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We are in a starter home, and fortunately for us...we bought way below than what we could afford back in 2006. As you all know, prices have fallen and our house is currently worth exactly the same as what we paid for it in 2006.
There are several rentals in our neighborhood that rent for 900 to 1000 a month. Our mortgage payment is $700 a month.
The neighborhood that we want to move to next has some really good deals and will probably do so for the next year. This particular neighborhood is for sure where we want to move next and was previously priced out of or range....but not now. That's exciting because we can afford to get in before the prices eventually come up.
The problem: don't want to sell now because I refuse to bring a check to closing (realtor fees)...to me that would be the worst financial decision ever! Or maybe it would be an okay decision since we would be getting such a good deal on the other end of it? The other option would be to rent this house out and buy another house using a rental company. I've heard having a rental is great but can also be a nightmare? We will have 20% down in cash for our next house, so it's not a huge deal that we are not making a profit here, since we will not be using that towards the next house. It would probably take 2 more years for our house to appreciate to where we could break even and leave with the principle we put down and equity we've accrued. But.......if we wait 2 more years, the houses in that neighborhood may be priced too high? What should we do.
It's in Raleigh, NC. In general the triangle has seen some appreciation and is projected to gain appreciation in the next 2 years. The neighborhood we want to move into is now selling at 2006 prices (they were all built in 2006) like us. Houses that sould be selling at 320,000 under normal 5% appreciation, are selling at 260,000. They are still building in that neighborhood and only have 10 lots left...they are selling like hotcakes. Of the 10 lots that are left, they have already sold 3 lots in the last month. We are only interested in the resales because they are better deals than the new ones going onto the lots. This is a very highly sought after and popular neighborhood. A new interstate is being built and will be finished in about 3 years and will be 1 mile from this neighborhood. They are very well built, custom, non cookie cutter homes that are rare to find these days. One of the resales that we liked sold in 5 days! Our neighborhood had a short sale about 4 months ago that brought our home prices down, plus you don't get much appreciation from a starter home in a lower price range to begin with.
Yes, you'll have to write a check at closing on your present house but you will make up the difference on the new home since you're buying in the same market.
I would not rent my home. There are no guarantees that you'll get a renter that respects your property or indeed any renter at all. The three year old house down the street from my home was rented by a family that left thousands of dollars of damage when they left. You would have had to see it to believe it.
Yep I've heard those types of terrible stories. If we did sale and bring a check to closing, it would be about $2,000....so it wouldn't be some ghastly amount. My realtor said we could probably break even meaning selling at what we paid for it plus realtor costs. I don't think so, I think we would end up paying about 2,000 in the end, just because of what the other homes in the neighborhood are selling at. This is the best home in the neighborhood (everyone else in the neighborhood has said so) because it was the former model home and has a huge number of features the other homes don't have. We are the only ones in the neighborhood who has hardwood floors, huge fenced backyard, stone front, mouldings, the other homes don't have any of these.
I don't recommend renting your place out, but that is just me. It is a big wildcard that could cost you money in the end. Depending on your renters, they either respect the house or do not. I would expect to replace carpeting after renters move out, as I think people get sloppy in rentals.
The problem: don't want to sell now because I refuse to bring a check to closing (realtor fees)...to me that would be the worst financial decision ever!.
Never say never. That's my advice to you.
By "refusing" to bring a check to closing; one day you like many others who have tried to sell their their current homes and had a fair market offer on the table will learn to regret that "refuse". There are so many people who had chances to sell for X amount 6 months ago, and now are forced to either short sale/foreclose or sale for 20-100K less than their previous best offer. This is one scary RE market we are living in.
I swallowed my price. Am wiring 30K in cash just to sell my home in Maryland (that's in addition to the 100K hard cash principal I had put as downpayment and my principal payments). So consider yourself lucky.
The US real estate psychology needs to change. Sure everyone wants to make a profit on any investment purchase. But the old model of "real estate never goes down" is not in existence anymore.
I know NC real estate prices did not skyrocket like some parts of the country but it also didn't tank like the rest of the country.
So consider yourself lucky if you just for having purchase at or near "peak 2006" prices and only having to bring a $2K check to closing. If you like another home and would like to purchase it and can get by just bringing a $2k check, I would jump on it.
Renting could be an option. But's a chance game. You can get lucky with good renters. But you could get unlucky with renters would could tear up your home. Is it worth the risk?
Are you comfortable carrying two mortgages and potentially not having any renters (those who either stop paying rent or you can't rent the place out).
Good luck and selling right now is not the worst financial decision you can make. Remember sell low/buy lower. Those homes you are thinking about buying, you are getting a "deal" Sleep on it and think about it.
1. How the rental market in your area? Does it take a while for homes to rent out?
2. Your monthly mortgage is $700 - does that include your property taxes? If you have a homeowner's exemption in your state, you'll eventually lose it and your property taxes will go up. You need to factor the cost of taxes, any utilties, insurance, etc.
3. On the plus side, your tenants will be paying down your principal.
Not everyone has the stomach to be a landlord - tenants can be the worst kind of hell you've ever imagined. And on the other hand, some tenants will care for your property better than you might have.
Plus side is I believe if you have a second home as a rental and it sits empty you can write it off can't you? Anyone know?
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