Should I Sell My House and Move Back to New York?

Photo-Illustration: by The Cut; Photo: Getty Images

Like so many people in 2020, I felt worried about COVID, left New York and decided to buy a home. I got a pretty good deal (I think?) on a two-bedroom house in upstate South Carolina near my family. House prices were still relatively low then, so I was able to cover the 10% discount with my savings. I have a 30-year mortgage and my monthly payments (including taxes) come to about $1,700, which is still less than I pay the rent in Brooklyn. There are also a lot of other costs – the house isn’t in top condition, and there’s mowing fees and all the other stuff that I don’t think about. Financially, I’m lucky I can afford all of this. But I started to realize that this purchase was a big mistake.

First of all, I really miss New York. I love being around my family, but I’m single and quirky and my romantic prospects aren’t great here. I have some friends from growing up, but most of them are married and have kids, so we’re just at different points in life. On the career front, I’ve also realized that there are limitations to being completely remote. I’m slowly losing the opportunity to advance in my field because I don’t have visibility or connectivity back to New York, where my office is currently a remote option.

Basically, I want to sell my house and move back to Brooklyn. But is that a terrible idea? I know you have to be in your home for at least five years before you sell, plus the real estate market isn’t so good right now (or so I heard). Is that really true? I think I could rent it out, but that seems like a huge headache and I’m not sure if it’s financially worth it. What shot will I get to sell it now? Is there any other option that I haven’t thought of?

First of all, I’m glad you can acknowledge this. I have a personal theory that a lot more people regret buying a home than the reality would say. Of course, it’s a huge privilege to own property, and complaining about it can feel a bit rude. But I give you credit for realizing that you’ve made a big, costly decision that didn’t turn out the way you expected and are now taking steps to change your situation instead of living in it. . A home should be a source of comfort, not an expensive burden that forces you to go somewhere you don’t want to. If you really want to go back to New York, you should!

That said, selling off a home just a few years after purchase, especially in today’s economy, may not be in your favor. That’s why you need to step back and consider your sale or rental options before making any moves.

The “5-year rule” you mention is popular advice and it’s not wrong. The logic behind that is that selling a home really costs a lot of money. Closing costs and commissions associated with both ends of the transaction (buying and selling) typically account for about 7 to 15 percent of its overall price, so your home needs to appreciate an equal amount to you can break even on the trade. In other words, you want the value of your home to increase enough to cover these costs, and that usually takes at least 5 years.

However, like any rule of thumb, there are many exceptions. “That advice assumes that the housing market is operating in a vacuum,” said Stephanie Ghenkin, a certified financial advisor based in Brooklyn and owner of My Financial Planner. “That’s usually not how the real world works.”

Furthermore, there is nothing average about today’s property prices. Suburban home buying at the start of the pandemic has slowed, especially as mortgage rates soar, but the market remains very uneven. You can still sell your house for more than you bought it for; maybe not. But the point is, don’t let the five-year rule stop you from doing your research on what your home’s value might be today and what you need to be on top of a potential sale.

To hit the numbers, you can try one of the many online real estate calculators that help you estimate the potential profit from the sale of your home, including easy-to-forget expenses (the complicated ones). like pre-inspection and marketing). That will help you figure out what you need to sell it for without losing money, minus all sales fees and whatever you owe on the mortgage. If your home is in a desirable area and you think you can get a good price for it, then maybe you should talk to some real estate agent about the next steps. (You might want to do that anyway, just to get an idea of ​​the market. Just make sure you haven’t signed anything off with anyone.)

However, it is more likely that it will be difficult to monetize a sale right now. And for that reason, you should also explore option two: renting. This can be even better financially and an emotional perspective because you won’t have to give a Large selection, reactions that you may regret later.

You should also remember that selling this home and moving back to New York need not be in the same decision. You could try a test run: Rent out your home and sublet an apartment in New York for six months and see how things go.

“One thing that I’m seeing with a lot of my clients, especially as we emerge from the pandemic, is people aren’t sure where to put themselves,” Genkin said. “I encourage you to test solutions before you commit. Especially because the New York you remember may not be the New York you find when you come back.”

Plus, you could get a great mortgage rate if you buy in 2020. If you can find a tenant that will cover your monthly shipping costs ($1,700 for a home). two bedroom seems like a pretty good deal, although I don’t know what’s normal in your area), this home could turn out to be a great investment over the long term. Sure, it’s frustrating managing a property when you live in another state, but you mentioned that you have family living nearby, so maybe they can help and you’ll be visiting often. . You can change your mind again and come back in a few years, or continue to rent it out as an additional source of income for decades – both good results.

Finally, a quick word about the most boring part of home ownership: taxes. “If you sell your house now and make a profit, you will be exempt from capital gains tax because it is your primary residence,” says Genkin. But if you rent it out and then decide to sell it later, that exemption won’t apply unless you lived there for at least two of the five years before selling it. I won’t say anything about this – you’ll only pay capital gains tax on the profits you make, not the entire sale price – but it’s something to consider. You can always rent it out for two years and then revisit the option to sell before the waiver expires. Again, you have time to make this decision.

Overall, I think you should be patient with this process. Deciding where you want to live, especially at this difficult and transitional time, can take some exploration. If I were you, I wouldn’t complicate it by trying to sell your home at the same time. “Take a breather,” says Genkin. “There’s a financial element to this decision, but there’s also a qualitative process to understanding what you ultimately want.”

The Cut’s financial advisor Charlotte Cowles answers readers’ personal questions about personal finance. Email your money conundrums to Should I Sell My House and Move Back to New York?

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