Rent or Sell house?

Question

We currently live in this house. But going to make a bid on a new home. Not sure if we should rent it out or sell it. If we sell it its paid off, end of story. Rent will bring in mortgage payment plus extra, with monthly headache of renter. We have one rental so far. This would be our second. What would you do?

Answer 1

Why You Should Invest In Real Estate
By: Ron LeBlanc

I am always amazed when I talk with people about investing and real estate. I was at a resort recently with my family and struck up a conversation with a woman about her experience with the resort. As we chatted she mentioned that she was a Realtor. I asked if she did her own investments, and to my amazement she said ,I wish I could, but I have my money tied up in funds,.

I almost drowned in the hot tub! Here is someone who facilitates deals for people in real estate (assuming she has ever met an investor), and she would rather earn 2-5% (maybe) per year on her money. Wow.

I hardly know where to start. I think the most exciting things about real estate investing are leverage and control. Let me first discuss leverage. How much interest in a mutual fund can you get for $10,000 ? $10,000 worth would be the correct answer. Options aside, how much stock can you purchase for $10,000 ? $10,000 is again the correct answer.

How much real estate can you buy for $10,000 ? How about $250,000? I’ve done it for less. Now let me ask: When you have $10,000 in stock, how much do get appreciation on? $10,000 – this is easy! How about if that mutual fund goes up 5%, what do you get 5% on? $10,000 again!

Now what if that $250,000 house goes up 5%...you get $12,500 in appreciation. That’s more than your initial investment.

Now let’s look at involving OPM – other people’s money. Is there anyone at a bank that would lend you $10,000 to buy stock? I doubt it. Is there anyone at a bank that will lend you $10,000 to buy a house? You bet there is! Lenders are tripping over each other to lend you money. How much mortgage related junk mail do you get every day?

So, not only do you get appreciation on much more than you spent, but you have people willing to lend you the money to do it! What could be better than that? How about control or knowledge.

When you buy stock in a company, what can you do to make it go up or down? Not much. I doubt you could buy enough product to affect the stock price of any public company. What about with real estate? What can you do to affect the market price of your property? Plenty! You can really affect a market, but you can do a lot to a property yourself.

When you buy a stock, do you have any idea if that stock will go up or down? Not really. Hopefully you study a company and pick one that you think will do well, but there are no guarantees. Phrased differently, do you have any idea what that stock will be worth 3 months from now? Absolutely not.

How about a property you buy – do you know what it will be worth in three months? You better have a good idea! You can run a market analysis or get an appraisal any time you want, and most markets don’t make radical changes in three months, so you can have a pretty close idea what a property will be worth in three months.

That investment is under your control, because you can fix it up, add to it, or even scrape it and add another building. When you add up leverage, control and predictability, real estate comes out shining as the best investment vehicle. Of course I would never recommend it be your only investment vehicle, but you are missing out on a huge return if you are not investing in real estate.


Lets Take It a Step Further
By Matt Gilmer

Using the principles you learned above. What if you were to buy a property and 80% of its current value and put no money down? A lender will allow you to roll in closing costs of the loan into your mortgage as long as the home can support it. Take the 250,000 example. 80% of the 250,000 is 200,000 or 50,000 off. Normal closing costs will be from 6000 to 7000. Roll that into the loan for a total purchase price of 207,000. This home is worth 250,000 as is. Say you want to make some improvements(new carpet, landscaping and paint and some new appliances) and borrowed another 5000. The home is now worth around 260,000 and you have 213,000 in it. If you choose you can sell now and make after Realtor Fees(if you use them). Realtor Fees are around 5-6%. Lets say you gave a big commission 6%, that $15,600. So you take the 260,000 minus Realtor fees of $15,600 = 244,400. Now subtract what you owe 213,000 from 244,000 = You just made 31,400 just for buying it right and doing minor improvements. How many times could you do this a year? 2 maybe 3 times. Lets say 2. How does an extra 62,800 sound?
Lets say you just want a house to live in. Same example from above. House is worth 260,000. Lets say you live in for ten years. Contrary to all of the "sky is falling media" Denver home prices still rose 3% last year. Say it stays the same for the next 10 years you live there. 10 years X 3% = 30%. 30% of 260,000 is 78,000. Add 79,000 to 260,000 and you have a home that is worth 338,000 and you owe 213,000 or so you thought. You have paid your mortgage for 10 years. You have a 30 year fixed rate mortgage and are paying 7%. After 10 years you owe $182,781.12. Your home is worth 338,000 and you owe 182,781.12. If you sold for 338,000 minus Realtor costs of you generous 6%(20,800) = 317,200. 317,200 minus what you owe 182,781.12 = $134,418.88. Just for paying yourself rent or making your mortgage payments. What if you bought 5 houses like this and rented them out? You guessed it $672090. What if you learned to sell your house without Realtors? Add another 100,000 to the profit. This is why so many people invest in Real Estate!!! Please get in this game. The time is now to act as the Denver Market will not always be this slow.

Answer 2

Being experienced with real estate, buying and holding is a great investment as long as your personal situation allows for it. You must already know about the write offs involved.Yet, the market right now is shaky. If you are anywhere near the coasts i.e. California, Florida, etc.. I would strongly consider selling. Read articles on msnbc.com the market is getting bad and may get extremely worse. If you have lived in your house the last two years you have got past capital gains and this could be a good time to cash out and choose a better position later. Even if you cash out and the prices stay the same you'll be about even less selling costs. If the prices go down you'll be at a loss and they may fall rapidly in the near future. I highly doubt that in the next few years you would gain much by keeping the house except for the buyer paying down your loan. I personally am selling off my investment property being that I am in California and I am paying capital gains on most of them. I hope my answer was clear enough. I would sell in this market. But I would absolutely make sure I kept my money and re entered the market at another time. It may be reasonable to hold onto the property if 1. you will waste the money away instead of investing it elsewhere and 2. you owe so little on the property that if rents went down 30-35% you would dtill not be strapped by holding onto it(and definitly make sure you calculate ALL expenses high). If you meet both qualifications I would keep it just because losing some equity is better than losing it all.

Answer 3

You would be better off selling. Renting a house is nothing but
problems! I helped my Father in-law take care of 3 houses and
I've seen it all, I guarantee you that you will lose more money
than you ever gain by renting out a house to someone! I know
that there are some good people out there but, they are outweighed by the ones who leave in the middle of the night owing rent and completely destroying the inside of the house!
Do yourself a favor and don't even consider renting to anyone.
It's just a headache on both you and your wallet!

Answer 4

Your girlfriend is exempt from CGT if she sells now. If she rents the house out, she is potentially liable to CGT on any future sale, but the period in which she lived in it would be exempt and there are other exemptions as well. She would pay tax only on the profit made from the renting, ie rents received less all expenses to do with the house. She should remember that no one will look after the house and love it the way she has done, so be prepared to do some repairs when the letting ends. She is unlikely to get 100% occupancy. My advice: 1. never do anything purely for tax reasons 2. if you can't decide what to do, don't do anything.

Answer 5

i believe that there are two ways to look at this question.
1 - Let's say you intend to be a "long term" investor. Keeping rental houses as a business.
A - What would it sell for? ..rent for?
B - Would you BUY it for that much to own
it as a rental for that much rent?
C - Is it better to buy a different rental?

2 - Let's say you're a "short term" investor. Renting out the homes that use ed to be primary residences. If the house has been your primary residence for the last 24 months, you can sell it INSIDE OF 36 MORE MONTHS, and not pay any capital gains tax (up to 250K/single, 500K/joint). Maybe you need to sell the other rent house before that hits?
A - Figure out what you'll make as a rental
for three years - and what you'll spend.
B - Will it sell better NOW, or in three years?
C - Is it worth the risk of gain/risk of loss?

These questions get answered differently in different parts of the country, state, county and city that you're in - as well as depending on the condition of the house (will the A/C go out inside of three years?) and for different people (some cannot handle being a landlord and should not try to be one).

Hope this helps.

Answer 6

I have read the answers here and I am going to be more direct to you. I have a home I lived in for 10 years, then bought another house. I kept the old house and now have 2 wonderful tenants in there that I hope will stay for a long time. It's making my mortgage payments on it, it's sitting there increasing in value and giving me better "interest" than any bank around.

I am in no hurry to sell it and the 2 years have gone by fast and the property has only increased in value. You have nothing to lose in keeping it. You can screen your renters very well, I have never (been a landlord for 15 years on other properties) had the landlord nightmares, I'm very careful.

I rent to only employed people with great references. It might take you a while to find them, but its worth the wait.

Good Luck!

Answer 7

It depends on if I could make a profit selling it. If so, yes I'd sell it. If I'd just break even then I would rent it out for a year or two and then sell it. I'd be stern but fair with the renter.

Answer 8

Well, investing in real estate is a challenging thing. If you are not sure about buying a new house so you should rent out your old one house because it will not create any other real estate hassle for you in future.

Answer 9

Rent To Own Home : http://RentToOwnHome.uzaev.com/?WpCt

Answer 10

Rent it.... it's better option according to me. You will get money monthly and plus you have the property which you can sell anytime.