Need Advice: Sell investment property to buy gold?

[HELEN]

We purchased a townhouse for the purpose of rental income for 254k in 07/05 here on the west coast of Florida. Over time, qualified renters are becoming more scarce. There is no mortgage on the property, but the carrying cost amounts to about 7k/yr. The current renter will not be renewing after June, so we were thinking now of selling. We anticipate being able to sell and net 200k. We are also getting into purchasing gold, and selling the property would allow us to increase our position in gold. The attitude we have is this: selling a potentially diminishing asset whose future seems questionable and that requires carrying costs (the real estate), in order to buy part of an commodity that has minimal carrying cost (gold) and that may be a better investment.
We would appreciate any thoughts on this. Thanks.

[aaron]

Re: Need Advice: Sell investment property to buy gold?

Where did you come up with the 200K number? I think, if you purchased in 2005 at 254K that you are being wildly optimistic. Would you sell if you can only get 125K?

Oh.. I just read "west coast"... It may be difficult to sell at all.

Welcome to iTulip!

[chr5648]

Re: Need Advice: Sell investment property to buy gold?

Your going trust some random people on some site on the net to give you advice with potential consequences on your current and future financial well being?

I suggest buying classic rubber chickens http://www.amazon.com/Century-Novelt.../dp/B002T47Z6C. These are definitely due for a bull market.!!!!!

[HELEN]

Re: Need Advice: Sell investment property to buy gold?

Thanks!
The agent just sold 2 comparative properties in the same development, one at 215, the other at 213 last month. Our thought is sell when there is still demand, even at 25% loss, not including the received rental income. Commission: 5% (6% if split) + closing fees would net about 200k.

[aaron]

Re: Need Advice: Sell investment property to buy gold?

Was that before or after the oil spill?

[HELEN]

Re: Need Advice: Sell investment property to buy gold?

During oil spill, but the property is 10 miles from the coast, and so far, of no consequence to this town.

[cjppjc]

Re: Need Advice: Sell investment property to buy gold?

Good luck Helen. Your leaning it seems, to selling the property and buying the gold. Who can say for sure what the best choice is? For what it's worth, if I were you it would do it.

[jpatter666]

Re: Need Advice: Sell investment property to buy gold?

Good luck Helen. Your leaning it seems, to selling the property and buying the gold. Who can say for sure what the best choice is? For what it's worth, if I were you it would do it.

Sheesh, guys, let's try to be more helpful here.

Helen, we don't have an idea as to what your overall financial situation is, so that makes it harder. Also, none of us are financial advisers (although to some that's a positive point!)

That said, the general opinion on the site tends towards neutral (or slightly negative) on owning your own home (depends on whether you own outright, location, etc), but is definitely negative on housing as an investment. I'd probably agree with that. Unless you plan on moving there yourself one day, I'd seriously consider selling. FWIW, I own my own house.

Now you've said you're already into gold. The recommended allocation on iTulip is 30%. It used to be 15%, got moved up to 30% some time back. The other 70% is in Treasuries (holy war on whether *that* is wise). Some people do a blend of both gold and silver. JTabeb who has been seriously into PMs for a long time, is 50/50 last I read.

Now, remember when buying gold, the premium for physical, NAV for paper gold such as GTU, or even carrying costs for something like BullionVault factor in. Most people here are not fond of GLD/SLV ETFs except as trading vehicles. Miners are not recommended on iTulip, although I personally have positions.

Finally -- iTulip is moving more towards inclusion of an energy position as you've doubtless read in the latest postings. More investment choices are coming.

Good luck!

(one more thing)

PMs are *volatile*. Make sure you differentiate between your permanent (for now) position and anything for trading. I have no problem seeing an event where gold goes sub-1000 for a time. I also find it far more likely that we will never see that -- so have at least a basic position.

ThePythonicCow I believe once suggested using a ladder of price points for entry, or simply buying some every month.

[dutch12]

Re: Need Advice: Sell investment property to buy gold?

Well, this fool is 80% in PM.
When choosing the PM option (precious metals) one could (should?) consider buying a nive Vault that has room enough to store silver as well.
Depending your personal situation (some say young more weight on silver old more weight on gold) you could make a mix of 25% gold & 75% silver to 75% gold & 25% silver.
Silver rounds of 1 ounce could be handy in a SHTF scenario, and silver is as well money as industrial metal.
Much, much more to be said on silver.

[jpatter666]

Re: Need Advice: Sell investment property to buy gold?

Well, this fool is 80% in PM.
When choosing the PM option (precious metals) one could (should?) consider buying a nive Vault that has room enough to store silver as well.
Depending your personal situation (some say young more weight on silver old more weight on gold) you could make a mix of 25% gold & 75% silver to 75% gold & 25% silver.
Silver rounds of 1 ounce could be handy in a SHTF scenario, and silver is as well money as industrial metal.
Much, much more to be said on silver.

"Nive vault"? Did a google search and nothing came up. I'm not too fond of small house vaults other than for basic protection/fire. If someone wants it bad enough, they'll haul it out of the house and break it later. It's also a big "valuables in here!" sign.

[BiscayneSunrise]

Re: Need Advice: Sell investment property to buy gold?

The attitude we have is this: selling a potentially diminishing asset whose future seems questionable and that requires carrying costs (the real estate), in order to buy part of an commodity that has minimal carrying cost (gold) and that may be a better investment.

Helen, I'd say your thought above says it all. As a comparison, figure absolute best case scenario for real estate and compare it to the most conservative gold projections. if you continued to rent, what is your cap rate? vs any expectation of ROI on gold or even some dividend paying stocks?

As a way of putting my money where my mouth is, I recently inherited a small home here on the east coast. I am running the numbers to decide whether to rent or sell. Factoring, in hurricane insurance, property taxes, hassle factor and opportunity cost. So far, the numbers along with my own projections as they regard to gold vs. RE indicate strongly towards selling RE.

RE isn't the investment it used to be, even at these prices. The cap rates are still too low.

[dutch12]

Re: Need Advice: Sell investment property to buy gold?

Sorry, a typing error: nice I meant.
I did buy a 1200 KG vault that even takes a professional very skilled person in optimal conditions a full week of work to crack. (producing lots of noise and fumes)
Did cost about 7000 EUro but it stores 18.000 ounces of silver and some gold.
The 1200 KG is without the content so add a few more 100 KG and you end far beyond the 1.500 KG: only specialized transport under optimal conditions will work for transport. Also there is a possibility to anchor down the vault.
O yeah and uh.... it was placed in a very discrete way so nowbody knows. I have it a the study in such way that even people walking in don't notice the vault.

[zoog]

Re: Need Advice: Sell investment property to buy gold?

Just to add my two cents... As others have said above, one solution does not fit all circumstances, so the advice we give is influenced by our own situations. I sold my primary (and only) house in 2007 after learning about the housing bubbble and everything that was going to come with that. Not only was my personal situation no doubt different than yours (for one thing, I had a mortgage representing most of the value of the house), but the timing as well. The Portland market peaked right about the time I put my house up for sale... so I was entirely confident that the home value would decline. I felt like I would be better off with the cash profit from selling just sitting in the bank earning one bazillionth of a percent, much less investing it in gold or whatever else. In fact, because of the "carrying costs", I decided it would be worth selling even if I just broke even. As it was, I did make a profit, and some of that went into gold.

Although home values in Florida have dropped considerably from the peak, my amateur opinion is that there is more downside to go. You can take a look at the charts in my Case-Shiller thread. Using Tampa as a proxy for western Florida, prices rose 138% from January 2000. Now Tampa is 36% above January 2000, in nominal terms. My guess is that by the time things really bottom out, that 36% will be gone.

[BiscayneSunrise]

Re: Need Advice: Sell investment property to buy gold?

I had mentioned calculating a cap rate to help determine valuation. Another way to look at valuation to piggyback off of zoog's last post is to go back to the old formula that says a buyer should look at homes that are 2.5 times their annual income.

If Helen's home is to be priced at 200K, that means a buyer who doesn't want to over extend would have to earn 80K yearly. I'm not sure what city the townhouse is in but there aren't a lot of 80 grand a year workers on the west coast. That would indicate to me that a 200K valuation may be high for a run of the mill townhouse for a middle class wage earner.

Of course, the market is still the market and potential buyers may look past the 2.5 rule and only look at the recent decrease in price as a great opportunity.

As an aside, I have done some research about the property in Palm beach County I had mentioned earlier. In an example of how RE can be very local, it turns out this neighborhood is still closely priced to the old top. In 2005, it had gone up but was widely ignored for more glamorous areas. Now, it turns out to be considered highly desirable by people wanting to downsize but still looking for something relatively upscale.

It's a good news/bad news scenario. Good for a seller to get an high price but bad for a landlord because since the rents are still relatively low the cap rate is miniscule.

[FrankL]

Re: Need Advice: Sell investment property to buy gold?

Your going trust some random people on some site on the net to give you advice with potential consequences on your current and future financial well being?

I suggest buying classic rubber chickens http://www.amazon.com/Century-Novelt.../dp/B002T47Z6C. These are definitely due for a bull market.!!!!!

maybe I'm too cynical, but I had exactly the same idea. Aren't these kind of posts exactly the contrarian indicators we should be on the lookout for? 'person with no posts comes in and asks strangers if they should sell a house to buy gold'