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Hi all. We may be moving out of state for my husband's job, and will probably rent in the new location for the time being. Unfortunately, we bought at nearly the height of the market so if we sold right now, I fear that we'd be a good $40-50k (or, horrors, more!) upside-down (after paying the realtor, etc...). We're considering renting the house out as an alternative. We'd use a property management company to help deal with the whole absentee-landlord thing...
I know that renting out your previous home is generally discouraged...but my feeling was that taking a small loss monthly (paying the management company, discrepancy between rent and mortgage, etc.) and possibly taking a loss for damage to the property/vacancy still doesn't necessarily add up to $40-50k or even more. IOW, a "potential loss" appeals to me more than a large, definite loss.
Figure out what the cost of paying someone to take of it every month is going to be.
To be safe, I'd assume that your house will regain its value in 10 years, so figure out if you'd indeed be losing money for 10 years.
Actually, find out what the average % increase is in your area for houses like yours, and use that as a figure, to figure out what your break even point would be.
Personally, i bet your rent intake will be higher than your mortgage payments, and that you'd come out ahead every month with that property.
The other way to make money, is to have your house value increase at a higher rate than what you're paying out. With these current markets, thats not likely.
Not only that, you have to compute what the cost of rent will be at your new location, and if it doesn't make sense to sell your place, and then buy a new one.
Figure out what the cost of paying someone to take of it every month is going to be.
To be safe, I'd assume that your house will regain its value in 10 years, so figure out if you'd indeed be losing money for 10 years.
Actually, find out what the average % increase is in your area for houses like yours, and use that as a figure, to figure out what your break even point would be.
Personally, i bet your rent intake will be higher than your mortgage payments, and that you'd come out ahead every month with that property.
The other way to make money, is to have your house value increase at a higher rate than what you're paying out. With these current markets, thats not likely.
Not only that, you have to compute what the cost of rent will be at your new location, and if it doesn't make sense to sell your place, and then buy a new one.
will op need to inform the mortage company of the intended plan?
Sadly, I'm pretty sure we WON'T be coming out ahead if we decide to rent it out...I'm thinking we could probably get $2000-$2200 in rent, but the mortgage is just shy of $2200. Add in the extra costs of property management, extra insurance, etc...
But a smaller loss still seems somewhat preferable to a large definite loss...and at least "losses" for an income property have some tax advantages.
Really, there's no great solution to any of it. I would be happy just to break even with the house, but it doesn't look like that's likely to happen.
Sadly, I'm pretty sure we WON'T be coming out ahead if we decide to rent it out...I'm thinking we could probably get $2000-$2200 in rent, but the mortgage is just shy of $2200. Add in the extra costs of property management, extra insurance, etc...
But a smaller loss still seems somewhat preferable to a large definite loss...and at least "losses" for an income property have some tax advantages.
Really, there's no great solution to any of it. I would be happy just to break even with the house, but it doesn't look like that's likely to happen.
Actually, that's not bad if you consider that you will be operating at a loss -you will probably break even during tax time (because of the deductions). I wouldn't be crying a river just yet. Right now you are at a very SLIGHT loss vs. a massive loss.
No, you do not need to notify a mortgage company that you will be renting out the property.
You would need to check out the terms of your mortgage. Mortgage rates tend to be higher for non-owner occupied homes. So, read through that before doing anything. Good question.
Redpanda: At least in WA, if you live in a house for a year, you have established that house as your 'primary' dwelling, and will not have to deal with capital gains if you sell within the next 2 years. So, if you move out, you have two years to sell the place before you'd have to deal with capital gains, another factor with selling rentals.
I don't think a re-fi would help...our rate is incredibly low...I believe it's in the high 4's. Of course, we're 2.5 years into a 7-year ARM, so we may do so just to be on the safe side now that the stupid market is tanking.
I'll check the mortgage terms, but as far as capital gains go--I'd be THRILLED to have the opportunity to pay them instead of being 25k in the hole, heh.
I don't think a re-fi would help...our rate is incredibly low...I believe it's in the high 4's. Of course, we're 2.5 years into a 7-year ARM, so we may do so just to be on the safe side now that the stupid market is tanking.
I'll check the mortgage terms, but as far as capital gains go--I'd be THRILLED to have the opportunity to pay them instead of being 25k in the hole, heh.
You realize capital gains are something like...40%? I'd have to check, but they're a really high percentage.
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