Reply to Should I sell my house or rent it out?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Take it and invest it. After investing for 20 years at 6% interest, your initial investment of $650,000 will have grown to $2,084,638 with literally ZERO outlay on your part. Meanwhile, that house in Reston will have property taxes, repairs, etc. and even if it's paid off will absolutely COST you money year over year.[/quote]

Isn't her house paid off and she will make rental income? Your scenario assumes the house only carries costs and appreciate with inflation if at all.  She can take rental income and invest it in the markets. She needs to calculate how much rental income she will net and compare with the performance of her market investments. She isn't likely to do better in the markets than she is already doing, because this assumes re-education and for her to change her strategies.

Another question to ask is whether she wants to pass the house on to her kids.  She needs to do the numbers, that's the bottom line.  Also, it is beneficial for her to sell and not pay cap gains tax on her appreciation now before it gets rolled over into a rental property.  But then she gets to deduct expenses of rental maint. from her income as well as depreciation. Depending on her income bracket she may get tax breaks and invest the money she would have had to pay in taxes each year.

What you say (cash out, pay no tax and invest the whole 600+K in the markets that will continue growing steadily with a rather high rate of 6% and with no risk) sounds tempting and convincing, but I don't think counting on markets consistently returning this for the next 2 decades is realistic.  You are looking at the past  performance, but then the same rule has to apply to housing market where properties keep appreciating.  Yet we don't believe this will continue and believe housing prices may actually drop or barely keep up with inflation.  What makes you believe markets will keep rising in that scenario?[/quote]

The stock market consistently returns 7%+ over time.  So as long as you take it out of market a few years before you actually fully need it you should be good....market is the simplest way to get a good return.  Much less risky than a rental house, especially one that's older and will need work. What if you go 3 months between renters, then your profits for the year might be gone. [/quote]

Consistently since what time? What happens during market crashes and what makes you believe it's going to keep going?[/quote]

Stock market returns since 2005 have averaged 9.51%.  So if you put $100 in in 2005 you'd have $537 now, even with the downturn years.  So as long as you didn't need to pull it out in 2008 you would do better by just leaving it in and riding out the downturn.  It has always been this way

Similarly S&P500 return since 1950 is 11.28% per year and 7.49% inflation adjusted.  
No reason to assume that the last 70+ years of data points will significantly change anytime soon.

So I stand by my statement that you can average 7% in the stock market over time.  Just be sure to pull what you need in the next 2-3 years out of the market (ie. start pulling your 529 out of stocks 2-3 years before your kid starts college, but not all of it as you wont need all of it until the 4th year of college).

[/quote]

You are talking about past here.  In the past RE also performed extremely well.  Many doubled or tripled their money invested in RE in high COL areas decades ago.  People retired because they bought RE early on in places where it's skyrocketed.  Is this going to continue?   How likely is it that RE will become a dump and a loss to own while stocks keep going higher and higher? Not likely, because things are connected.  We had printed sh** ton of money in the last decades even over the last few years. If I count on stocks performing well then so would RE.  [/quote]

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