Are you planning on coming back to the area eventually? Do you want a house that is building equity and keeping place in the market?
If the answer is yes, then why are you selling your placeholder? A house that keeps you in the market that has a mortgage that would be reduced by your tenants paying it is a good choice to keep. While there are certainly downsides, keeping your house in the city has a lot more positives beyond the traditional reasons.
The Pros and Cons of Having a Placeholder:
- Ride the Market. This allows you to ride the increases and decreases of the market. This way if the market rapidly increases, you have a house in the market. This allows you to have a house at the “old” rate.
- Tenant Paying Down your Mortgage. Your mortgage will continue to be paid down even when you are no longer there.
- Locked In Mortgage. You can lock in an interest rate and the mortgage price so when you return to the house it is in the past.
- Recapture Depreciation or Capital Gains. Under current IRS guidelines if you live in the house for two years you can recapture the principle pay down, any appreciation and depreciation on your taxes.
- Market could decrease. If the market crashes again than you would lose any large increases and could even be in the negative.
- Mortgage is less than rent. If you are experiencing a loss then that would be compounded over time.
- Large Maintenance Expenses. These repairs or replacements may have to be covered out of pocket.
Personal Example of a Great Placeholder Home:
Our very first house in Virginia Beach was bought as a placeholder. We bought the house in a great neighborhood with the hopes of being able to bounce in and out. The elementary school is in the top 2 in the area, and only 15 minutes from base. In our absence the area has continued to appreciate, the house mortgage is decreasing through every principle payment made monthly. We also have FABULOUS tenants. It just works for us.