Should I sell my current home before I buy my next home?
With COVID-19, the option of selling your existing home before buying another is really out of the question. Selling your home without having another already locked down places you in the precarious position of having to buy what's available – no matter if it's a good fit or not – or renting for an extended season based on a lack of housing inventory. And this all while prices continue to firm up or rise due to tight inventory.
Before you sell only to purchase something else, is the property an excellent rental candidate? Can you re-finance and take cash out for your next purchase and keep the current home for a rental? What would it rent for? After all expenses and a reserve for replacement, will the house cash flow? If yes, then that may have some appeal. Make sure to consider hiring professional property management. Having a rental doesn't mean you have the be the one managing the rental personally.
Before considering a move, can you update your existing house to meet your needs? If the real issue is space, can you add-on to the existing home. The cost may be the same or less than moving. Staying in place is not always plausible, of course, but worth bringing up. A kitchen and bathroom remodel may do the trick and add a few more years of livability to your current home.
It's a fine line to leap that if you sell your existing house before tying up the next one, that everything will go just perfectly. It's the chicken and egg question regarding what should occur first; the sale or the purchase. There is no one right answer; the right path is market-centric. Not every market is "hot," with houses selling as fast as they are listed. And there is a myriad of creative methods that can get you where you want to go without hyperventilating. For example…
Deferred Sale #1. I don't want to talk bad about my kissing-cousins (Realtors), but I must mention the obvious; they only get paid when something sells. Just know that you will come across sellers that are more than willing to tie up their house for a spell for you to sell your home to be able to buy theirs. And that season maybe 6-12 months. Everyone's circumstances are different; thus, an immediate sale is not always the right answer. A deferred purchase may work out just great for the buyer and seller. But, FYI, the Realtors are not going to suggest this.
Deferred Sale #2. Sell your house and rent it back. What? Why? It sets you up for doing the next thing – whatever that is. Maybe you want to build a house, but you need the cash now to purchase the land. And it would help if you also had a place to live during construction. Perhaps you are relocating next year, but you don't want to try and time the market. Sell now and rent until you are ready to relocate.
Real estate markets are fluid. As much as it seems like real estate is a slow-moving monolith, it will surprise you once you are in the market for a specific thing- a house, a rental. It just seems that something you want to find is miraculously in short supply. Thus, selling in hopes of finding is precarious. Anything you can do to avoid this fate is a step in the right direction.