Help me decide about relocating

[youngman]

Background: I am losing my position at work in August. My wife works for same company. We both took out 401k loans to repair our house and pay off credit card bills and medical debt. She was strongly opposed to bankruptcy and we were well over the median income.

Now: The house still needs foundation work and many other items repaired like roof and siding. We would need at least $20,000 to make it sellable. It is probably about $10,000 underwater as well. It could be a good rental though.

Decision: We have an opportunity to take new jobs with same company in a different state. We have to pay to move and we both take a paycut though. If we move and can't sell or rent old house then we couldn't pay for two places to live. We would also have a bunch of new debt incurred in the move. Should we move? What happens if we buy a new house and then end up in a chapter 13 with two houses? Wife wants to buy another house and we have 3 kids so apartment would be tight. Any ideas?

[Drazil65]

Hi and welcome...my husband and I (one child) took a relocation 7.5 yrs ago and left a house (rented out) in our home state. Built new home here in 2009, life was good. One month after we moved into our new home husband lost his job (first time ever laid off in same industry for 15 yrs). Within 6 months our tenant was transferred to another state and we could not find a tenant (being out of state was not ideal for renting out house and keeping things up). Went through all our savings and retirement fund trying to keep everything paid. Husband took out of town job and commuted for a year. Our relocation was paid for (and the move was still expensive as many things you just don't realize) and if we had to do it again we would have continued to rent until we sold the out of state house. Stupid move to use all our savings and retirement funds to keep everything paid, husband filed for chapter 7 December 2011 and we were discharged March 2012. That was the best move we ever made financially.

Moral of our story is life happens, good one day and not so good the next. We struggled trying to keep both homes going and ended up filing anyway. Having a home out of state is tough and when something goes wrong you better have an emergency fund ready and waiting. The situation can be tough and you end up making bad decisions financially because of it. Just my opinion based on our experience and we learned a hard lesson since then. We live life very simply and do not bring about any extra stress that we can control, we now live on cash, rent and on one paycheck (bank my paycheck ) just so we are not caught so off guard again. Good luck with your decision.

[bcohen]

If your house is already "underwater", plus it needs tens of thousands of dollars worth of work, then it really seems like a no-brainer to let it go! Even assuming that you could make $1000 a month profit renting it out (which I guarantee isn't going to happen), you are talking about at least 3 to 4 years just to break even. Most likely, you will clear closer to $200 profit per month, and that's assuming that you have good tenants who always pay on time, don't trash the place, and don't have difficulty keeping the place occupied. In all likelihood, you would simply lose tens of thousands of dollars trying to rent the house out, compared to just letting it go in foreclosure.

[youngman]

Well the house would only rent out for around $1000, so not that much profit. My concern is if we moved, bought another house in a new state and then were unable to sell this house and couldn't keep up two mortgages. The old house gets foreclosed on eventually, we end up having to file chapter 13. What happens to the new house we had just bought? Can we even get a new mortgage without having the old house sold yet? Is it better to be renting or paying a mortgage when you file for chapter 13?

[bcohen]

It sounds like your best move is to quit paying the mortgage immediately, move to the new state, and let this house foreclose. You will need to rent for several years, but that's not necessarily a bad thing as long as you will be living in a city where housing costs are affordable. With your new lower incomes, hopefully you can qualify for Chapter 7 once the higher income "falls off" after 6 months.