Penciling Out the Housing Options

Summary:  this comparison of options suggests that the best course might be to sell the townhouse and become a nomad renter, i.e., “selling and renting.”  This may significantly reduce the (net) monthly housing cost to about $1,250/mo.  Selling the townhouse could maximize personal freedom and cash liquidity.

In contrast, “leasing out and renting” might reduce the monthly housing cost slightly more to $1,000/mo., but it would not improve cash liquidity, and landlord duties could limit personal freedom.  The disadvantages may outweigh the potential, speculative benefit of $250/mo.

I could stay in the townhouse in the short-term (option 3), while preparing to sell (option 1).

1.  Sell the townhouse — (a) rent long-term a smaller hip place, or (b) rent short-term a series of hip places in different places.

conclusion:  rental cost of $2,000/mo. (e.g., Archstone SM), with investment income of $750/mo. (4% withdrawal from freed-up equity), for the second lowest housing cost of $1,250/mo. (with a liquid cash cushion).

freed-up equity:  liquid cash @ $220K net

future equity:  none — no upside gain, but no downside risk either

income:  @ $9K/yr. = (4% return * $220K equity out)

liability exposure:  none

location:  really wide open

mobility:  really wide open, with no roots anywhere

2.  Lease out the townhouse — and (a) rent long-term a smaller hip place, or (b) rent short-term a series of hip places in different places.

conclusion:  rental cost of $2,000/mo. (e.g., Archstone), with net income of $1,000/mo. from leasing out, for the lowest housing cost of $1,000/mo. (with no cash cushion).

freed-up equity:  none

future equity:  upside gain, but also downside risk

income:  $12K/yr. net of taxes = (rental income of $3500/mo. — refinance down to $2,300/mo. — taxes)

liability exposure:  some

location:  wide open — subject to landlord duties

mobility:  wide open — subject to landlord duties

3.  Stay in the townhouse. 

conclusion:  net housing cost is the highest, at $2300/mo. (with no cash cushion)

freed-up equity:  none

future equity:  upside gain, downside risk

income:  none, but refinancing to $2300/mo. might save @ $1000/mo., $12K/yr.

liability exposure:  very low

location:  good (north of Montana)

mobility:  possible, but tied to townhouse

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