House Dilemma: To Sell or Rent

Our First House

In 2001 we bought a small starter home in a working class Portland neighborhood with the intentions of fixing it up, selling it in a few years, and buying a bigger house. The typical American dream. Five years later, while everyone else was racing to buy bigger houses before the prices got too high, we decided to stay put in our 980 square foot “starter home.” We consolidated our debt and refinanced from a 30 year to a 15 year mortgage with lower interest rates. Housing prices were going up daily, everyone was selling off their yards to squeeze in one more house, and the real estate market looked like a great investment. We purchased our house for $100k and in just 5 years it had more than doubled in value.

Dude, Let’s Go Cruising

The reason we had decided to stay in our house and refinance was that we had agreed to a 5-year plan. The plan was that we would spend the next 5 years saving money, paying off debt, and then sell everything we own and go travel for a couple of years. At that time we were heavy into sailing; we owned a sailboat, I raced 2 times a week on the Columbia River, and we wanted to spend a couple of years cruising around the Caribbean in a sailboat with our daughter. The call of warm turquoise waters and white sandy beaches was strong. Our boat at that time was a 27-foot Pearson, not nearly big enough to be a liveaboard, so our intentions were to sell our house and use the money to buy a cruising sailboat big enough for a family of 3 to live on. But after our sailboat dismasted and we experienced the hassles of boatyards and costly repairs, we realized that one little accident while cruising could ruin our dreams and break us financially. We then discovered a nice alternative to cruising on a sailboat; barging through France. France has a network of canals designed for barges. Many people have purchased barges and slowly travel through France and Europe via these canals on their floating homes. If they want to stop for the night they pull over and tie off to the bank. If they need supplies, they stop at the next town. You don’t have to worry about hurricanes nor pirates.It sounded ideal and we were committed! Unfortunately, a lot of other people have this same dream and the cost of barges is not cheap. The other issue was that we could not stay in France for longer than 90 days at a time unless we got residency, which is not easy. They also drain many of the canals during the winter, which would leave us stranded in a costly marina. So, we opted to just travel as tourists and go round-the-world; a plan that would have us see more places and we would not have to worry about being slaves to a boat. Though our plans kept changing, the dream of taking time off work and traveling was still the goal and was the real point of our 5-year plan.

The End of a Plan and the Beginning of a Dream

The end of our 5-year plan has arrived and we have saved money, paid off our debt (not including mortgage), but unfortunately the housing market is in dire trouble. The housing prices are falling daily and the banks are hesitant to lend out money for loans. Our original plan was to sell our house to buy a boat to live on and it is a good thing we changed our plans. There is no way we could afford a boat big enough to live on with the leftover money from selling our house now. Whatever money we do get from the sale of our house needs to go towards the purchase of a new home once we are done traveling and have resettled. We don’t want to keep our current house as we would like to relocate to a different area, preferably one with less rain and more sun.  We are fortunate that we are not upside down in our mortgage like so many others, but we still won’t be getting nearly as much money out of our house as we had hoped 5 years ago. So now we are at a crossroad on what to do with our house.

Sell the House?

We would really like to sell our house but the thought of the housing market recovering in a couple of years and losing money now worries us. But the future is unknown and the housing market could be even worse than it is now. With more and more foreclosures happening around the area, the future is starting to look grim. We had hoped to have our house on the market this month, but with all of the projects we still need to complete, it might be next month… or the month after that…

Rent the House?

Portland is experiencing the lowest rental vacancy rate in years. This is driving up the cost of rent and the rent can actually cover the cost of a mortgage, something that wasn’t possible 5 years ago. The option of renting sounds great on paper, but what if you get a renter that trashes your house or decides there is nothing wrong with having a meth lab in one of the bedrooms. We would need to pay a management company to collect the rent and deal with emergencies and this would work out pretty well. But if no one wants to rent our house and we must pay the mortgage payments from our travel fund thus cutting our RTW trip short. A seriously scary thought!

What Do We Do?

We would really like to sell the house and not be worrying about it halfway across the world, but we might not be able to sell it for what we want in this economy. We plan to talk to a couple of real estate agents about the sell vs. rent option and see what they think. Our thoughts now are that we will try to sell our house for what we want and try renting it out if it doesn’t sell. Maybe being landlords won’t be that bad. But then again…