[Ana]

I’m trying to help a friend but I’m not sure what would be the best advice to give.

He wants to sell his house , which has only 6.5 years left in mortgage, at 2.8% interest rate.

He wants to get the equity ($500K) to buy a smaller place and live debt free.

I understand that his house is a liability and it’s not generating any income, however, I believe it has potential to appreciate in the years to come.

What would be a smart move?

His house has almost doubled the value in the last 10 years, It’s in a beautful city in Texas, with great schools.

Any suggestion will be appreciated.

TIA!

[Patrick]

It’s his house and his life. Give him your opinion, if he asks for it, but beyond that stay in your lane.

[Adam]

The last 10 years have been an anomaly in real estate. Average home appreciation historically is 3-4%.

Not exactly something to be too excited about if you’re not living there or getting rental income.

They seem to have a pretty good plan selling and downsizing

[Dawn]

If the smaller place suits his needs, it sounds like he is making the financially savvy move to reduce his expenses.

He will save a lot in real estate taxes and possibly other property expenses as well: insurance, maintenance, etc.

[Melissa]

Appreciation on a house is not good enough if you don’t really want to live there or just really want to be debt free.

If he buys a smaller house that will likely appreciate too.

His expenses will be less.

The question is where does he want to live.

Also the stress relief of being debt free, even if it’s “Just a mortgage” to others, is well worth it to some people.

[Chrissy]

If you think it is a smart move, you could buy it from him if the FHA interest rate is assumable.

He gets the money and you get the valuable appreciating property.

Otherwise, his goals sound pretty reasonable.

[Diana]

Since his house doubled in price I think he’d be okay to sell. Buy low, sell high is the strategy.

[Rachel]

You mean turn it into a rental? IMO if he wouldn’t have purchased the house to rent out he should sell it.

He could possibly loose out on owner occupied tax benefits

[Kent]

You might imagine that the property is going to appreciate in the coming years.

But the statistics suggest real estate is already nosebleed-priced.

[Christina]

He wants to sell, take equity and buy a smaller place and be debt free. Why would you steer him away from what HE wants to do with HIS own money?

Some people value the peace of mind of being debt free and doesn’t care/need potential appreciation.

Let him be.

[John]

Not everyone inspires to be a landlord. This can be a huge burden too many.

He wants to live mortgage free, show him the roadmap to do that.

[Allison]

I think it entirely depends on how much he likes the house.

[Dawn]

If he’s trying to downsize monthly expenses, I think it’s a great move. Will the new home be in the same area?

It will appreciate too then.

[Marty]

Yes. Let him
Do what he wants. If he wouldn’t have had that house in the last 10
Years and would

Have invested it it would have more than doubled

[张扬]

Does he live living there? I fell out of love with my last house and downsizing has made me so much happier, even if I lost some appreciation in the process.

As a friend you should not only want him to be better off financially, but happier and less stressed about his life too.

[Laila]

If he buys his next house in all cash, what is his age, in how many years will he retire, and what money will he live on?

Some people prefer the peace of mind of being mortgage debt free in retirement.

One consideration, however, is that once all that money goes toward paying for a home,

it can become quite illiquid, especially if interest rates are too high,

and/or if one doesn’t have regular and relatively high W-2 income to show to potential lenders.
—-
Is he single or married in terms of being exempt from paying taxes on $250K profit vs $500K profit, should he decide to sell.

[Yvonne]

Why would another smaller house in the same area not increase in value at close to the same rate?

[Author]

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