What should I do? Sell or Rent?

Question

I have a new home that I bought last year (pre contruction) and I am trying to sell this year. Supposedly it went up over 100K in value but I am having a hard time selling because the market is very bad in Orlando now and everyone and their grandmom is selling now.

Should I just get rid of it and try to break even (because I would basically have to lower it to the price I paid just to get rid of it in this market) or rent it out for a few years until the market stablizes and then try to sell it and attempt to make the 100K that supposedly it went up by.

If I rent I will have a negative cash flow of $400 a month so I will have to pay about 4,800 dollars a year until I sell the property. I am just worried that the market will crash and prices will drop so badly it will take years to recoup my money.

Any advice?

Answer 1

If you sell now, you may not qualify for a long-term capital gain and you have not lived in the house long enough to use the personal residence exemption. Here's an idea: try to rent it on a lease option. You can get a higher rent if you offer to credit a portion of each month's rent towards the down payment on the house. This will help your immediate cash flow and will give you a seller and a sales price for down the road. If the tenant exercises the option (there should be a time limit, say two years), you are rid of the property. If the tenant doesn't end up buying, you've gotten a higher rent, which you get to keep, and there is a good chance the market will have stabilized and the house will be easier to sell.

Is there some reason you cannot live in the house yourself? You might be able to get a roommate to help with the costs. If you live there for two years, you can shelter up to $250,000 profit on your personal residence, saving a lot in taxes.

Answer 2

In a buyer's market, sellers have to compete either in "terms" or "price." If you need top dollar or at least close to top dollar then you are going to have to offer better terms. For example, seller financing with little or no money down and an attractive interest rate. Or you could sell subject to your existing mortgage and defer you equity payment for a period of time. That would give the buyer the opportunity to be seasoned in the property and qualify for a refi at the end of a year. He would then cash you out of the agreed upon equity and you could still be listed as the mortgage holder for tax purposes.
By selling subject to the current mortgage you wouldn't have to take the negative $400 cash flow and wouldn't have the tenent nightmares.
There are literally a couple of hundreds of ways to structure a deal to get you out of your situation. You have to consider your tax situation as well. Would selling at a loss and using that against any other income be advantageous? It could negate any negative issues you are facing.

Answer 3

Well, it is hard to tell what will happen in the future, but if you sell now, you will break even. If you hold it for a year, it seems like you will lose money unless the market heats up again. You have to ask yourself if you are willing to risk $4800 a year on the likelihood that you will eventually have a hot property. If the answer is no, you should try to sell now.

Answer 4

I rented and then sold it because it was a pain in the a,ss .I did more work on it when I wasn't living there

Answer 5

Renters can damage and devalue your home faster than termites.

Answer 6

RENT!!!