Tough Decisions

Well, last night was one of those rare times where the twins decided to take a nap at the same time as did our daughter. And, instead of a 10 minute cat nap, they actually slept for almost an hour. This gave me and my wife some needed time to talk in-depth on what our goals were with House #1 and House #2. I'm not sure if I mentioned it here before, but the tenants in House #1 gave me heads-up that they will more-than-likely be leaving at the end of October. As most probably know, the Nov/Dec timeframe isn't exactly the best for finding buyers or tenants, so the house may be sitting a while. At almost the same time, we will be closing on House #2. In Dec (or Jan), we will also need to pay for the property taxes on House #1, House #2, and our own personal residence. We also have our annual insurance premium due the beginning of January, Christmas is coming up, we need to pay down some of our CC's, and the list goes on.

After discussing all the pros and cons, we have decided to not only sell House #2, but also House #1. It really pains me to have to sell House #1, because I know it is a very good house with long-term potential. It's roomy (1950sf), has a large backyard with a huge open meadow in the back (i.e., no neighbors), great location (i.e., new corridors being built 1/2 mile away, shopping center being built right up the road, etc), and so on. The market appreciation over the last 1.5 years has been 1-2% at best, but I can see it going upwards to 5-8%/year the next several years. But they say never to get emotionally attached to your investments, which I realize I've done with House #1. A lot, I'm sure, has to do witht he terrific tenants I've had living there, which have caused me absolutely NO grief whatsoever (quite the contrary).

I still don't know if we will want to sell one or both via an agent and lose 6%, or try to sell it ourselves and lose 0-3%. With all the distractions ahead, we're both leaning toward using an agent. So, here is my estimation of the outcome ...

House #1

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Comps: $72/sf
Size: 1,952sf
FMV: $140,500
Sale Price: $139,500
Holding Costs: 3mos x $900/mo = $2,700
Closing Costs: $1,500
Agent Commissions: $8,370
Other Costs: $3,500
Loan Balance: $103,000
Net Profit: $20,430

House #2

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I gave my synopsis in a previous thread. The bottom line net profit after 3mos would be ...

Net Profit: $12,692

So, the bottom line is we'd make a total net profit of around $33,000 from the sale of both houses, given a 3mo. holding period (which is a little conservative for this area now). The $33,000 includes the taxes for both those houses already, so we won't have to worry about paying that. With the $33,000, we haven't really decided exactly what we will be paying and when, but I plan to set aside about $10-15k for future acquisitions (closing costs, downpayment, u-haul money, or whatever). The rest will be used to pay down/off our CC's, hospital bills, personal property taxes, etc.

The good thing is out DTI should come WAY down afterwards, and we should be in better shape - financially - to make wiser acquisitions. Our credit will probably look like a seismograph during an earthquake for a short while, but I figure it will slowly go up since the main thing keeping it down was the large recurring balance.

In hindsight, making $33,000 over the course of almost 2 years wasn't the kind of booming profit I was looking for when I bought House #1, but it sure beats $0. Plus the experience in buying, renting, and selling will be immeasurable in dollar amounts.