Real Estate Scenario advice

My advice: Don’t rent out anything that has any sentimental value to you.

If you want to do this, wait for the coming correction in Real Estate and pick up a couple of bargain properties to rent out.

 

My uneducated real estate opinion would be to Sell now and then prepare to rent for a bit. Then buy the equivalent for .80

 

And yet the rental market is through the roof at the moment. Hard to pass up an opportunity to earn high dollar on either a low dollar or zero mortgage.

FWIW I am finally in a position to sell my G'ville townhome purchased in 2005. Rented it cheap, but had the mortgage pd (+) during the last 11 years. It's going on the market w/in the next couple days. I'm having to arm wrestle with my seller agent about price, since she want to sell it to one of her "investors" at a low rate, so they can make bank on it. I'm sticking to my guns on price. Wish me luck.

Bluke, I don't think you can go wrong here. Sell and you'll get a wad of cash. Rent and you'll make some money, plus keep ownership. I'd do a +/- analysis, considering the hassle of owning a rental. It can also be a tax burden. To think simply, if you want short term value, sell it. If you want long term, rent it (assuming the rental market is strong where you are).

 

I did exactly what you are describing. Kept and rented my former home and moved into a new house. Had 2 mortgages for a while, but paid off my former home in 7 years with the rental income.

Of course, there is no way to predict the future markets, but I can tell you this, the appreciation alone on the rental home, combined with using the cash flow to pay off the mortgage, blew away all my stock market returns, and it's not even close ... Plus, I recently had the tenant move out, nearly doubled the rent, and still had insane interest in it.

I also don't think it's a great time to sell. Interest rates are higher than people want to pay and it's slowed the market a bit. Not like it was a few months ago with bidding wars and people offering way over asking price.

My advice, and I got I this from my parents who are big into being land lords ... go little under market on asking rent, and be selective. We even drive by their current address to see how their house looks, try to met them in the driveway and look in their cars to see if they have trash piling up, do a public records search for court cases they were involved in, and we do call their employers to confirm income.

 

I actually bought at a bad time, as it was peak. Only silver lining was that I sold my home in Apollo Beach to come back to school, so I had some $ in the bank. When the market crashed, my townhome went to 1/3 value. It's finally back and I'm tired of renting it. Will invest the equity in retirement funds and save some for downpayment on a second home.
We've had property managers for 10 of the 11 years it's been rented. One was a turd and the next was pretty good. Didn't cost a whole lot and not having to deal with renters was worth the minor expense. If you rent it, will you have a manager? Otherwise, are you or your wife retired and in a position to deal with renter hassles?

 

That sounds like a horrible selling agent. Stick to your guns.

Rentals are not that bad on income taxes, lots of write offs and depreciation, but they are not covered by "save our homes" and "homestead exemptions" to property tax is extremely high... between taxes and insurance, it eats up 3 rent checks a year.

 

Thanks. She's the same agent who helped me purchase back in 2005, so I went loyalty. She's been low-balling me throughout the process and seems to be protecting the interests of her investor more than me, the seller. I signed an exclusive rights to sell, though, so appear to be stuck with her for the moment anyway. Good thing is, my price is listed in that contract, so she's honoring it.
Will go on the market early next week, barring the need for major upgrades. I'm in MN, so have to rely on photos to know the condition. Will be interesting to see where the first offers come in at.

 

I did something similar in the past and it worked out well. I owned a property outright and bought another one using a HELOC taken out on the first one. Rented both out and used the income to help pay off the HELOC quickly. I then owned two properties. But… it really all depends on the market and going through worst case scenarios if rents decrease. Can you afford to cover losses if rents don’t match carrying costs? If so, then the risk is greatly reduced.

It can be a great way to increase your portfolio. BTW, you just received financial advice from a liberal. Scary times.

 

sounds like you need a new agent

 

Yes, it’s a good idea… speaking from my personal experience with doing it. I only question the timing, as we may see big discounts in real estate over the coming months. I am planning on acquiring properties when the crash happens. Might not happen, but the uncertainty of buying at the peak, especially in Florida, concerns me.

 

Rent it out. As pointed out in earlier threads consider AirBnB if possible. And for those above thinking that a crash is coming, even if it does private equity and big corporations are gonna keep the bidding high, especially since it will be cash offers. Anyone banking on a crash is gonna end up without a seat at the table. Get what you can get, when you can get it, and hold on to whatever you have if you can do so.

 

Did she not do a competitive market analysis (CMA) ? A competent Realtor should be able to let you know within $5/SF what similar places have sold for in the last few months.

No reason to give it away but if you overprice it the unit will sit and get “tired.” One month later people will ask what’s wrong with it.

It’s not what you want or what she wants - it’s what the market says it is.

 

The agent and I have looked at several comps. Most of the sales are a little lower, but they have all been rentals and looking at them, they were dumps. The neighbor's unit, though, sold for 16k more than I am asking (These are low cost properties in a working class 'hood, so 16k is signif). I'm thinking about an appraisal, if necessary.