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My wife and I live ‘an average life’ in the Bay Area making $320K. Last year, we bought a house for $200K over asking — now we don’t want to live in it. Should we get professional help?


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Question: I was a victim of FOMO during the housing market craziness and bought a house for $200,000 over the asking price. Now house prices are coming back to reality, and I feel like I lost my hard-earned money. I don’t know what to do as I am living with constant stress thinking that I made a big financial mistake, and I’m not sure if I should consult a financing adviser for better decision-making and long-term investment planning. (Looking for a financial adviser too? This tool can help match you with a financial adviser who might meet your needs.)

My wife and I are in our 30s and are working in the Bay Area and making about $320,000 combined yearly. We live an average life and watch every dollar that we spend. We bought our first condo in an average neighborhood back in 2016 as we didn’t have kids at that time and we wanted to stay close to our job location since we both had to go to the office pretty much every day.

In 2021, we had a child and started thinking we needed more space. We wanted a good/safe neighborhood, good schools, and a good work-life balance with a hybrid work option. I started to look for a place with these needs in mind knowing that the housing market was crazy, and we would need to go over the asking price. We found a house (nice neighborhood and schools, however very far from our job location and not big as we wanted) and put an offer $200,000 over the asking price (we were disappointed as our prior few offers were not selected). We closed the deal in March 2022 and went for a vacation because we really wanted to recharge.

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After coming back from vacation, we didn’t end up relocating to the new house, because I wasn’t sure that I would be able to go that far from my job’s location and from our current friend circle. We decided to continue our stay at the condo we bought in 2016, and we rented our the house we bought this year (monthly mortgage is $4,450 inclusive of everything, however we’re only getting $3,250 in rent). I feel like I made a very bad financial decision and am doubting my skills to manage finances/investments effectively. What should we do?

Answer: First of all, know you’re not alone: This has happened all over the country as tight inventory forced bidding wars. And kudos for knowing that it’s time to face the music and figure out what to do next — by looking at what’s going on and considering hiring a financial professional to give you advice. (Looking for a financial adviser too? This tool can help match you with a financial adviser who might meet your needs.)

Step one is to “do a complete financial evaluation of the house,” says certified financial planner Chris Chen of Insight Financial Strategists. “It’s now a business, so what does the profit and loss look like? We know you’re losing $14,400, but is this a complete accounting or just the mortgage, less rent?” says Chen. Indeed, certified financial planner Timothy Parker of Regency Wealth says that: “Given depreciation expense and maybe interest, you may be cash neutral on the monthly cash flow.”

Parker adds that you’ll need to “look at your cash flow and the current value of the rental home and the outlook for real estate values in the future. It could be that the investment will work out or it may make sense to sell,” says Parker.

Since it’s a rental property, if you sell at a loss, you may be able to write off some of the loss on the property sale for tax purposes. That said, “it’s important to review your tax situation. Real estate is one part of an investment portfolio and an adviser would likely opine on your other savings and investments, taking into consideration your tolerance for risk,” adds Parker. (Looking for a financial adviser too? This tool can help match you with a financial adviser who might meet your needs.)

Selling isn’t your only option, and it might not be the right one. “What is the likely future of the property? With inflation raging, we would be justified to think that rent will increase over time and eventually will make the property pass breakeven on a cash flow basis. At that point, at least the investment will not be bleeding cash,” says Chen.

Once you have these elements in place, Chen advises thinking about what you want out of your life and financial plan. “How does an expensive rental fit into your future? What would you do with the money if it sold?” says Chen. It seems like you could use a real financial plan to figure out some of the answers to these questions.

Do you need a financial planner to help?

It can certainly help, but if you feel you can do this on your own, it’s not necessary.

“Working with a financial planner to carefully weigh different considerations before making your next move would give you an expert outside perspective,” says Kate Wood, home expert at NerdWallet, who thinks your instinct to talk to a financial planner is a good one. “You could also potentially talk to a local real estate agent to get a sense of what’s going on in your market now, giving you more data to inform your planning,” says Wood. (Looking for a financial adviser too? This tool can help match you with a financial adviser who might meet your needs.)

If you just need someone to help you get started, you might want to find an hourly financial planner with real estate experience. Garrett Planning Network has a feature that allows you to search for qualified financial planners using areas of expertise. “XY Planning Network has people who work under a variety of models and some of them offer hourly services. When you check an adviser’s profile there, you can see if they offer hourly advice,” says certified financial planner Justin Pritchard of Approach Financial. This can also be the most economical way to employ an adviser to your advantage as hourly, fee-only financial planning typically costs between $200 and $500 per hour depending on the adviser’s experience.

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Questions edited for brevity and clarity.

The advice, recommendations or rankings expressed in this article are those of MarketWatch Picks, and have not been reviewed or endorsed by our commercial partners.

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