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After owning my house for almost 5 years and putting almost $10k into it, it is now only appraising for $87k, while I still owe $97k on the loan. I have come to the conclusion that I won't be able to sell it within the next year. So, I've decided that I will be renting it out in September and staying in temp housing until I get a job transfer lined up in my new state. There's so much I'm wary about. I don't know where to begin. How much more does a LL policy cost than a homeowners insurance policy? Will there be a property tax change? If I can't cover the mortgage and basic maintenance with the rent, or I lose money due to vacancy, are there any tax issues I'd need to know about? Help!
I just can't stay here any longer. I NEED to move.
I don't have the answers to your questions, but I would think landlording from another state would be a nightmare! You would have to have someone on standby for emergencies - like what if the AC stopped working or a pipe burst in December? Who would be taking care of that? The renters sure won't.
Possibly make a post on the real estate or renting forum on here and someone may be able to give you better feedback. I know in FL when I rented a condo the owners lived out of state. They listed the condo with a realtor who also handled items like if I needed a repair done. The realtor would call the appropriate repair person. You probably have to pay a higher commission for them to do that.
After owning my house for almost 5 years and putting almost $10k into it, it is now only appraising for $87k, while I still owe $97k on the loan. I have come to the conclusion that I won't be able to sell it within the next year. So, I've decided that I will be renting it out in September and staying in temp housing until I get a job transfer lined up in my new state. There's so much I'm wary about. I don't know where to begin. How much more does a LL policy cost than a homeowners insurance policy? Will there be a property tax change? If I can't cover the mortgage and basic maintenance with the rent, or I lose money due to vacancy, are there any tax issues I'd need to know about? Help!
I just can't stay here any longer. I NEED to move.
I recommend that you figure out a way to get the money and sell it. I was an out of state landlord for one year and I will never do it again. I believe that I got off easy but there were issues. People are unpredictable and not always forthcoming. As a landlord, you will be managing two households. Tenants are hard on your home and repair costs sucks. Again, I believe I got off easy. The property was returned in relatively good condition and they paid their rent. However, I was very strict and did not deviate from the lease.
As for taxes, it looks like I did okay. The tax man is generous with deductions. However, I discovered I will have to repay the depreciation deduction when I sell. My net income from the property was negative. Good for taxes but bad if you want to buy another home. Mortgage companies only count the net income reported on schedule E. If you decide to buy another home, you will have to qualify for both loans. It is just not worth it.
I have come to the conclusion that I won't be able to sell...
(at a price level that will recover the investment made)...
So, I've decided that I will be renting it out...
And taking that loss over time instead as well as mainntaining the same risks of ownership.
Not the best move MrJones.
Sell it as soon as you can (spring is always best).
Get the MOST that you can from the sale.
Move on unencumbered.
If you are upside down, be aware that the "forgiveness " tax provision has ended, so you will be responsible (1099 form by the lender ) for the difference between the sale and the loan. Also, a short-sale can take a year. Lenders are notorious for dragging their feet as they can actually end up better financially by forcing a foreclosure. Also, a short-sale can adversely affect your ability to buy a home for years.
Having owned rental properties, here are my suggestions.
Go visit a real estate company in your area that specializes in rental properties. See what rents are, and if you can rent for enough to cover payment, taxes, insurance. Be aware that you will lose your homestead exemption and taxes may increase. However, you will not be having contents coverage (check with your insurance agent as there are specific policies for the home itself and liability). Even if the rents are marginal or you have to put a little in between the payment and the income, you are better off.
A good rental agent will do the credit searches, be responsible for getting good tenants, etc and you will seldom hear from the agent. Unless you are in Detroit proper or similar locations, at some point the equity will exceed the note, and then you can sell.
When you buy, the lender will take the note into consideration but you will get credit for the income stream from the rental stream. Also, when you do your taxes you will be doing a form for the rental income and be able to depreciate the home, helping your tax situation at the end of the year.
I recommend that you figure out a way to get the money and sell it. I was an out of state landlord for one year and I will never do it again. I believe that I got off easy but there were issues. People are unpredictable and not always forthcoming. As a landlord, you will be managing two households. Tenants are hard on your home and repair costs sucks. Again, I believe I got off easy. The property was returned in relatively good condition and they paid their rent. However, I was very strict and did not deviate from the lease.
As for taxes, it looks like I did okay. The tax man is generous with deductions. However, I discovered I will have to repay the depreciation deduction when I sell. My net income from the property was negative. Good for taxes but bad if you want to buy another home. Mortgage companies only count the net income reported on schedule E. If you decide to buy another home, you will have to qualify for both loans. It is just not worth it.
This pretty much nails it. If you think your life is depressing now, try being an absentee landlord. You might get lucky, but "luck" is not an investment strategy.
Sell it. Take your loss. Move along. You will lift an enormous burden from your shoulders. Renting brings with a whole different set of aggravations which simply prolong your frustration.....and then you are still stuck with a house which won't sell for the balance of the outstanding mortgage...perhaps even less after it has been a "rental property".
In some places it is against the law to be an absentee landlord, so you are required to have a local property manager.
I assume you have an owner occupied mortgage, which means that the bank may very well take action against you for defaulting on the terms of your mortgage if you rent the house out. A guy from work did this and the bank called in his loan. He was able to get things temporarily smoothed over because he was able to explain that he just got married, moved to his wife's house, and was putting his house on the market. He planned to sell the house anyway, and the bank requires he sell the house because they will not carry the mortgage on the house as a rental property.
Do you need your credit history? Is it just your name on the mortgage? You could also stop making payments and wait to be thrown out and foreclosed on. In the meantime, you could stash the mortgage payment amount each month so you would have a solid savings account when they did foreclose.
You said a job TRANSFER. If you have a job, why can't you afford to pay the mortgage and stay there? Landlording without experience from another state is going to create a long term loss every month and may cause some serious grief. I generally don't advocate bankruptcy, but it can be reasonable for people that have the worst loans. At the same time, 5 years ago puts you in 2009, which is after the housing downturn was well under way.
Yes, you put money into the house, but you expect to spend at least 1% of the house value on repairs per year and in some places 2%. You aren't that far above 2% per year. Granted, these figures also depend on if you are a DIYer, or if you hire someone to do every job around the house which massively inflates the cost.
If you walk away from the house it will hit your credit really badly and tank it for the next several years . I would find out first if the bank will still carry the mortgage should you decide to rent it out . If not then you will have to put it on the market for sale and then hope you sell it and the bank accepts the sale .I wish you luck either way you decide to go .
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