Also, there’s been talk about putting a cap on rent increase.
- Our tenant is moving to a bigger home. The timing is just about right.
- We need to simplify our investment. I’ll have to spend more time in Thailand to help my mom and Mrs. RB40 doesn’t want to be a landlord. She had to replace a GFCI outlet while I was gone for 5 weeks. It was a debacle and I’m never going to hear the end of it.
- The stock market has been quite volatile. The US probably will see a recession sooner rather than later. It’ll be a lot more difficult to sell a house in a recession so we’d better do it now.
These are the reasons why I want to sell and move. We’re happy in our condo so we didn’t mind the status quo for a long time. However, it is the time to get going. Who knows what the housing market will be like next year. I definitely don’t want to be stuck paying multiple mortgages.
Pros of moving to a house
We lived in our condo since 2007 and it’s been pretty good. We have an awesome view. I’m really going to miss that. Also, the condo is centrally located so it’s very convenient. However, I’m looking forward to moving into a house too. Here are the pros of moving to a house.
- Backyard – Yay, we’ll have a backyard. RB40Jr is so energetic. He runs around our condo and shoots the basketball all the time. It’ll be nice to have a backyard so he can go out and play.
- Basement – The size of the living area is about the same, but we’ll have a big unfinished basement to store stuff. Eventually, we’ll remodel the basement and increase the living area of the home.
- More walkable – The duplex is located in a more walkable neighborhood. There are many restaurants, coffee shops, bars, and grocery stores in that area. Hopefully, we’ll get out more often. Now, we rarely go out after we get home.
- Better community? – The duplex shares a backyard with 3 other houses. Hopefully, we’ll become a part of the community there. There isn’t much of a community at our condo. Everyone is entrenched in their unit and we rarely talk.
- No HOA – This means fewer rules and regulations. We can remodel the kitchen and plant whatever we want in the yard.
- Better price appreciation – Disappointingly, the price of our condo hasn’t increased much since we moved in. Of course, we purchased at the height of the housing bubble so it’s somewhat understandable. However, I still think the house will appreciate more than the condo.
- Noise… – Usually, this is a big complaint about living in a condo. We’re surrounded by other units. However, it hasn’t been too bad for us. Our building is made from concrete (mostly) and the disturbance has been minimal. About 5 years ago, we had a neighbor upstairs that played loud music at 9 pm before going out on Saturday night. But that was pretty infrequent and he’s gone now. The house should be much better. Our renter is a professional and he’s a reasonable guy.
- Size – The size of the living area is about the same, but eventually we’ll have more space. We’ll remodel the basement and add some living area there. Also, our tenant will move out eventually. Once he left, we’ll have plenty of space. I might turn the upstairs unit into an Airbnb rental, though. We’ll have to evaluate the situation later.
Cons of moving from a condo
There are some disadvantages to moving from a condo as well. We enjoy living here and it’s hard to change. That’s why we stayed for so long.
- The View – We have a spectacular view of the Willamette River and Mount Hood from our condo. We have the privilege of seeing the sunrise every morning and it always lifted our spirit. This view makes a huge difference in a rainy city like Portland. In a house, we’ll just see the rainy street with gray sky above. In the condo, the view is beautiful even when it is raining. I’ll really miss this incredible view. This is the main reason why I was reluctant to move.
- 1 bathroom! – Unfortunately, our unit will only have one bathroom. I don’t think it will be a huge deal, but who knows. It’s not like we spend a lot of time in the bathroom. We’ll just have to manage our bathroom time more efficiently and leave the door unlocked… Eventually, I plan to finish the basement and add a bathroom down there.
- No dedicated parking spot – This house was built in 1890 and there wasn’t a need for a garage back then. I assume the residents took public transportation or just park their carriage in the backyard. Maybe there was a carriage house back then, but the lot has been subdivided and built over. Anyway, we’ll have to park in the street. Mrs. RB40 is unhappy about this because she needs to work on her parallel parking skill.
- Maintenance – At the condo, the HOA handles the maintenance outside of our unit. At the house, I’ll have to handle everything. Well, I’m already handling everything because it’s a rental property. It won’t be a huge difference for me.
That’s all I got for the pros and cons. These aren’t big factors that swayed us to move or stay. It’s really a move with an eye on the future. Eventually, we’ll have a bigger living space and some money on the capital gain tax. This is a long-term play that should pay off later. In the short term, I’m pretty sure the move will reduce our cost of living.
The finance of moving into a house
Now, it’s time to crunch the numbers. This is a little tricky because it’s a duplex and one unit is rented out. I’ll assume the rented unit will pay 50% of the mortgage, property tax, and other shared costs. I’ll add a 3rd column for after our tenant moves out. We’ll assume 100% of the housing cost then.
As I suspected, living in one unit of the duplex will reduce our monthly expense by a good amount. However, the monthly housing expense will shoot up once our tenant leave. That’s in the future, though. I’ll worry about it later. For now, the number looks good to me. The only thing I didn’t add here is entertainment. We’ll probably spend more money on entertainment after we move to this more walkable neighborhood. There is a great ice-cream shop just a block away. It’ll be much easier to eat out too. There are a bunch of great restaurants in the neighborhood. I’ll have to keep an eye on that expense and try to keep it down.
Lastly, our rental income will drop significantly. This reduction will be a big hit for our passive income. However, we’ll get some cash infusion from the condo sale. I’m planning to invest this money in dividend stocks and real estate crowdfunding. There are a lot of moving pieces here. I’ll have to wait and see how it goes.
Okay, that’s the summary of our upcoming move. I’m hopeful it will work out in the long run.
What about you? Have you moved from a condo or apartment to a house? Was it a good or bad move?
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