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Eric, Home Buyer in 33184

Buying a short sale. Sell existing home now or rent?

Asked by Eric, 33184 Tue Aug 5, 2008

I am approved for the purchase of a short sale. Now I need to think about what to do with my house. Options: 1) Sell now. Short sale is 15-20% below market, so even if I sell in low market, I'll be coming out ahead from a net worth standpoint. 2) Rent now and hope for a turnaround within 3 years. Don't want to pay capital gains tax so have to sell within 3 yrs. Can cash flow property without problems even if no renter. 3) Rent and ignore capital gains tax. Look to 5-10 yr horizon to sell.

Concerned with having too much net worth tied up in real estate. If market declines another 10-20%, I would have been better off selling today, because no way that turns around within 3 yrs.

I live in West Dade. 3/2 double car garage. Nice house near Belen Area.

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6
The only way you could possibly make money from that deal is to put 10% down so if you get it at 20% below equity you will have a nice cushion. You should do more research to make sure that is the deal for you and make sure it will withstand negative cashflow which means you have determine if you can sell it fast or collect rent on it for at least 5-6 years to make it worth your wild or really 10 years. With only a 20% spread going in on a quick flip you will either have to sell at break even or at a loss or be in a short sale position youself.
0 votes Thank Flag Link Sat Jun 6, 2009
Eric,
You're dreaming. When you start trying to execute your plan, you will see what I mean. Good Luck
0 votes Thank Flag Link Tue Aug 5, 2008
Hi Eric, Your market is pretty soft right now. If you dont need to sell now, I would definatly explore the option of being a landlord. Check the local paper to see what current rental rates are in your area for a comprable home. Do a drive-by to compare. Are the same homes listed week after week or are rentals getting snapped up. You could consider a property management company to help you find value and manage your property, but there is a fee. Is the rental dollar figure 10% to 15% over what your monthy cost of that home are. (Remember your taxes will be going UP- loss of homestead) Can you make the emotional detachment from "your home" to your "your investment"? Are you able to make the payments if you dont have a renter. Are you willing to sell your current home at current market price? Its a personal decision. I've regretted selling when I could have afforded to convert a home to a rental. Good Luck.
0 votes Thank Flag Link Tue Aug 5, 2008
Hi Eric -- Wow! You've really put a lot of thought into this and I commend you for that. I'm partial to your option 2, with the flexibility of going to option 3 with a 1031 exchange. Just shows how everyone's personal circumstance colors the way we look at things. Having said that, we don't have a way of knowing what your personal financial needs/goals are and my best advice would be to talk with your accountant.

I agree with Myke--investment properties are terrific on April 15th when we're figuring out our taxes, however when I have a vacancy on November 26th or a tenant who pays late every month, I'm less enthusiastic about my rental properties.

Just another word of advice and it's probably worth what you're paying for it: I don't make financial decisions solely based on how to avoid the tax. If you use this as your major motivator, it can lead you to make the wrong decision. I would suggest you work out your net sheets for each possibility, factor in your goals/pitfalls and make your decision based on that.

Best of luck. I love to work with people who understand that real estate is an investment for the long term (not just a place to live in today).

Louise Warring
Coldwell Banker Residential Real Estate
0 votes Thank Flag Link Tue Aug 5, 2008
Hi. First of all I want to give you some credit for being so aware of all your options. Definitely very important to realize everything you have to deal with, especially in today's market. I assume the home you are selling is an investment property or you haven't lived in it for two years because you mentioned capital gains taxes. If it is your homesteaded property and you have lived there for twenty four months, then you would be able to save on the majority of the capital gains depending on how much profit you are making. With all of that said, I think your first option is your best option. If you need additional help, please contact me at (305) 439-3031 or visit my website at http://www.DadeCountyMLS .com.
Web Reference: http://www.AmitsBlog.com
0 votes Thank Flag Link Tue Aug 5, 2008
If you can afford to hold on to your property, it is a great time to buy, but hold out to sell later. There are a lot of income tax benefits to having a rental property--all expenses are deductible from your income tax. It would probably be worth your while to talk to a financial planner or an accountant to see how to maximize your investment. A 1031 exchange could also be in your future where you can delay the payment of taxes to further down the road. Consider all options, but this forum isn't equipped to handle all of your specific personal investment needs. And remember, there is a reason why many people hold rental property--there are definite advantages--I am one of them, and see significant savings, even though the process of renting and maintaining can be a pain in the _______. Every time I do my income tax I am glad I have the rental property!!
Web Reference: http://www.MykeTriebold.com
0 votes Thank Flag Link Tue Aug 5, 2008
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