Sell house and go back to renting?

[melikeyoubaby]

Kia ora all.

Like many, we're struggling with the cost of everything.

We're thinking of pulling a controversial move and selling the family home and going back to renting.

From a maths view point.

1. We earn about $150,000 before tax combined. Three kids, two workers.

We pay just under $3k on our mortgage monthly. $600 of that is principal.

An extra $375 for rates, $420 for contents and home insurance.

1. Just to live in our house, no fun is costing us $4095 a month.

Our house is worth $640,000 on homes.co.nz .

If we sold and got a low end $600k we’d still end up with $166k before agent fees, breakage fees etc. (agent fees look at $15,217)

1. Low end guessing say 150K left over.

We’d put that into 3/6/12 month deposits.

Here’s the kicker, we hate our house, we only bought it because we needed another room it seemed to fit all the criteria but after living it in for two years, we’d almost rather be in our old smaller house. (hind sight is 20/20).

If we look at northern canterbury or even city central it looks like four-bedroom houses are $600-700 a week.

Which is still less than our interest payments. Then also missing water, rates, home insurance.

1. Even if we got a nice $750 week rental, we’re looking at only rent payments being $3250 a month.

1. Then secondly the money we get from selling would be sitting earning interest, even on a low guess 5% that’s another $7,500 extra for one year.

However even looking a the maths it just seems wrong.

Has anyone else done this?

Anyone got any thoughts?

 

[melikeyoubaby]

There have been a lot of really insightful comments/posts, too many for me to get around to everyone. I really appreciate them, and your time.

It was never "this is happening" situation but some thoughts i wanted to bounce off other. You all have my thanks.

To those struggling, Kia Kaha.

 

[theforbiddenchild]

@melikeyoubaby The biggest thing everyone is missing is inflation. The real value of your mortgage is decreasing every year, whether you pay principal or not.

At the same time rents are increasing, and the real value of money in term deposits is decreasing.

 

[godismyredeemer]

@theforbiddenchild Yeah if they sell they need to outpace 600k appreciation over time with 160k capital. Not impossible especially as running a house you own can be costly, but it takes discipline and more than just TDs.

 

[carld1121]

@theforbiddenchild But they could put the money into something else, like stocks/bonds, albeit, it's more risky.

 

[katstamper]

@theforbiddenchild Interest rates are higher than inflation though

 

[theforbiddenchild]

@katstamper That's true; but the value of the debt is decreasing with inflation and thus the value of the interest is also decreasing in real terms.

You can look at it like this: imagine 5% inflation, 10% interest.

Y1: Interest 10k,
Y2: Interest 9.5k (y1 money)
Y3: Interest $9025 (y1 money).
y4: Interest $8573 (y1 money).
etc.

Now this might not be true year to year, but will essentially follow inflation over the long run.

 

[godsunworthyservant]

@melikeyoubaby Maths seems right, but doesn't take into account, any capital gains in the future, the insecurity of renting and moving each year once the LL decides to sells etc. You will still need contents insurance for your rental

Could you rent out your place so you still have some skin in the.property market and.if all else fails can move back in?