is a 10 percent profit a good enough amount or should I try to rent my house after we move?

Question

we are moving to the other side of the country, after our down payment, what we have put into the house, capital gains, realtor fees and all of our payments to the bank minus what we would have paid for rent elsewhere, what we have paid down on mortgage and all of the rebates we got we will end up with at a 14,000 profit- that is the bottom of the pool of similar homes that have sold in the last 6 mo. there is about a 25,000 difference between the lowest priced one and the highest similar home in my neighborhood so we could but most likely wont get up to say 35,000 in profit. would I be better off trying to rent out of state? will my mortgage on the house we buy in wa's rate be higher because it is a second mortgage? what do you think? Please dont tell me I dont know what my house is worth- the "similar houses" are all missing second bath, updated kitchen, most donthavewood floors new bath, newer windows, new roof, new water heater, sump pump, fin basement new hvac and appliances

Answer 1

You really don't want to be an absentee landlord. Also, the capital gain at this point is tax exempt. It may not be if you rent the house foe an extended period.

Answer 2

Renting out a single unit from the other side of the country is difficult and expensive. It is hard to find good renters and get reasonable rates for clean up and such between renters. Management companies tend to charge too much for anything less than 5 units. If you have family or a friend that will take care of it for you, it would make it much more doable.
Depending on your income to debt ratio, your intrest rates could be higher if you keep the other house just due to increased risk of you defaulting.
The new house is not the interest rate to worry about as much as the house you are leaving. You will be breaking the terms of your mortgage by moving out (in general the mortgage specifies that the house you are mortgaging must be your primary residence and not used as an investment). That being said, if your mortgage company finds out, they can recall the mortgage (demand you pay it all within a set term....like a month). Then you will have to get a loan on your existing house as either a second residence or as an investment property (right now I would bet you're not getting one of those loans for under 9%...and maybe not for under 9.5%).

Only you can really decide what is best for you and if it is worth your while to speculate on the neighborhood that you are leaving. And can afford to make both payments if your old house takes awhile to turn over renters.
I, however, would not do that with a single family home.

Answer 3

Take into consideration that renting from the other side of the country can be a real pain. OK, sure you can find a rental agent, but they'll charge you. And it's hard to tell what wear and tear can happen to the house while it's rented, or what the market will look like if you want to sell a year or two out.

Unless the rental market is so good that you can get an almost ridiculous amount of rent reliably, I'd take the money and run.

Answer 4

Trying to rent a single-family dwelling is an exercise in frustration. Normally, you can't get a sufficient rent, and even if there is a fairly good tenant, there's a lot of wear and tear.

Trying to rent it from across the country is even worse. You want your tenant to call you long distance with a problem, and then you phone someone long-distance to come out and fix it? And what do you do when the repairman says it's fixed OK, and the tenant says it isn't?

If you're not within a 45-minute drive - and preferably a 10-minute drive - you don't want to be in the rental business. Sell that sucker as quick as you can!

Answer 5

Be happy you actually have a profit, as most people now a days have negative equity. I also would not want to be in a position where I cant see what is going on with my home, so renting for me would be out of the question. I would take the money and run. With the way the market is slipping down hill there is no telling if your profit will rise or shrink over the next few years. I would think it would go down, after all the market is horrible, and renters destroy property.

Answer 6

First, there is no capital gains tax if you are selling a personal residence.
If you rent your house from the other side of the country, you will need some one local to manage it, make repairs, and make sure the tenants don't get out of hand. Check the state and local laws on evictions - some places make it almost impossible to evict tenants, even if they don't pay, so make sure you can make payments on the house even if rent does not come in for 90 days or so.
Mortgage rate on second house should not be higher unless it adds so much to your total debt that it puts you into a riskier debt/income ratio.
Good luck!

Answer 7

if you wish to sell and are considering renting i have a third option! owner finance or rent to own option the home to a buyer! you get not only the price you thinkthe house is worth but the interest for 5 years on top of it! the home would remain in your name and the new buyers will pay your mortgage and provide you some extra profit!

as far as the lender coming after you because your not still living in the home it is very very unlikely as long as you are paying your mortgage they will care one bit. lenders have enough to deal with due to foreclosures this is not a risk. the fact you decide to move has o bearing at all. do you think lenders are ever peaking in your window to see if you are there. the only time they are going to care is if you didnt make the payments. AS long as they get thier money they really could care less

consider this many people are looking for a home owner finance the home at lets say 8% interest only for 5 years. after 5 years your buyer refinances for the full amount of the mortgage and you make out do the math 8% of sale price

EX 100k sale price
8% interest only is 8000.00 a year for 5 years is 40k

first of all the new home would not be a second mortgage
a second is a second mortgage on the same house.

if you bought the home as a primary its the new primary and no one should be quoting you a higher rates. if they are they are trying to bump your rate up to make yield spread!

Answer 8

This would highly depend on the trends in the area your house is in. Where I live (AZ) house are depreciating in value because investers overflooded the market, but if I were to move across country to say NC, the houses there are increasing in value. It would be to my benefit to sell my house in AZ before the value goes down too far. But if I lived in NC and I were moving to AZ, I would keep my house in NC, because they are just now at the start of their boom and I know the value would be much greater in a couple years time.

To fj2002, who said no capital gains if you are selling a personal residence, that only apllies if the property was your primary residence for at least 2 years at the time of the sale.

Answer 9

Sell. Take the money. Run.

I am renting a house 850 miles away b/c I couldn't sell it without a big loss (bad market). I have a property manager and everything runs smoothly, but I still have the worries of repairs and maintenance.

Take the money.

Answer 10

Are you really ready to have a rental house 2000 miles away? I have had local rental properties and had plenty of tenant problems, vacancy problems, repair issues and things requiring my personal attention.

I would take my $14,000 and find either a local real estate property or a better investment.