I rent a house out, and the rent does not cover the mortgage but the house value has increased. should i sell?

Question

I have rented a house out for the last three years,the rent does not cover the motrgage but the value of the property has increased,is it worthwhile sustaining this loss or should I sell the property

Answer 1

I am in the same position. I have just let a property I knew would not cover the mortgage, however the capital apperciation is considerably higher than the shortfall. So as long as you are able to fund that shortfall from income (eg salary), and the capital gain is higher than said shortfall. KEEP IT!
Two things to consider when calculating shortfall;
- Are you able to raise the rent at next renewal?
- Is your mortgage rate fixed? If not, can you tolerate a 0.5% increase as it looks 110% certain it will happen before 2008

Answer 2

If the value of the house has increased, surely even if the rent doesn't cover the mortgage, its still a good investment. Lets face it, its unlikely that the house price is going to go down, so I'd keep hold of it. Who knows, in another 12 months it might have gone up again!

Why don't you put the rent up? Surely if you give enough notice then you will be able to do that?

Answer 3

OK, sometimes a loss is a good thing, depending on what else is going on tax wise. If the loss is not substantial, it lowers what you pay in taxes. When you sell it, depending on the money you make, you now have capital gains, which will be taxed. If you can afford to continue to take the lose, I would suggest you crunch some numbers. Look at your past taxes and work them without the house. What is your bill in the end.

Rather than do it yourself, go to a CPA. They can do all the work for you and let you know what is going on. Remember, you are gaining an asset that should continue to increase in value. It could be that the tax savings is worth the retaining asset.

Answer 4

A. I very own 2 properties one among which I stay in the different I lease. it somewhat is around the corner so if it desires maintenance i don't have some distance to flow to do it. in case you will get out from below the different homestead and make a income that's what i might do. Renting belongings is a crap shoot. You get sturdy renters this time and a gaggle of morons the subsequent that do greater injury then they pay lease while they be certain to pay it and attempting to evict somebody is worse then pulling tooth and takes months to do legally. flow with the fowl in the hand and are not getting into the slum lord corporation. they are going to call you all hours of the day and nighttime while issues destroy and in case you employ a administration corporation there is going your income and additionally you nonetheless have Taxes and assurance. And in the event that they don't mow the backyard wager who gets mailed the citation. You!! sturdy luck!!

Answer 5

With property prices going up on average £45 a day in the UK i think you would be mad to sell, raise the rent AND try to remortgage for a better deal, you now have equity in the property to use as a larger deposit which will get you favorable rates, property investment is about long term gains these days.

Answer 6

It all depends whether the gain is greater than the loss!!

Also, look into the tax implications when you come to sell, becuase if you own another house (inlcuding one you might live in), you will have to pay tax on the increase after 3 years.

Bascially, if you rent out a proprety for 4 years and it goes up £100,000, you will have to pay Capital Gains TAx on £25,000 (first 3 years free)

Answer 7

Compare your negative cash flow to the increased value of the home. That way you can decide if you're getting a good return on the investment or if your money could do better elsewhere. Don't forget the tax advantages to rental property either. Factor in the tax breaks and you may find that your negative monthly cash flow isn't so bad after all!

Answer 8

Increase the rent if the property has sentimental value and you barely need the proceeds of immediately selling it. It is also having a passive income if you are not spending so much on its maintenance.

Answer 9

Well it all depends on how much you will gain from selling and whether it's a great loss.

Could you remortgage and get a better deal perhaps? How about raising the rent (particularly if the tenants are coming to the end of their lease or are looking to move out).

Answer 10

always ask the mortgage price and the taxes and insurance costs for the house..you must pass that along to the renter to make a profit.
why would you let someone be on your property if you are losing money each month?

Personally I rent out houses and the profit is not worth the destruction and aggravation we incur each month.

If they stop up the toilet...the service call alone is $75.00 and why would you not make them pay for this? It was their fault. Take it off of the deposit.

a leaky roof now translates into thousands to put a new roof on.

the furnace goes out...more thousands out of your pocket.