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Author: AfoolwondersNot Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127523  
Subject: To sell or not to sell... Date: 1/31/2013 4:45 PM
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...that is my question.
Hello, I'm looking for additional information to ponder concerning whether this is a good time to sell my house. In the SF Bay Area there had been a 30% run up in real estate in the last year (specifically 26% in Sonoma county where my house is located). No ones seems to know exactly why this is.

I have a fixer upper ( block and pier foundation needs repair or replacing for starters) The foundation is stable and could probably last many years and survive a sever earthquake but a potential buyer may want to repair or replace it. The lot is 10 times the size of the house in a very desirable neighborhood. My agent told me a year ago that we could put it up at 160K as a fixer or possibly 210K in hopes someone would buy the house to live in as is. At this point she believes the home should be listed at 225k and would be bid up from there and snapped up quickly by a flipper. She is very honest and ethical and I trust her. The inventory in my city is very low and there are quite a few people looking for houses to flip. If I had the capital I would fix it up myself but I don't.

I own the house free and clear. I don't have the temperament to rent ( been there done that). I don’t want to trust it to a rental agency for a lot of reasons ( been there done that too).

My main question is does anyone have a good reason to believe real estate prices, in this area, or in general in the US, will continue to go up at a clip higher than inflation, or better, for the next 5-20 years?

I'm 51 and single. The money I make from my business barely pays the bills and that could change for the worst. Almost ALL of my assets (with very little savings) are tied up in this property. My business has suffered severely for quite some time and barely pays the bills. This could change for the worst. The business I run is one of the first to go in a bad economy.

I don't really like this city although I do like Sonoma county. I would rather be in the east bay for various reasons I shall leave unnamed. If the house sells I would have various options. I have a girlfriend in Italy I could stay with and see where that relationship leads. My sister has land in the southwest she would let me put an airstream on, rent a room in the east bay and so on.

If I have left out anything important let me know and I will address it if I can.

If anyone can suggest another board to post this on please let me know.

Thanks.
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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124642 of 127523
Subject: Re: To sell or not to sell... Date: 1/31/2013 5:27 PM
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Hi Afool,

Here's my 2 cents...

You are dramatically over-housed and under-reserved! What I mean by that is, based on the state (or non-state) of security and stability of your income source, and the fact its just barely covering your lifestyle consumption costs as it is... you can't afford to even consider gambling by keeping all your liquidity tied up in your real estate. (And you can't afford to rebalance liquidity *out* of your real estate because you can't afford the interest costs to separate your cashout for safety!)

You're playing financial Russian roulette... and in terms of odds of calamity, there are 4 rounds in your six-shooter not just one.

You need to do at least one (probably several) of the following steps;
1) reduce your lifestyle costs to the point where your cash reserves are at least equal to 1/4 your annual lifestyle costs. (Of course, you currently have zero cash reserves, therefore;)
2) Sell your free & clear home, in order to fund your emergency cash reserves account of 1/4 your annual lifestyle costs,
3) Look at the costs of renting, or mortgaged-owning, of the smallest housing footprint you can comfortably survive in, in the least expensive location you can be safe in... add that housing cost to your lifestyle nut, and re-calculate #1 and #2,
4) Of the remaining cash, (assuming you are 'location-stable' at this point in your life,) compare renting versus buying your next home (perhaps even a condo) with 5% down, in order to conserve as much of your net cash as possible. Yes... real estate *IS* likely to be a *VERY* strong asset class, versus inflation, going forward the future 5-20 years... so sayeth I ;~)

Luck!
Dave Donhoff
Leverage Planner

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124643 of 127523
Subject: Re: To sell or not to sell... Date: 1/31/2013 5:52 PM
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Sell. You are owned by your house and don't even like the city you live in, yet are flexible to go elsewhere. Perhaps the better question is why are you considering staying?

IP

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Author: determinedmom Big red star, 1000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124645 of 127523
Subject: Re: To sell or not to sell... Date: 1/31/2013 6:22 PM
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In your situation I would sell rather than hold on with the hope that the property would increase even more in value.

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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124646 of 127523
Subject: Re: To sell or not to sell... Date: 1/31/2013 9:06 PM
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...If I have left out anything important let me know and I will address it if I can. ...

It was not clear if you were living in it and if you would qualify for the homeowner's capital gains tax exemption (Google this)

You might want to keep it for long enough to qualify for that if you can. Other than that It don't see any reason to keep it, you wouldn't buy it today if you didn't own it.

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Author: AfoolwondersNot Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124647 of 127523
Subject: Re: To sell or not to sell... Date: 1/31/2013 9:07 PM
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Dwdonhoff "Hi Afool" lol any hidden meaning there? Just kidding. I like to think of myself as aFool

"You are dramatically over-housed and under-reserved"
No doubt about that. Excellent points. Thanks for your post.

__________________________________

inparadise "Perhaps the better question is why are you considering staying?" Good point. Some of my cousins live in this area. Another is Luther Burbank said "I firmly believe, from what I have seen,that this is the chosen spot of all this earth as far as Nature is concerned". I agree.

It may not be wise to post the other reasons. This post will likely be available for "the world" to see forever. Thanks for your post.

__________________________________

determinedmom That is one of the reasons I would consider staying. If it jumped 26% or more in a year one has to wonder what may happen in the next three years. I could probably hold on for that amount of time (or more depending on various factors). I'm extremely frugal and I am under prop 13 with very low property taxes and obviously no mortgage. It's not that I hate this city, there are some redeeming aspects. It's just that I have lived in quite a few places and I have enjoyed many of them a lot more than I do here. Thanks for your post.

__________________________________

I'm leaning dramatically on the sell now side.

Any additional posts would be appreciated.

Thanks all!

- aFool (:

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Author: AfoolwondersNot Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124648 of 127523
Subject: Re: To sell or not to sell... Date: 1/31/2013 9:16 PM
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Watty56 "It was not clear if you were living in it and if you would qualify for the homeowner's capital gains tax exemption.."

I would have to pay zero capital gains.

"you wouldn't buy it today if you didn't own it." Good point. Thanks for your post.

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124655 of 127523
Subject: Re: To sell or not to sell... Date: 2/1/2013 6:29 PM
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My main question is does anyone have a good reason to believe real estate prices, in this area, or in general in the US, will continue to go up at a clip higher than inflation, or better, for the next 5-20 years?

Last week I attended a talk by Bruce Norris, a prolific investor in Riverside County, CA. He's buying everything he can get his hands on because he believe CA real estate will appreciate by 20% or more in 2013 alone.

Norris accurately predicted the California Comeback ...

http://www.thenorrisgroup.com/blog/tag/california-comeback/

... and more importantly predicted the California Crash.

http://www.thenorrisgroup.com/blog/tag/california-crash/

A lot of California real estate investors follow his advice with good results.

He made a strong argument for 20% increase--all of which I can't repeat here because I can't post the graphs he used--but he was right twice before, so...

http://www.thenorrisgroup.com/index.php?cID=308

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