If this should happen, homes with no title issues, no mortgages/ title invovlement will be at a premium.
Watch the market.
Time your sale.
Income from will be a great resources and return on your investment.
Be sure to remember your insurance premiums will go up significantly during vacancy periods so keep reserve capital to cover that.
Be realistic about repairs and upkeep as a portion of your net rental income.
Just like changing your oil, do periodic upkeep of the property using your rental income reserve.
The best advice I have for you is to talk with your tax adviser. They will look at your finances and assist you through the gains, loses, etc. Also, starting in 2011 (If I remember correctly) there will be new tax consequences for transfer of property on certain gains. It is around 3.5% at transfer date. This is why I say talk with your tax adviser. How long you have lived in the house how long it has been rented and the profit all need to be taken into account.
As for renting for 1 to 4 years in your new state, if you are going to finance the home our rates have been in the 4% range, It's a good idea to get to know the lay of the land, but we can not predict the future and rates right now are very good. Consider the cost of the new home vs the cost to sell the other home, and weigh do you really think value in WA will go up greater than the savings on the house and interest rates now in your new state.
If you sell your home for fair market value you will still have money in your pocket at the end of the day even selling it for $150K less. Many people put ZERO or very little down on their homes and are forced to sell now for certain reasons and they virtually have NO equity at all. With home prices dropping for owners that means prices are dropping for buyers as well not to mention low interest rates. The value of homes in other states are much less than a few years ago too, so when you buy there see what it sold for in 2007 versus what you get to buy it for now and average it against your "losses" here.
I am 51 years old so I feel for your situation but being able to sell and not have to pay anyone back is a bonus in my book. Good luck .
Tim V. Johnson
Windermere RE/Puyallup, Inc.
We would structure the deal to help you obtain an up-front option deposit that will be applied towards the purchase price if the option is exercised in the future. Because the property now becomes a rental, by working with your tax professional you can structure the property so that it is now treated as a rental property and thus gaining the ability to depreciate the property to positively impact you from a tax perspective. Structuring it in this way enables you to retain the primary residence "estate tax exemption" as long as you lived in the property two out of the last five years as your primary residence. For example, if the market has an unforeseen turnaround during the term of the lease option and you now make money at the time of your sale from your original acquisition price, as a married couple you can exempt the first $500,000.00 of the gain from capital gains tax.
The market will improve over the next 24 months so there is an extremely high probability that you would have been able to minimize your unrealized loss by holding onto the property for the next couple of years and improving your tax treatment on the property by changing it from your primary residence to a rental property. Here is the real kicker, since you would have a long term lease in place you can acquire a new property in the city where you have relocated to at a reduced price and be able to get mortgage financing because if you do obtain a mortgage on your current property to have funds for a down payment on a new primary residence, your mortgage payment can be offset by the existence of a long term lease in place on the property thus still allowing you to qualify for a new mortgage. I previously owned a mortgage company before moving to the real estate side so I have a great deal of experience in structuring these types on contracts. This way you get the best of both worlds: you get to take advantage of a depressed market on your purchase and you have a strategy in place to reduce your loss on the sale of your home.
Please feel free to email at firstname.lastname@example.org or call at 206-300-2693 if you would like to discuss this option in greater detail. My team works in great deal in the Seattle market and we have full service property management services available for our clients including finding the lease option Buyer, tenant screening, property maintenance, rent collection, site visits and monthly reporting. I hope the above explanation helps. I look forward to being of assistance.
With that in mind, how many years do you want to mess with that property to see any positive return with 2-3% growth in mind? I took a listing last week for a Condo and the sellers will have to pitch in 25-30k to balance the boot yet by not selling they will be paying 30k in pmts for the year and will have to continue unless the values rocket up 40%..... Yeah right!
So they get a renter with management as suggested 10% for the management and I would recommend a bit below comps for rent as you then get some nice renters to choose from, in my experience. I would make sure you get the right insurance for your property along with vacant properties are usually vandalized or robbed.- So take the Rent average minus 20% 10 for the service and 10% for the discount on rent---keeps people in there, along with better choices for renters-log-term Vs someone temporary, or stretching budget to fit.
Also take into consideration 30% vacancy as you can rent for 2 years and be vacant for 6 months looking for the right tenant. Underwriters use that vacancy as a rule of thumb when considering financial responsibility. As well as the weight on your credit for re-occurring dues, / fees taxes upkeep.
If you have any intention of putting the home up for sale however, having a renter in it is a liability. Rented homes are much harder to show and maintain for marketing purposes. If next summer is the timeline suggest a short term rental and then a month to month term after that. Then you can have the property empty for sale.
Planner, ... would love to hear your thoughts after all this.
I think we are all in agreement that vacant is your worst option. Deferred maintenance, potential for vandalism or break-ins will further drive down the value.
Selling right now, while doing so would be at a significant loss, would resolve the issue for you and allow you to take what you can get and move forward leaving this tough period in your past. The value where you are buying will also be down, so there is the opportunity to make it up on the other end.
Renting would allow you to cover your costs and hopefully recover some of the losses IF you have good tenants, affordable and competent management and few if any surprises.
The answer as to what you should do depends on factors I don't have access to. What is your tolerance for risk? How long are you willing to wait for the market to return? How comfortable are you renting a home both a tenant & landlord? What is the market like where you are going?
How you answer these questions and a few others will help you decide which of the two real options you are most comfortable with. I wish you the best. If you need help working through these questions or need others to consider, don't hesitate to call or write. I enjoy troubleshooting.
Renting it out generates some income stream. Since you have this house paid off, it'll be a monthly revenue source. Sitting vacant of course generates nothing.
The common fear I get from a my clients who are going to rent their house out is how much damage the house will sustain with a renter. Nobody can really predict but of the properties I manage, the tenants that we place have taken care of the properties quite well. I believe in doing by example. This is both the property owner and the property manager showing they care about their property and by doing so, the tenants will show the property the same care we do. If the owner and manager don't care about the property, the tenants will likely take on the same attitude. This includes also being prompt and proactive in property maintenance and keeping a good line of communication open. With the right tenants, the risk of damage is minimized. You should, however, always prepare a budget to do some wear and tear repairs after the tenants leave.
A vacant house as others have mentioned already runs not just break in or squatters breaking in but just the fact that a house deteriorates without activity in it. Case in point...if you've seen any of the homes that are in foreclosure that have been vacant a while. Mold is a common problem, pests, insects and just things break when put back into use after long periods of non-use. Those repairs usually will cost more in the long run than potential damages a tenant may cause.
Another complaint I hear a lot is the cost of property managers, ... costs can vary from company to company. We have a couple plans for individual homeowners available. Msg me and I can give you details as well as other firms for you to compare.
Long distance owning of rental property is in my experience and opinion an inherently risky proposition and fraught with potential problems and should be considered carefully before committing.
Allowing it to sit empty whether you can afford it or not simply add to your losses and my guess is it adds at the rate of $10,000 - $25,000 a year or even more once you factor in mortgage, taxes, insurance and utilities. Also your insurance company is likely to drop you as they don't like uninhabited homes, if they don't drop you they will certainly raise your rate.
I have no idea how long it may take for the Seattle market to rebound, do you? What if it takes 5 years? How about 10? Do yourselves a favor and sell now. Take the loss, write it off against your taxes (check with your accountant on the best way to do this) and forget about it. Life will go on and I promise you'll be much happier a year or two from now than if you still own the property and there's no end in sight.
Sorry you are in the position you are and I wish you well whatever your decision may be.
If you're moving out of state, I highly recommend retaining the services of a professional property manager. Ask a realtor in your area for recommendations. A property manager is well worth the peace of mind. They can help you find and screen potential tenants, negotiate the lease, handle the bookkeeping, take care of property maintenance and watch over your investment.
Best of luck!
If you are thinking about renting it out you have the ability to ask for a large deposit for any disasters.
If you have equity in your home, in today's market you might want to cash out even at a loss. Interest rates are so low right now that your payments for a better house in a nicer area might be the same or less then your old payments. Remember you will also be buying in a market that has been depressed for some time. There are truly great properties out there to be had.
If you have been used to owning your own home, you might find renting not very enjoyable.
If you lease you have additional write off 's speak with CPA
Leasing it will offset some of loss additional income for you.
Allow a home sit vacant can destroy a home, like a car parts need keep working.
Property Mgr's are great it depends if they are in business to do this. Most will take approx. 10% of rental income ot manager property.
You might be able to locate a family interested in lease purchase
Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
Jo Stovall/ Realtor Sacramento California
If you do not want to do that , I would sell it now... any options other than leaving it vacant . you would end up with all kinds of headaches with that option.
I would be happy to find a great person to lease your home for you .... let me know what you decide !
Karen Skinner 949-606-4845 Keller Williams
I do not know the Seattle market...however taking all the foreclosures..the economy ...how long do you want to hold on to this house. For the housing market to recover it could take anywhere from 5 to 10 years in a lot of areas. Check with a Realtor in your area and ask for statistics on what % the homes have dropped and then figure if the prices do not go down anymore.Then at a rate of 6 to 7% a year increase how long will it take before you get back your $150k and add on your closing costs.
I would suggest you get with a qualified RealtorÂ® and have them run some projected rental returns so you can have all the facts. Knowing how much revenue you can generate will help you answer the question. I am not familiar with your local market conditions but here in southern Florida we are most probably at least 3 to 5 years before we unload the foreclosures which really is going to be the first step to seeing any significant price appreciation. It truly is supply and demand and I see a few years before that scale is more in balance.
You may be better off cutting bait but look into the projected revenue stream before making your decision. I hope that this is helpful but if I can provide anything additional please feel free to contact me at your convenience.
Always at Your Service,
Tom Priester e-PRO
"Results Driven Real Estate"
Kelle Williams Realty
Hopefully your the rental income you receive will cover the property taxes and expenses.
Best Of Luck,
Prudential Beverly Hills
310 849 2485