No, no, if I keep it I’ll find a way to refinance it.
Just out of curiosity, does anyone know if historical trends in rent and house prices support this?
I realize that California has an absurd housing market, and Santa Barbara doubly so, but I’m amazed at how out of whack it is if those numbers are a good rule of thumb. The house we rent for ~$2000/mo has a property tax assessment of $550K+, and a reasonable market value estimate of nearly $1 million.
Opal, I suggest you sell. I agree that you don’t want to be an absentee landlord, and if you have no plans to return to live in the house in the future, don’t hold on to it. If you had a reasonable expectation of positive cash flow from the rental, then it might be worth it, but it looks like you’re barely going to be breaking even, assuming nothing bad happens. Trying to time the market is a sucker’s game. Doing so when you have an IO mortgage and may not have the income to pay it down quickly or be able to refinance in the future is dangerous.
You are bumping into the illiquidity aspect of real estate investments. I’d only want to own a property if I plan to stay in it 5+ years, or if rising home prices make it attractive.
IMO, you should sell and take the hit. If there’s positive cash flow, then it’s likely you can sell to real estate investors for a good price. I’d imagine some of the $6000 can be recouped if you go with a flat fee realtor or go down the FSBO route. Perhaps you can sell some of the clutter or recoup it if you include furniture, etc. in the sale price of the home.
As best I know, (1) the tax break for a sale of a primary residence can be taken once every two years. If you plan to take the break for the VA townhouse (which my back-of-the-hand calculation shows is likely), then you won’t get to take it for the GA house unless you hold onto the GA house for two more years. (2) There may be a prorated tax break if you live in the house for less than the 24 months out of 60 that the tax law requires. (3) Capital losses can partially offset other income.
If either points (2) or (3) apply – and I suspect (3) does, due to your FT student situation – then you definitely want to talk to a professional real estate and tax lawyer.
I too am considering whether to sell up or rent out. I’m seeing some agents tomorrow. What I have decided is that if I do rent, a substantial deposit will be required - 3 months rent - and that the rent will be paid by direct debit only. And if it doesn’t get paid then they’re out. Immediately. This may not be possible under U.K. law. I need to investigate.
::checks forum::
If you really want advice, it can’t quite be all hard fact, some anecdote has to enter into it. Mainly because the rental situation is very different for everyone.
I watched the parade of horrors that befell Fierra as she rented her house out for 2 years, and I say “sell.” If something goes wrong, it will go really profoundly wrong. Clogged drain? They’ll be calling you at 11:45pm and demanding you do something about it. Pilot light goes out on the furnace? They’ll be calling you, and screaming. You’ll have to deal with them causing wear and tear to the house, and possibly burning through the security deposit in the first year. Rent checks will be late, and you likely will get a rent check bounce. Etc., etc.
There is a lot more stress to it, much more than you might think. That stress on your life has a value, and it’s probably close to the $6000 you say you’ll lose. If you were living locally, near the house, I’d say it’s a coin-toss. But remotely? No way.
Well, they wouldn’t be calling me at 11pm–I’d hire a manager to take care of all of that stuff. I wouldn’t consider renting it out, especially from long distance, without having a manager.
((laughs)) Oh yeah, we had a manager. She took 20% of the rent, came extremely highly recommended (and highly priced), and essentially screwed things up so much that the renters tried to make a complaint with an environmental agency just because the carpet wasn’t cleaned fully to their satisfaction. She got the contracts wrong, did not obey the legal requirements for notifying the renters, could not arrange simple repairs without constant communication and back-and-forth, and kept delaying the pass-on of the payment due to a myriad of reasons which had us wondering “what excuse will she use this week?” (frequent excuses were “I forgot”, “the bank was closed” (ALL WEEK???), “I had to hold the check until I got an estimate for gutter repair”, and of course “the check wasn’t signed and I didn’t check it before I accepted it.”) And from contacts we had with others who had agents manage properties for remote owners, this wasn’t unexpected.
And the renters will still find you and your number, and call you if they get indignant enough. It can happen, as long as your name is on the deed. When this happens, your manager will throw up her hands and say “well, since you’re handling it, I can go back to sleep now” and spend her 20% cut on lottery tickets.
Different country, true. Maybe it’ll work for you, who knows? I’m guessing the stress can be entirely not worth it if you live far away from the property.
There are so many condos being built in the Atlanta market, it’s hard to imagine much appreciation in a condo over the next few years. Too much supply.
Who is talking about a condo? This is a single family home in a subdivision about 30 minutes north of Atlanta, near Kennesaw State University.
Something I didn’t see listed above-check the restrictions on your current mortgage. IIRC, some are based upon the dwelling being occupied by the debtor-you. If you alter the use from that of your primary dwelling to investment, an interest rate change might apply.