Ravenna House // Why We Are Selling One of Our Seattle Rentals
THE RAVENNA HOUSE
Why are you selling the Ravenna House? It's a question we've been asked over and over again lately. So today, I wanted to share all of the reasons we're selling one of our Seattle rentals. But first, let's back up and do a quick recap of the Ravenna House.
Ravenna House sources available here
our history at the Ravenna House
We bought the Ravenna House, a 1926 Tudor, in 2013 at what turned out to be the bottom of the Seattle housing market. The house was in rough shape (an understatement) and priced at only $220k. The "tear down on a small lot", as it was dubbed, garnered 16 offers, including ours. The seller was the elderly son of the original owner and liked our family enough to sell us the Ravenna House for $270k cash, $16k under his highest offer. Of course we didn't have $270k in cash so had to beg, borrow, and beg some more from family (more about that here).
Garrett and I then launched into a renovation that covered every square inch of the property. We tore down the dilapidated garage, renovated the main floor of the house, had the old oil tank removed, brought natural gas to the property, installed a new water line to the road, lined the side sewer, commissioned a new furnace and ducting, built a fence, installed sod, and finished the basement before mortgaging the property with a process called delayed financing (more on that here). We lived in Ravenna for 2 years before moving on to our next project, the Dexter House. At that point, Ravenna turned into an Airbnb - our first foray (of many) into short-term rentals - and that's what it has been for the past 2 1/2 years.
why we’re selling one of our Seattle Rentals
So let's talk about why we're selling the Ravenna House.
Below are four reasons we’re selling the Ravenna House, one of our Seattle rental properties. While these reasons are specific to our situation, they are worthy of consideration before anyone sells a home.
The main reason we’re selling now is capital gains. Capital gains are the taxes you pay on profits from a home sale. In our case those taxes would be about 15% of the profit and north of $50k. However, if you lived in the house for 2 of the past 5 years then you can exclude up to $500k in profit ($250k for single people). Meaning you don't have to pay taxes on the profits from your primary residence unless those are over $500k (or $250k for a single person). Tax free money is a rare commodity and with our 2-of-the-last-5-years deadline looming this year, Garrett and I reached out to our tax accountant to verify we’d qualify (something we highly recommend you do if you’re thinking about applying for this exemption). And with the green light from her, we started considering selling. (You can read more about the exclusion here.)
We are lucky to be in one of the best real estate markets in the country. The Ravenna House is now valued at nearly 3 times what we bought it for. Even with the $70k we have tied up in renovations, we're still expecting to make a six-figure profit in tax free money. Of course accessing equity in a property isn't usually that difficult - you can do a cash out refinance or take out a HELOC - but not if you're us. Banks don't like to loan to 'unemployed' folks who have with a high debt-to-income. So selling Ravenna was the only option available for us to access the equity.
One concern Garrett and I have always had with our situation is that all of our metaphorical eggs are in one basket. And that basket is Seattle, single-family real estate. What if that big earthquake finally hits? What if Amazon pulls out of the city? What if there's another recession and unemployment leaves the renter pool sparse? Seeing problems and liabilities is just what my brain does and I'll feel more comfortable when our investments are more diverse.
Free up Time for Other Interests
Selling the Ravenna House will free up time (and equity of course) that Garrett and I can spend on new projects that we're more excited about. This year we got a little burnt out of landlord-ing: cleaning houses, communicating with tenants and Airbnb guests, and driving back and forth to Seattle. Taking one of our Seattle properties off of our plate will give us back some of that time. We love the Ravenna House (I hope that's obvious) but we're ready to shift the time we were spending on it to something we're more excited about.
We spent the better part of August preparing the Ravenna House for sale and it went on the market last week! We'll be sharing more of our selling process and the work we did over the next month or so, but in the meantime, let us know if you have any specific questions in the comments below.
Related Posts //
*disclosure: We use affiliate links. If you make a purchase through one of the links, we may receive a small commissionat no cost to you. Affiliate links is one of the ways we keep this blog running, so thanks for supporting the Grit and Polish!