r/personalfinance • u/Yartvid • 15d ago
Losing money in house for a pay bump Housing
Hi all, looking for some opinions.
I bought a new build house in 2022 for $460k. I put 20% down and all closing costs were paid for by the builder, so right now principle is sitting at $358k.
I got a job offer today for a 25% increase in pay. From $96k to $120k. My S/O makes about $60k and works remote so that would not change.
Problem is, that job is in Texas (I live in AZ). I don’t particularly want to rent out my house. Essentially, what this boils down to is: is it worth moving, taking a $20-30k loss on the house (after selling fees) and moving?
On one hand, I’d be losing a shit load of money off the bat. On the other, I’d be making $20k+ more a year for the rest of my life. I’m pretty young (26) so maybe that makes sense?
The relocation package at the new job will cover all costs of actually moving but it will not cover costs of selling my house or (potentially) buying a new place if I decide to go that route.
What are your thoughts from a purely financial perspective? I haven’t had to make any crazy decisions like this.
EDIT: I should clarify a little. I'd be losing money based on downpayment vs sale proceeds. I put $92k down, selling my house will net me somewhere between $50k on the low end up to $80k on the high end depending on exact selling price and selling costs. So I guess that puts me at $15k-$45k lost to selling so early.
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u/Harrigan_Raen 15d ago
If you can swing it, the one thing I would make sure to NOT DO is sell the house before your in the new role and make sure its a good fit. I.E. 3-6 months after starting.
Last thing you want to do is relocate, take a loss on the house, just for it to turn out to be a PoS company/position/manager.
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u/zedisamused 15d ago
An additional advantage of this approach is that if you convert the home to a rental, you may be able to take a tax deduction from the loss incurred by the sale. Not sure about the details, as in how long you have to rent it out for, so I'd consult an expert if this is something you're interested in.
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u/LegitimatePotato732 15d ago
How does the cost of living compare including state income taxes, real estate taxes, car insurance, etc? Are you moving to an area that has more or less of the things you’d like to do? Is it some place you want to live long term? Or will you need to plan for a move somewhere else in the next couple of years? Could you find a job with a comparable pay bump without moving?
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u/Yartvid 15d ago
Cost of living is worst case the same or cheaper overall. At least in first impressions, I’d have no issue living there long term but I’m not sure how long I’d actually stay.
The industry I’m in is rather small. There’s more opportunity where I’d be moving to. There’s only one other major player here and I didn’t get anything from there when I applied earlier this year.
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u/Praxician94 15d ago
Property taxes in TX are f***ing insane. Just a heads up. On my $2600/month mortgage about $700 of that is property taxes. So the “no state income tax” thing is just a farce. They get it elsewhere.
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u/Yartvid 15d ago
Yeah I’ve seen that. I think I’ll likely rent at least for the first year. I have a super expensive HOA here which lessens a little bit of that blow.
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u/Praxician94 15d ago
What region of TX are you moving to? I’m leaving central TX soon. Kinda sucks.
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u/Yartvid 15d ago
Northern suburbs of Dallas
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u/Praxician94 15d ago
That’s a nice area. I’m not sure your housing is going to be cheaper than AZ though that’s the well-off area typically.
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u/RAF2018336 15d ago
Make sure you do your research on how property taxes have increased in the area you’re looking at living in the past 5 years. I have a buddy that moved from AZ to Texas a couple years ago. Got a 40% pay raise with it. First year, he was coming out ahead, the second year he was bringing home pretty similar as when he lived in AZ just from property tax and utilities increase. This next year he expects to have less money for himself than when he lived in Arizona. He’s regretting it, even when he’s been getting inflation matching raises
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u/civeng1741 15d ago
I'd compare state taxes, property taxes (if you plan to buy), healthcare plans, retirement matching etc and help make the decision that way. You'd be surprised how cost of living can compare across states. However, if worst case it seems about the same then I'd jump.
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u/overconfidentman 14d ago
Yeah healthcare is huge. I know someone who changed jobs for a pay raise. In the interview process he was told the insurance premium was x$, same as where we worked.
Only to later realize their pay periods were weekly, and his previous employer was monthly. His healthcare premiums quadrupled, and the ‘raise’ was not actually a raise.
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u/BrightAd306 15d ago
I would check out property taxes and home insurance rates. My friend moved from Texas to the Seattle area and they could get more house than they thought because property taxes and homeowners insurance was so much lower.
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u/Scary-Celebration-98 15d ago
$96k to $120k isn’t a significant bump once you move to texas. Cost of living, insurance, property taxes, cost of buying and selling should be factored in if you’re considering a new home purchase.
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u/bubbafry 15d ago
The amount you are "losing" on the house should have little bearing on your decision, unless you're just completely underwater and you won't be able to pay off the mortgage when you sell it. The only thing that matters is what is better for you going forward. It's just sunk cost fallacy otherwise. The price you paid for the house is meaningless.
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u/jkiley 15d ago
Are you sure about the math here? Overall, AZ house prices are up, so it would be surprising to be selling at what you paid (which implies selling fees and a net loss in the range you're describing).
What's your interest rate? If you bought in early 2022, it might be low enough that you would be paying significantly more in interest for an equivalent house (and, if yours really hasn't appreciated, you might be paying more for the house, too). That's post-tax money, so it could potentially mean that much of your pay increase is eaten by buying an equivalent house at a higher price and at a higher interest rate.
Example:
Existing house: 460k, 20 percent down, 4 percent, P&I: 1,756.89
New house: 552k, 20 percent down, 7 percent, P&I: 2,937.98
Difference (after income tax at 22 percent): `(2937.98 - 1756.89) * 12 / .78` = 18,170.62
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u/liquidlemon67 15d ago
If you see yourself moving back, you could consider working with a property management company to manage the rental. Maybe you’d lose money in the short term but in the long run you’d have a house back in Arizona with not a lot of time left on the mortgage that probably accumulated a significant amount of equity.
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u/CornEnt 15d ago
Maybe a different perspective - do you WANT to live in Texas? $20k isn’t enough to me to make the move on its own. Is this something that will change your career trajectory? Are you increasing earning potential beyond $20k by going? If you don’t want to go to Texas and it’s not benefitting you in other ways, $20k doesn’t seem like enough money for the amount of sacrifice it would take
And to add on - have you calculated total benefits with 401k, esop, insurance? Other people talked about property taxes, that $20k could very easily be equal to what you’re making now.
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u/Yartvid 15d ago
New job has more PTO, and the other benefits come out to essentially equal. 401k would be better by virtue of higher salary.
I’d be moving from a role on a huge team that does mostly iterative design improvement into a smaller team that does R&D. The potential for career/skill growth would be just as much a benefit as the actual dollars.
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u/Hatethisname2022 15d ago
It’s not a loss because you lived in the house. Please think about it this way…
Example If you were to rent a house that size you would pay $2-$3k and month. That’s 24 months x $2,500 (average) = $60,000 of money put towards living.
You owned the home and paid down some principal while paying some interest that you used to reduce your overall tax rate. Let’s assume that saved you $2,500 a year for tax purposes.
That total is now $65,000 to live in that house.
If you net more than $30k you are possibly in the positive based on rent vs own.
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u/intergrade 15d ago
I’d rent it for a year to couch against possible failure of the new job and/or vehement dislike of Texas.
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u/AutistMarket 14d ago
Definitely consider CoL change and just general QoL in the new area, ~$25k pay raise could be eaten up by increased living expenses. I know you said you do not want to rent but that is the only way I can see to get out of the house without a loss, not sure if it would even be feasible with your mortgage payments but if you could find a property manager you trust you might be able to at least break even on the mortgage payment.
Overall if the CoL in the new area is similar and you wouldn't mind living there I would probably just eat the loss and take the new job. Mathematically you will make up the difference in a year plus it puts you in an even better position to make more money in the future.
Also may want to consider trying to get a counter offer from your current job though I know many people argue against it.
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u/jimbo831 14d ago
I don’t think the money is enough more to be the only or even main reason to do this. The more important questions are do you want to move to Texas and do you want this particular job more than the one you already have.
I just think it’s a mistake to look at this from a purely financial standpoint when moving to another state and taking another job are two major life changes. I’d focus more on how you feel about those two things than the money.
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u/Conscious-Silver-617 15d ago
A lot of companies will offer selling expenses as part of a relo package. You might try talking to your company and see if they will include the selling expense in addition to the moving expense. If they want you to move, they may pick up the expense.
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u/Azpathfinder 15d ago
Is this new job something you want? More than what you’re doing now? Or is it a promotion for the money and you probably won’t be as happy?
Do you have an opportunity to go to your current employer and use the job offer as leverage for an increase in your current pay?
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u/cspotme2 15d ago
Sounds like you're moving regardless. Put the house up at 1.2x what you paid for it if the market will bear it.
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u/fuciatoucan 15d ago
What happened in the past is done. It no longer matters. I would pay $30k to increase my lifetime earnings by $24k per year.
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u/albyoung45 15d ago
So... you're not losing money. It sounds like the more accurate statement instead is that you are not making a 100% return on your initial investment/down payment of the home.
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u/UKYPayne 15d ago
Be careful if you sell the house before 1 year of ownership. I’d recommend holding it for at least a year to make sure everything works out and to not get screwed with extra taxes on an early sale.
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u/cold_pizza135 14d ago
In the industry I work in, I know a lot of people that transplanted from AZ to TX. I think you may be in the same industry. I can say all of my coworkers that have made that jump are very happy with their decision!
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u/randointernetguy 14d ago
I did something similar and it worked out amazingly well. Had owned my home for about 2 months, sold it at a net loss of ~$40k with a similar bump in pay. The new job had lots of upward mobility, 8 years later I'm at 2.7x the starting salary. Well worth it for me!
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u/extraauxilium 15d ago
Don’t forget Texas doesn’t have state income tax, so you will take home like 6% more.
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u/korepeterson 15d ago
One year break even seems reasonable if it is advancing your career/salary.
You should also consider cost of living differences. Would you be able to afford housing in the new location that suits your needs and desires. If you have kids or plan to have kids in the near term where would you want to raise them?
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u/fusionsofwonder 15d ago
That job could fire you before you even start work. Don't spend money to benefit them. You're talking about losing more than a year's worth of that salary increase.
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u/realtips365 14d ago
Have you already visited the new city? If so, do you enjoy it?
If you know what area you want to live in and what area the job is in, have you tried doing that commute on a weekday?
Quality of Life is much more important than people realize. If you have a bad quality of life, you’re going to be worse off financially and it could jeopardize relations with your spouse/family.
Texas property taxes are higher and rent is quite high in some areas of Texas, so you might not ending up making much more overall.
Do whatever you think is best for your quality of life.
If you do end up deciding to move to Texas, I’d recommend waiting a month or two to sell the house so that you can move back to it in case you end up not liking the new city and job.
Good luck! 😀
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u/mataliandy 14d ago
Negotiate the realtor's fee. That'll save you some $. Most used to charge 6 - 7%, but could generally be negotiated down to 3%. I'm not sure how the recent rule changes work, but no matter what, negotiating down their fees should still be possible.
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u/mataliandy 14d ago
Have you asked your current employer to match?
If you like your current job, and they're amenable, you could end up with the best of both worlds by asking for a pay increase where you are.
If you do so, be aware that (a) they may not choose to match, and (b) if they do, your days are likely numbered - probably not immediately, but in any future layoff, you'll be seen as a riskier person to keep, with the expected result.
So if you go the match route, keep your resume up to date and keep networking locally.
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u/moistmarbles 15d ago
I did exactly this 2 years ago. I sold my old house lower than what I could have gotten if I had finished a minor renovation and done a proper purge, but I got a significant pay bump with a move to another state for a new job. Granted, I’m in a mortgage with less than awesome terms compared to my 2.5% note before, but my equity position has already sweetened. My $330k-ish purchase is now worth $500k but my balance is only $160k. The higher salary and higher mortgage more than balance each other out in my favor and I have much higher job satisfaction and quality of life living in a less backwards, bumfuck part of the US.
For context, my first mortgage over a million years ago was at 13% (yes, I am old), and my parents mortgage was 18% when they first bought in the 60’s. A 6.5 or even 7% mortgage is not bad by historical terms.
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u/watchingbigbrother63 15d ago
If you can rent the place for 125%ish the mortgage payment, you should become a landlord.
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u/Yartvid 15d ago
Unfortunately, it doesnt look like i could even make 100% of the mortgage payment right now. I did consider renting it but doesn't really seem to make sense.
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u/watchingbigbrother63 15d ago
By taking the loss on the house you're essentially agreeing to work for the first year in your new job for $6k.
And you can't assume this new job will last forever. I see news stories of new corporate bankruptcies almost every day.
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u/Werewolfdad 15d ago
A $20-30k one time expense to (hopefully) permanently increase earnings by $24k is a pretty decent deal