Since MS will be covering closing costs I would say "SELL"! You say it could be up to $30,000, which I assume means you are including agent fees. I think that alone will tip the balance.

What you really should do is get a NPV of both and see which is better. Then add in the "trouble factor" of being an absentee landlord.

Will you have more fun investing your dough or being an absentee landlord?

Wes

Just want to throw in my two cents. You do not have to wait the required two years to sell your home (assuming you haven't sold a previous primary residence in the past two years).

The IRS allows you to sell prematurely due to certain hardships, one being that you are relocating for a job. The gain exclusion would then be prorated. Since it appears that you would only have a gain of about $75,000 and the amount you can exclude is $500,000 (married-filing-jointly), the prorated gain exclusion would definitely cover it.

If however, you choose to rent it out for two years while you are relocated, you would then need to sell it within a year of returning. The IRS says you need to have it as your primary residence for at least two of the previous five years. Which means that if you begin renting it in, say january 2006, for two years, then in August 2008, five years will have passed since you acquired the home and you will have lived in it for at least two of them (Aug. '03 through Dec. '05 and then Jan. '08 through Aug. '08). Once you go beyond that date you are eating into your two years and then you may be required to hold onto the property for longer than you may like in order to exclude the gain.

In addition, because you are renting it, your basis will decrease due to depreciation allowance that you can take (cost basis over 27.5 years) each year and this must then be recaptured as gain regardless of whether you can exclude the gain or not under Sec 121 (gain exclusion from sale of principal residence).

SELL!

Wes said everything I was going to say.

For what it's worth, I once saw a study by Jeremy Siegel that suggested that individuals 30 years of age or under should actually have more than 100% of their assets invested in stocks (believe it was around 122%) to capitalize on historical market patterns. I will look for the link, but the basic idea was that when you're young, even a big market decline will pay out over the long run and so leverage makes a great deal of sense.

The reason why I find this interesting is because I think it talks to the real advantage of a house: leverage. If you're planning to buy a new house where you move to (on a mortgage), I think it makes sense to sell and avoid too much of your portfolio in one asset class. If, however, you are not planning to do so, while I know housing lags stocks in the long-run, I can still see the benefit of leverage to someone as young as yourself (or myself) in order to get more investable assets at modest long-term risk.

On a separate note, living in the Bay Area makes me darned envious of your mortgage. I think I need to look for a new job in Seattle! Good luck! I wish we all had your good fortune of having this sort of decision to make.

Selling is probably better. But if your employer is picking up the closing costs, they still might W2 you for that, which would mean more US taxes next April 15.

You are paying out about $1420 per month on everything associated with the house. With adjusted potential rents of $1300-1500/month, you are just losing or breaking even, not factoring in any appreciation.

I lived in a house near grad school and the landlord went overseas to Iraq. The people he left behind to run the place were not exactly responsive. The people in the house did damage that a rented manager wouldnt notice, but as the owner you would have noticed.

You own this place. You want to be around if it floods, or if a tree falls or if the people who live there are slobs. You dont want to be overseas from it.

Even if you were making money off of it, for the hassle factor alone i would advise you to sell the house. The value of not worrying about a property while you are overseas is definitely worth the lost income. Invest the money in a no-maintenance asset like index funds.

The real estate market is fantastic, your company pays closing, which is like throwing another $20k onto the price of the house... It seems so clear to me that you should sell. Plus, you dont seem like the landlord type. Everybody thinks they can do it these days, but its not as easy as it seems. Especially from thousands of miles away. Just my USD 0.02

Hey one more comment - the WSJ online has an article on this exact topic today...
http://online.wsj.com/article/0,,SB111892803843361442-email,00.html

i dont know if that link will work because you have to be a paid subscriber. I can email it to you if you want...the wsj will let a subscriber email the article to a friend.

Anyway, it was written by Terry Cullen and the headline is "Bubble Anxiety Has Homeowners
Debating: Time to Sell or to Rent?"

Thanks Damian. Good finding! Yes, I do have WSJ access.

Ask yourself if the potential upside is worth the downside risk? Then remember, part of being a successful investor is knowing when to sell.

Good luck, 1stMill

I think you should keep the house and rent it.

I left Atlanta after owning my home for only a year. I didn't want to be an absentee landlord. But now it has been 8 years since I left, and I still own the home. In that time, I've spent maybe $12,000 out of my own pocket, while the tenants have paid the rest.

The tenants have paid down the mortgage by about $40,000 and the home has appreciated by about $20,000.

Yeah, sometimes it's a pain, but with a good management company, it makes sense to hold on to real estate.

Sell! You will be happier for it. I'm 26 and I just sold my house in West Palm Beach for many of the same reasons. Talk about real estate bubbles ... we are going nuts down here. Anyway, I sold my house to go to the Univesity of Florida and get an MBA.

Read my new investing blog:
http://grosscapital.blog.com/241282/

Selling seems like the thing to do. Then you have no time constraints for excluding your gain at tax time, and you don't have the worry of relying on a management firm to protect the property. You already made the decision to find another house upon your return. Why hope that the real estate prices will stay as high as they are now? Marj

Hi,

Eight months ago I was facing the same question, and my company paid 100% of the closing cost for selling the place as well as the closing cost of buying a new house at the destination. My house was sold at $196,500, and now another house in the subdivision which is about 400sqft smaller (with less upgrades) is being listed at $232,000, and for my case I think I would be better of not selling it it. I knew that my property would go up, but because I did not want to be a remote landlord I decided to sell the property.

I think you should just keep your property for two more years. I'm not sure if renting will be a good option unless you can find a really trusted tenant. A few people I know owning properties and being remote all have problems with tenants. They are always late on payments and some don't pay and there is nothing you can do about it. So, I think you should forget about renting, and keep the property if you can afford it.

Sell, sell, sell. If you never want to live in the house again. Get rid of the baggage.(g)

An article about this subject included a link to the AICPA's page with a spreadsheet designed to answer this sort of question. Hope it works for you.
www.aicpa.org/download/pubs/jofa/2005_06_witmer.xls