Selling the family home can be a heartbreaker, but imagine the freedom if you move to a rental.
"The financial stress we lived under is gone, and I can't overstate the power of that," says a woman whose family sold a house in Vancouver a year ago and now rents. "There's no longer any going to bed at night, looking at your husband and saying, 'Oh my god, the kids need braces. We need to cough up another $5,000.' There's a massive sense of freedom."
I nicknamed this woman Ms. Bold in a column written a year ago on her family's decision to bail out of a housing market they astutely sized up as being at an unsustainable peak. Ms. Bold contacted me not too long ago with an offer to share her experience as a renter, and I gladly accepted because of what's happening today in the housing market.
Sales trends in some cities demand the attention of people who have lived in their homes for ages and seen the price soar to double what they paid or more. We don't know whether home prices will fall hard, go sideways or continue to rise until only rich people can afford to buy within 100 kilometres of a city's downtown. But there's a concept drawn from stock market investing that applies, nevertheless.
It's called "taking profits." You decide when you've made a satisfactory profit and you exit. One of my favourite investing quotes comes from an American financier named Bernard Baruch, who lived from 1870 to 1965. "I made my money by selling too soon," he said to underscore his belief that people can't time market tops and bottoms.
Most people are too emotionally attached to their homes to think this way, and that's fine. They'll stay put until their house no longer suits them and they'll take their chances in the market. But others, Ms. Bold among them, are looking at their homes as a big financial asset that requires careful handling.
That's why her family decided to sell a year ago, pay off the mortgage, invest the profit and wait. They want to buy another home, but aren't in a hurry to do it.
Ms. Bold's overall description of the experience: "Excellent, but it took a while to get to that. Initially, it was, 'Oh my goodness, what have we done? Are we crazy?' And you do have a lot of people who think you're crazy – they can't believe you'd sell the family home."
Their four-bedroom home was bought in the mid-2000s for $445,000 and sold for more than $1-million in March, 2012. The family's rental home is a similar size to their old house and located in a different neighbourhood. The biggest immediate adjustment had to be made by the family's two boys, aged 8 and 12, because their new street did not have as many kids to play with.
Ms. Bold herself had qualms about leaving a house she had worked hard to fix up. "There are moments when I miss that house, and how we made it look and feel," she said.
The family's rental is just a transitional home. Ms. Bold definitely wants to buy a house in the future, after prices come down in Vancouver. That's already happening – March results for the city show sales fell 18 per cent on a year-over-year basis and an index of home prices fell 3.9 per cent.
Calling the market correctly has given Ms. Bold and her husband some satisfaction, and so has the financial predictability of renting. While their rent is comparable to their previous mortgage payments, their housing-related financial obligations end there. It didn't take long for them to benefit from this new arrangement.
On returning from a family trip a few weeks after moving into their rental home, they found the basement had been flooded by a leaking hot water tank. "It wasn't our financial problem," Ms. Bold said. In fact, the landlord actually rebated a portion of their rent to reflect the fact that the basement wasn't available for them to use for a month.
The family member happiest about renting a home is probably Ms. Bold's husband. "He loves not having any responsibilities," she joked. "Let's face it, he works full time, we're raising two boys, he coaches baseball and now he doesn't also have to think about the house. It gives him back time."
Time and money – what homeowner doesn't want more of those?
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ASK A RENTER
A Vancouver woman we'll call Ms. Bold has been living with her family in a rented house after selling the family home a year ago. Here are her thoughts on renting:
Do you feel richer now, given that you only have to pay rent?
No question. The financial stress we lived under is gone.
Have you dipped into the cash you made from selling your house?
We've tapped into it a little. We're taking a second honeymoon in Italy and we're planning to replace the car. One way or another, that would have happened, but now we can pay cash. Also, my husband bought a good bike.
You enjoyed fixing up your home – how do you handle that in a rental?
I've decided to go down the route of, "What can we get that we can take with us?"
How did you find your rental house?
Total networking. … I sent an e-mail out saying we're looking, and We found the house through friends. The house wasn't even on the market.
For more personal finance coverage, follow Rob Carrick on Twitter (@rcarrick) and Facebook (robcarrickfinance).
Rob Carrick