I own a house which I'm renting but it's going down on value.?

Question

I own a house wich I'm renting but it's going down on value, and I have to pay out of my pocket every month for the mortage and also for the taxes. I bought it for $525,000 put $14,000 for the closing, spend another $12,000 in fixing it and $100,000 for the Down Payment. this house it's probably worth right not about $480,000 what should I do? Sell or keep renting and keep paying out of my pocket? or sell and report a loose at the end of the year on the taxes? if I do report that lose what do I get back or ???? Please help I don't know what to do, I can afford keep loosing money or keep paying for too long. Please any help will be apreciated. Thank you.

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S I own a house which I'm renting but it's going down on value.?
I own a house wich I'm renting but it's going down on value, and I have to pay out of my pocket every month for the mortage and also for the taxes. I bought it for $525,000 put $14,000 for the closing, spend another $12,000 in fixing it and $100,000 for the Down Payment. this house it's probably worth right not about $480,000 what should I do? Sell or keep renting and keep paying out of my pocket? or sell and report a loose at the end of the year on the taxes? if I do report that lose what do I get back or ???? Please help I don't know what to do, I can afford keep loosing money or keep paying for too long. Please any help will be apreciated. Thank you.


The House it's San Francisco Bay Area California ....... Market it's bad right now.

Answer 1

Rough Question ...
Here's the info you provided:
Based on an original cost of: $525,000
100,000 Down Pymt
14,000 Closing
12,000 Improvements
This equals: $ -126,000 Present Value (at time of purchase)
You didn't mention how much your negative cash flow is monthly, so I made the assumption of: $ - 750.00.

The fact is that 10% + appreciation rates are gone & we are back to the historical 2-4% average appreciation depending on location.

So, there's some assumption we'd have to make. Most Real Estate professionals & Mortgage Planners believe that we are in a "2 year cycle" similar to the late 90s.

If you kept that property for another 5 years & appreciation was about 2.5%/year, based on your current valuation of $480k it would appreciate to about $543k (roughly) ... Even at a 4% appreciation it would only increase to about $584k (roughly).

There is a calculation called the Internal Rate of Return to help investors gauge ... well, investments (property).

It takes into acct. the Present Value calculated above, Present Cash Flows (which I guestimated at $ -750), the term of the investment (in months since your cash flows are monthly), and finally the expected Future Value (which is the expected Sales Price - Realtor commissions - Closing Costs - Mortgage Payoff) ...

Unfortunately, using the numbers you provided, and the ones I "guestimated" ...

If your house appreciates 2.5% over the next 5 years & you then sell for $543k, you end-up with roughly -22.20 % Internal Rate of Return (IRR).

If your house appreciates 4% over the next 5 years & you then sell for $584k, you end-up with roughly -11.29% IRR.

At this point, please don't take these calculations as advice on what to do. I would recommend that you find yourself a qualified Mortgage Planner that can help you with the specific calculations to determine whether to stay with this investment or move on to another one ...

At this site, you can find not only a qualified Mortgage Planner, but a Certified Mortgage Planner that can help you make the right decisions:

http://www.cmpsinstitute.org

Once there, click on "Go To Public Site".
Enter the state of California in the drop-down menu, & check the applicable check boxes.

You will see a listing of Certified Mortgage Planners for you to choose & contact.

Good Luck.

Answer 2

I'm an investor and I've been in this situation before (twice). Each time I decided to take a loss and sell it for the best I could, even if I lost a lot of money. the reason was, each time, was that I could waste a lot of money, time, emotion and frustration over 12-36 months which will keep me away from things that I could make money on. In both cases, getting rid of the property ended up giving me a tax write off, so the damage was not as bad as first appeared, since it cut my bill to Uncle Sam.

However, there might be some creative ways around this, especially if you own other properties that have good equity and positive cash flow. You might also consider doing a lease option arrangement. This would depend on how long the current renter is int here for - 30 days - 12 months?

Another way would be to bring in another investor. They bring in some cash, refinance the property to a mortgage that makes sense, then you both sell out in 3-5 years when the market recovers.

If you decide to sell, you might want to let me know. I have some business contacts in the Bay Area who are investoprs and are used to dealing with these kind of situations.

I wish you well.

Answer 3

It depends on what your market is like. You didn't mention general location as in state at least. The loss is the difference between sale price and current mortgage and you can take that off your taxes. Here is a question to ask yourself. hen the market does rebound, will you kick yourself for jumping out of the house. If you have tenants, you must be getting money coming in. You also need to research how long it will take you to sell the house. Right now it is a paper loss. So unless you are renting it for far less than your mortgage payment and you can afford to keep the house, you should keep it. Just remember if you do sell the house and you are upside down, you need to come up with the money immediately.

Answer 4

This is a common mistake in real estate . . . you haven't lost money (that was "lost" when you paid for it) you've lost value. If you were originally planning on keeping the house for more than five years you should be o.k. Valuation of rental property is a bit different than the typical appraisal . . . take your annual rent and multiply by 10. That's the high end of what you should have paid for the property - conservative estimate multiply by 8. You need to take into account the anticipated income shelter your rental provides you through depreciation . . . It's probably not as bad as you think (I'm not saying it's good - just not as bad).

Answer 5

In response to your question...

I don't know if the following will be of some help to you. Go to CBMall, it's the #1 info-product resource on the Net.

When you go there look for the search box in the upper left corner. Type in the word real estate and see what comes up. You could probably type something else to see what comes up.

Take Care & Good Luck!

Answer 6

Ah "hire to own" is regularly a foul concept, till you have a criminal expert pass over the paper artwork. the reason I say it is, you're able to pay hire for years, and if the owner dies, what happens then? Will the heirs are available in and say "too undesirable, pass?" What in case you're previous due with ONE fee, can the owner evict you? you spot, you will choose for a settlement which will safeguard you. additionally what approximately significant upkeep? The water heater, roof, etc? you certainly choose for an excellent genuine components settlement. Pay diverse hundred money and characteristic it completed. you will possibly be apologetic approximately no longer doing it later. additionally what concerning the taxes? Who will pay those?

Answer 7

'What to do' is toooo complicated to figure out here ,

But , if you do sell and take the loss , you do Not get it all back on taxes . . .
The loss just lowers your tax bracket so you owe less in taxes .
Although the calculations would vary depending on income , for approx $100K in losses , you could save $10 to $15K in taxes , for a net loss of $85 or $90K .

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