Deciding Which House to Sell
Mark owns two homes, one of which is being used as a rental. He has $80,000 of equity in one and is about $80,000 underwater on the other one. Should he sell one of these houses or both?
QUESTION: Mark in Colorado Springs makes $110,000 a year and owns two homes, one of which is being used as a rental. He has $80,000 of equity in one and is about $80,000 underwater on the other one. There are nine of them in the house, including a son with his wife and two kids. Should he sell one of these houses or both?
ANSWER: If you sell the house, you should encourage the son and his family to go rent something. If you don’t sell the house, then it’s okay. If you are going to sell both houses, then it’s not reasonable for you to try to find something where you are basically broke to try and support that household.
I would hold on for right now and watch this market recover. Start looking at the spring of 2014 to sell it, or maybe 2013 if you have a real bounce-back in values this winter. But by 2014, right after your interest rate adjustment occurs, you may be close to being right-side-up by then.
It’s possible because a lot of these markets have been rebounding, and Colorado Springs is not a bad market. I’m going to try and let this thing recover so that I can get rid of it and keep my house. Feeding it $5,000 out of a $100,000 income makes sense to me.
I’ll do that rather than dump them both and put the kid out on the street in the process.