Almost twenty years ago, when I was single and in my mid-twenties, I purchased my first home after several years of renting.

It was not fancy.

It was a simple two bedroom townhouse, with a one car garage, and a postage stamp of a backyard.

I got a great deal on the place, as I was able to purchase it as a foreclosure for well under $50,000. I dumped my life savings (outside of my retirement accounts) into the purchase, so I did not have a mortgage, which was a huge benefit as I tried to rebuild my financial safety net.

After living in my townhouse for over four years, I decided to return to school full time to pursue a master’s degree in an effort to change careers.

And then I made a financial decision I thought was prudent at the time.

I decided to sell the townhouse.

The school I would be attending was a few hundred miles from where I lived, so I needed to move. I knew I was headed into a challenging academic program. I wanted to focus as much attention as possible on my studies and preparing to pursue an entirely new career in a very competitive field.

The thought of potentially being a long-distance landlord was not attractive to me. Moreover, the townhouse had doubled in value since I had bought it. Cashing out would simplify my life, and more than fund my education and living expenses for the next couple years, as I had earned a fellowship that would pay a significant portion of my tuition.

That said, I did not have to sell the townhouse. Thanks to the fellowship, I could have probably financed my graduate degree without selling, and the rental income would have helped support my lifestyle while in school. I had family still living in the area who graciously offered to assist me in any way possible if I decided to become a landlord. While I tried to convince myself otherwise, I probably could have made it work, most likely without impacting my studies too significantly.

But I took the simpler route out and sold.

It’s not a decision I have spent much time reconsidering over the past decade and a half, but as I have started thinking more seriously about early retirement and financial independence, I have spent some time rethinking the sale of my townhouse.

Obviously, I can’t go back in time and change what I did.

But I can, in retrospect, try to determine whether it was a wise long-term financial decision.

So that’s what I tried to do.

Because there are hundreds of nearly identical townhouses in the development I lived in, it wasn’t hard to figure out what my old townhouse might be worth today. It has likely doubled in value again since I sold it.

It also wasn’t hard to figure out what the townhouse might rent for today, since there are many of them available for rent right now.

And I already know exactly what I sold the townhouse for before heading off to graduate school.

After that, it was just a matter of making a few assumptions. Specifically, I assumed:

• I could have invested the money I got from selling the townhouse, or the money I could have earned by renting out the townhouse, and earned an average return of 6% a year.
• Past rental rates on the townhouse rose 2% a year to get to where they are today.
• After taking into account income taxes, property taxes, insurance, repairs and maintenance, potential vacancies, etc., I’d actually have in my pocket 50% of the gross amount I expected to rent the townhouse for.

While there’s no doubt each of my assumptions are individually incorrect, I think they are reasonably realistic and conservative, and close enough for the purposes of this theoretical exercise. Taken together, they probably get me into the right neighborhood for how my finances might look today if I could go back in time and not sell my townhouse.

The results?

If I had never sold the townhouse, our net worth might be about 8% higher than it is today.

If I had never sold the townhouse, our annual passive income could be about 60% higher than it is today.

And if I had never sold the townhouse, based on what I originally purchased it for many years ago, it would likely be providing a gross yield of about 33% annually today.

Quite simply, if I had never sold the townhouse – and everything else in my life had been exactly the same – we’d easily be at least one year closer to financial independence and early retirement!

Of course, if I hadn’t sold the townhouse, everything else in my life would likely not have been exactly the same in the ensuing years.

Maybe I wouldn’t have done as well during my first semester of graduate school, which helped me earn the opportunity to interview with several of the top firms in my industry.

Maybe I would have been distracted by a dispute with a lousy tenant while I was at my summer internship, and not received the full-time job offer that enabled me to both change careers and earn a higher salary than I did before graduation.

Obviously, there’s no way to know for sure exactly how my life, and my finances, would have turned out if I hadn’t sold the townhouse.

If I had known about FIRE a couple of decades ago, I’d like to think I may have done things differently, because with hindsight being 20/20, selling the townhouse was most likely not a great long-term financial decision.

I felt smart when making that decision, because I had doubled my money in less than five years, while essentially living rent-free.

But if I had held onto the townhouse instead, between rental income, investing that income, and appreciation in the value of the property, I would have since likely doubled my initial investment several more times.

And I would still own an asset generating an incredible cash yield, based on the rock-bottom price at which I purchased it!

Have you made any financial decisions that dramatically impacted the potential timing of your retirement?

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