Maureen C., Home Seller in Saint Louis Park, MN

Should I continue renting out a 1 bedroom condo in SLP for less than my monthly mortgage payments or sell it short?

Asked by Maureen C., Saint Louis Park, MN Thu Oct 27, 2011

I purchased my condo in 2008, since then I moved in my fiance into his larger townhouse last year and instead of selling right away I began renting it out. My name is not on the townhouse.
I never wanted to be a landlord, but at the time it seemed better than a foreclosure or short sale. Now that we are getting married and planning a family, hanging onto a 1 bedroom condo that is not making us any money does not make sense. The renter's lease is up in April 2012. I plan to list the condo for sale, but it will most likely be a short sale. I am just trying to decide if the financial consequences of selling what is now considered a rental property as a short sale is worth it, or if I should just suck it up and keep renting. From what I have read on other posts I could end up paying the difference and having to pay income tax on the difference. Also even though it is a rental market I can not ask for rent that covers my association and mortgage payment. Any advice is appreciated.

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Answers

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It may be more difficult to convince a lender to do a short sale when the home is not your primary residence. Plus you would have to show some hardship and not just that you are losing money every month you hold onto the property.

And yes, it's possible that if the bank allows a short sale that you might be liable for capital gains on the banks loss as the home may not be considered your personal or primary residence by the IRS. This would be a question for the IRS. If it was determined that the home could qualify as your primary residence, the 'mortgage forgiveness debt relief act' would spell out how you could avoid paying capital gains on the banks loss.
0 votes Thank Flag Link Thu Oct 27, 2011
Yes, I can see now I misread what you were saying, sorry about that.

Ask yourself some questions and you will figure it our yourself.

Ok you say that it is not making you any money does it carry itself? If so consider keeping it. If you are losing money, how much? Eventually it will be paid off it could be a good investment over time.

If it is a burden to carry it try to find the best way out of it.

How much upside down are you? If just a little, you could ask the lender to not report the short sale against your credit in return for you signing a note for the balance. Now days short sales and foreclosures hurt your credit just as much. If so get that in writing do not take their word for it. You may need that letter later to get if off of your credit.

It may be that your credit is not that important at this point, but it sounds like your integrety is. So you have to weigh it and decied what is best.
0 votes Thank Flag Link Thu Oct 27, 2011
No I used my own credit to purchase the condo. I meant my name is not on my fiance's townhouse so I do not own more than one property.
0 votes Thank Flag Link Thu Oct 27, 2011
You should sit down with an attorney and financial planner and discuss all of your options. You may have a difficult time justifying a short sale if you cannot prove a hardship. (You can't just do a short sale b/c you want to -- there needs to be a "hardship" involved i.e. job loss, medical issues, etc.).
0 votes Thank Flag Link Thu Oct 27, 2011
Maureen, did you use someone elses credit to buy the condo?

If you did it was very kind of them to do that for you. Who ever it is with their name on it will have their credit destroyed if you short sale it.

I always recomend doing the right thing.
0 votes Thank Flag Link Thu Oct 27, 2011
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