We have grown out of our home and need a bigger house. Someone suggested that we refinance our current home with a traditional loan (we would not need to purchase insurance b/c of the equity in our home would equal 20% down or more) Our new home will be bouth with 0% down with my husbands VA Loan. (which doesn't require insurance) Our home is in a perfect location for a rental.
2006-08-09 10:16:39 · 10 answers · asked by Dominika 3 in Business & Finance ➔ Renting & Real Estate
Well, there are a couple of problems with what you say. The first is that you will qualify for a smaller mortgage if you keep the old house. You just have mroe of a debt load, whether its rented or not, so it makes you qualify for less. Second, VA loans arent that great. You dont pay PMI and they let you go 0% down, but then you pay their insurance, and you have a higher rate because of it being VA with a 0%. So getting a downpayment out of your old place could save you a lot of money. The thing about the refinance is only partially true as well. You could not refinance with your current lender, unless you have hit the 20% by money you have paid into the house. They do NOT count appreciation of the property towards that 20%. Now if you refinance with another lender, then they might take appreciation into consideration, but you still get stuck paying all of the closing costs, appraisal, etc, which will eat up more $$. Plus, if you got the house in the last few years, the odds are that you will be refinancing into a much higher interest rate, and that the additional interest you pay could be more than the PMI that you pay.
That being said, its hard to tell. If you arent looking for a huge mortgage on the next place, you might still qualify for a high enough mortage to buy the next one. And if you are able to command a rent that is way over what you pay on your old mortgage, and if there is decent appreciation in property values where you live, then it might be worthwhile. But for a lot of people it also may not be.
2006-08-09 10:24:41 · answer #1 · answered by bmwdriver11 7 · 0⤊ 1⤋
If you and your husband work full time and don't have the time to take care of all the problems the house will have with the new renters, charge a little less rent and have them agree to fixing anything that will cause problems. You'll probably end up buying new stuff in the long run if there isn't any remedy to them, but renting is a big hassle, on the other hand the rent $ is also good.
2006-08-09 10:29:27 · answer #2 · answered by Jessica 2 · 0⤊ 0⤋
It also depends on where your house is and what it's value is and how much rent you get.
For example if you house is in CA then and it may have a value of $ 700,000 (medium house) but you can get only 2,000 per months, 24,000 per year. Take all the costs off and you stay perhaps with 18,000 income. Let's not consider taxes but this is a lousy return of 2.5%.
So only if the house is ina location where you expect really good appreciation for real estate it makes sense.
Howeve - if your house has a value of $ 250,000 and you can rent it for $ 1,300 then that's 6.2 % return.
Again - not talking about taxes and other costs yet.
In addition renting a house out is a lot of hassle and you need luck to find good renters. You have to calculate investments in, like a new washer here or new carpets there.
So - unless you expect some major appreciation for your real estate I don't see a good reason to keep it.
2006-08-09 11:17:47 · answer #3 · answered by spaceskating_girl 3 · 0⤊ 1⤋
Keep in mind that there will be times when the house is vacant and you don't have that rent money coming in. You will have to cover the mortgage on the house and the mortgage on the house you are living in at the same time. Plus the repairs and maintenance that you will be obligated to do because you are the landlord. It's not a guaranteed money maker.
2006-08-09 10:24:42 · answer #4 · answered by ? 6 · 0⤊ 0⤋
It depends on what you're willing to deal with. If you sell your house, then you can use the money for a down payment on your newer house. But, if you rent your house, you will own two properties, one being an income property.
Just be careful that you don't rent to some loser who decides to trash your house and not pay the rent.
2006-08-09 10:21:47 · answer #5 · answered by westsida 4 · 0⤊ 0⤋
Rent it for less than 3 years then sell it. You get all the revenue tax free as long as you lived in your old house for at least 2 years
2006-08-09 10:20:21 · answer #6 · answered by jercha 4 · 0⤊ 0⤋
Renting would be wise as long as you charge high enough rent to pay your bills on that house. If you sell the house it at least takes it out of your hair.
2006-08-09 10:20:42 · answer #7 · answered by Anonymous · 0⤊ 0⤋
Depends...do you have the time and patience to find good renters, do repairs, collect rent, and put up with the thousand and one problems you might have with renting? If not, then sell.
2006-08-09 10:21:51 · answer #8 · answered by sandislandtim 6 · 0⤊ 0⤋
you guys should definitely rent it , its an 8-10% earnest money in a year
2006-08-09 10:22:56 · answer #9 · answered by Anonymous · 0⤊ 1⤋
Renters do not care about your house. They will destroy it.
2006-08-09 10:25:30 · answer #10 · answered by mrknositall 6 · 0⤊ 0⤋