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I need some collective wisdom! I want out of Albuquerque (some very scary experiences here... long story) and I want to leave by Christmas, if at all possible. I bought a new (2007) house in the NW Heights in December and have a good amount (40%) of equity in it. If I tried to sell it now, I would of course take a loss, but probably wouldn't have to bring a check to closing.
OK, so I'd lose a bundle, but is that better than the hassle of renting through a Property Manager who might rent to some slob who could trash the place or to some whiner who would want me to pay for lots of repairs?
Does anyone have a similar experience out there? What would you advise?
> .... If I tried to sell it now, I would of course take a loss, ...
Since you have to move, you've already taken the loss. So far, it is just a "paper" loss, but it's already happened. Once you close, you'll officially recognize the loss.
It's the same as if you had money in a bank that was not FDIC insured and also went bankrupt. You can't get to your money any more. It's gone. Closing the account doesn't make a difference.
> ... the hassle of renting ... trash the place ... lots of repairs?
Unless you are already in the business of renting stuff to strangers and can afford the risk of a money pit, starting into that new business and then moving to where you can no longer monitor your property is nuts. Nuts, I tell ya.
Renting to others *IS* a business. Being able to monitor your property (it IS still your property) is very valuable in terms of your ability to sleep.
Just to toss some numbers around, suppose you have $50,000 equity in the property, can you reasonably expect to make $5,000 off of it? That's the profit, not the gross rents. That's 10%. People that know what they are doing in real estate don't mess with it unless they can get 10% in a very bad year. 20% is safer because some times things will go bad. Don't be a nut.
You will not be renting it because it was a good idea and you are looking to make a living off of the property. You will be renting, basically, in a desperation move to avoid "officially" recognizing a loss that you already have suffered.
It’s just a property. If, in some unlikely event you are convinced that residential housing property is coming back, when you get to your ultimate destination, buy some stock in a REIT or a homebuilder. At least if you further lose money on that, you can write it off on your taxes $3,000 per year.
Mortimer's advice is extremely good, but let me add a slightly different perspective.
We're planning to move to ABQ within a few weeks. If I were looking for a long term rental (I'm not, BTW) why would I be interested in YOUR house?
What would make it stand out enough to make it jump off the page amidst all the other ads and say "You really need to take a look at this house, it's the one!!".
If you don't have a really strong answer to that question, better sell as fast as you can for the best price you can get since it's likely to stand empty for a long time.
As a rental, many of the reasons you liked it enough to buy it no longer matter. It's the combination of basic facilities, location and price that will drive its marketability and very few of us buy places in the very best rentable locations since our considerations for long term ownership are probably different.
[quote=sigourney79;4692237]
OK, so I'd lose a bundle, but is that better than the hassle of renting through a Property Manager who might rent to some slob who could trash the place or to some whiner who would want me to pay for lots of repairs?
[quote]
Or both of those combined into the same renter.
Very few people I have talked to anywhere who have done this option recommend it. I would recommend it only if you want to move back into the house. Even then, it may not be the best idea. We are military and like where we live right now but will have to leave. Our options are renting our home or selling it and buying land to move back to and build on. We are leaning heavily towards land.
Well, just to answer Mike's thoughtful question, I do have what's widely considered to be the most spectacular views in the city -- and in Albuquerque that means a lot. Also custom built home with granite countertops, saltillo tile, two covered upstairs terraces, covered patio, full landscaping -- lovingly so -- and lots of other good stuff.
BTW, I don't think I understand the rentable area vs. liveable area part of Mike's reply. huh?
BTW, I don't think I understand the rentable area vs. liveable area part of Mike's reply. huh?
Often when we buy, we take convenience to friends, family, specific hobbies, activites , social functions, status, mortgage availability, etc.
into account and house renters generally do not do so to the same extent. So the total package that really worked for you in deciding to buy your
place may not really be anywhere near as important to the average renter.
In 2005 we sold our house near Washington, DC. prior to moving to Panama. It was a small, 1920s house but in one of THE trendiest
neighborhoods so it had a huge amount of buyer appeal, but we could never have rented it for enough to have made it worthwhile doing that
rather than selling.
There were just too many far larger homes with modern floorplans and features for rent in reasonably nearby areas to make it a good rental
prospect. Peoples' priorities are just different when they're looking to rent, not to buy.
Lurked here as a guest for a few weeks but this thread finally prompted me to join and post.
While I think Mortimer makes some great points I have to nitpick on his analogy of the property to bank account. While I'm not certain of every various way of accounting for the property (and there are normally a few ways to stack the balance sheet on assets), it's not a cash asset. Or even a near liquid one so you haven't really already achieved the loss and are merely debating when to realize it, IMO (an undereducated opinion from me though I'll admit).
If you believe there will be a turn in the market, then it might be worth holding onto. But there are a lot of personal factors involved. Like whether you are comfortable holding 2 mortgages while you weather the storm, if the house will be 'ok' as an empty for 'sale home' with minimal supervision, or how much you just want to wash your hands of it asap (most likely to take a big hit there).
Like anything else for sale, you can put your price tag on it, see if there are takers at what you actually want to sell for and reject the low-ballers. Then pull it from the down market after a period if it doesn't sell, and relist later in a better market (note: this only works if you are in a position where you don't 'need' to sell).
Hope I didn't just make a huge noob mistake of a first post here with the novel above.
I owned a home in the ABQ metro area and rented it out for a few years while I was out of state. I listed the property with a property manager who assured me over the years that my property was beautiful and in great shape. When I returned to the house it was not a pretty sight. Too many bad experiences to list, but my advice is to take your short-term loss and be on your way.
> I have to nitpick on his analogy of the property to bank account. ...
> ... it's not a cash asset. Or even a near liquid one ...
> (an undereducated opinion from me though I'll admit).
No. You're totally right. I think the OP needs other opinions and yours was well reasoned. I come from a point of view that is very ignorant on how to make money from real estate.
My problem with holding onto a place, waiting for a turn is that it is a real financial strain.
Renting is not likely to turn a profit, so it's going to drain you, financially.
Maybe you can afford it, but if you are a good investor then you'll be stressed knowing you have a 'leak' in your finances. If you are not a good investor, then you probably cannot affort the double mortgage thing.
> If you believe there will be a turn in the market, ...
.... then there is more than one way to play it.
You have to ask yourself, if I was already moved and I had my one mortgage, would I enter into a new mortgage contract just to play the real estate market? If yes, keep the one you have after you move into the new place.
Again, you can buy securities on the open market that will track the real estate market. You can buy stock in many homebuilders or you can buy a tracking stock (an ETF) that is a mix of all of them. If the market moves up, so will their stock prices -- just as they all moved down when the housing market went down and they were all going up during the boom.
There are other securities you can buy that accomplish the same thing.
Again, if you're wrong about the housing market and it continues down, at least you can write off your losing investment easily. You can bail at a moments notice.
Holding on to the former residence, you're committed. You're stuck. You're paying insurance. You're paying interest. You're exposed to vandalism. You're exposed to theft. You're exposed to repairs. You're exposed - period.
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