Home Buying in Elk Grove>Question Details

Pam, Home Seller in Elk Grove, CA

We want to buy another home We own a home and want to rent it while waiting for the market to return.

Asked by Pam, Elk Grove, CA Sat May 10, 2008

Please advise. We would love to just sell our home, but we cannot compete with the short sales and foreclosures in our area. We want to move, but can't afford to pay 2 mortgages. Any advice?

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Pam,

I think your strategy is a smart one, but would tread very carefully in the Rent to Own arena--unless your tenant/buyers put down a substantial sum of money and have a thorough credit check.

If you are able to rent out your home and are comfortable with the financial results, then do so and move on to the home you really want. This market will recover, and you will hopefully come out whole.

I have referred a number of clients and investors to Gena Riede, who knows the Elk Grove market well and also authors http://www.SacramentoRealEstateVoice.com

Good luck with your transition!

Roberta Murphy
Villa Sotheby's International Realty
877-818-8197 or 760-402-9101
http://www.SanDIegoPreviews.com
http://www.LuxuryHomeDigest.com
0 votes Thank Flag Link Sun May 11, 2008
Roberta Murp…, Real Estate Pro in Carlsbad, CA
MVP'08
Contact
First I would ask you...What type of mortgage do you have on your current home? Is it a fixed rate mortgage? If you were to rent it out (to a standard renter), what would you realistically get for rent? If you have an adjustable rate mortgage.... How and when will this rate adjust?

You want to make sure you are completely aware of the risk you take in purchasing a second home. I personally have rentals and they have done well for us. But if you do not have a strong financial foundation to build on, this move could do your family harm. Work with a qualified mortgage professional to determine a budget to make sure you can safely pull this off financially. It is important if you make this move you have a plan! Good luck! Now is a great time to buy!
1 vote Thank Flag Link Tue May 13, 2008
Hi Pam,
I agree with Roberta - the rent to own scenario requires a lot of care in how you set it up, and since you are waiting for appreciation to make the sale of your home attractive for you, that may also price your home/the monthly mortgage payments out of reach of the people who can afford to rent it now unless their wages go up between now and then, and counting that would concern me a lot, as wage increases had stopped in Sacramento County well before the real estate market started to decline.
1 vote Thank Flag Link Sun May 11, 2008
Overall it is a strong rental market. With all the foreclosures remaining vacant you would be amazed how quickly you can find a tenant on line. Your first step should be to talk to a lender to make sure you can qualify for the loan without selling your current home. If you can do it you will be in great shape when the market turns.
1 vote Thank Flag Link Sat May 10, 2008
Steve Ostrom, Real Estate Pro in Roseville, CA
MVP'08
Contact
we want to purchase another home to down size, and this home we live in is on the market for sale we do not have a mortage on this home it is free of debit.can we use our home as collateral to purchase the other home.
0 votes Thank Flag Link Tue Oct 6, 2015
I had a client who bought another home, moved into it and rented their current residence out. It could be a good idea for the following reasons- You can rent it 3 years and still retain any capital gains tax exclusion when you sell it. You can depreciate it over those three years (amortized over 27.5 Years) and possibly receive a positive cash flow. Buying low (the new home), and selling high is the best way to build equity.

HOWEVER, it depends on what your cash flow situation is with the current house. Can you rent it and cover the costs on a monthly basis?(- there's an investment analysis worksheet that can help you there...) Did you buy the home such that it would make a good rental? (Those that are much larger than 2000 sq ft, with a pool, or various personalized features may not make a good rental). Is the value of your home such that you are currently in a 'short sale' position should you be trying to sell your home?

I don't believe that the market pricing will recover quickly now, as it's being affected by so many new factors, such as gas prices and general economic indexes, as well as the foreclosure market. In addition, I believe that should you be forced to sell at a later time, the government programs for assisting homeowners does not apply to investment properties.

Your idea has merit, but there are a lot of factors to consider. I would also recommend you speaking with an accountant on the tax implications of your strategy. And make your decision based on CASHFLOW, not projected market appreciation.
Web Reference: http://www.suearcher.com
0 votes Thank Flag Link Thu May 22, 2008
Hi there Pam. I think you are making a smart decision to buy now and rent. If you can get good tenants and cover your mortgage this would be the best situation. I would suggest that you learn all about CA laws for landlords as they have recenty changed.

I would love to help you find a great home too. and help you find tenants

Best Wishes
Michael Barron
Realtor
First Team Real Estate
http://www.ntustinhomes4sale.com
michael-barron@sbcglobal.net
0 votes Thank Flag Link Sun May 11, 2008
Pam,
Excellent decision. This is the best time to buy if you are considering moving up or to another area. Renting out your current home would be sound advice and wait until the market changes to make the decision as to wether or not you wish to sell it or remain landlords.

I'd love to help you when you are ready.
0 votes Thank Flag Link Sun May 11, 2008
Hi Pam: You may want to consider a Rent-to-Own for your home in Elk Grove. In that way, the rent to own tenant would cover your payment while your home appreciates. You still need to check with your lender first to make sure your debt to income ratio is good owning both homes. The lender will only give you credit for so much of the rent towards income--not all of the rent. This is a huge investment. You need answers to all of your questions. I hope this helps.

If you want more information on Rent-to-Own, let me know. Good Luck

Erin Phillips
Keller Williams Realty
Roseville
916-849-3961
Web Reference: http://SoldbyErin.net
0 votes Thank Flag Link Sun May 11, 2008
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