Market Conditions in 95822>Question Details

Tncounselor, Both Buyer and Seller in Derby Woods, Lynn Ha...

I own a 22 year old home in 95822 (Balfour Way) that I have rented. I am the original owner. Should I keep it for long term considering the area or?

Asked by Tncounselor, Derby Woods, Lynn Haven, FL Tue Oct 13, 2009

sell it when the market picks up. Thanks.

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11
Eileen,
Thank-you for the update below.
If you need to put more money in your pocket now, have you considered a re-fi :NOT to take money out, but to get a better interest rate and have a lower monthly payment because of the lower principle balance.
If you will need more income down the line, you seem to be less than 10years from paying it off, adding more principle payment would accomplish that faster. Talk to your tax advisor

Also you may want to invest in a home warranty to cover those items that are going to start to need replacement- companies include American Home Shield, Old Republic Home Warranty, Fidelity Home Warranty, just to name a few. Costs is usally about $350-400/yr. Just make sure your tenants know to call you or the home warranty company for any problems (not just pick a repairman themselves)

Keep your homeowners insurance updated too, protect your nice little nest egg.

Teri Andrews-Murch, Realtor®, SRES®
DRE CA Lic # 01734030
Lyon Real Estate
1900 Grass Valley Highway, Suite 100
Auburn, Ca, 95603
Direct Ph: 530-798-0215
0 votes Thank Flag Link Sat Oct 17, 2009
I saw Jack LaLane celebrate his 96th birthday on the Today show the other day.. With continued good health, you might be able to own that home another 22 years... It will almost certainly gain value over that long a term.

A very key date, is 2017, if you do nothing about the mortgage except keep paying it off is that it will be completely gone in 8 years, at which time you will be able to keep much more of your tenants rent than the $400 or $500 that you net after PITI now. Nice to get a raise in pay at anytime, even at 83.

If your church lady takes care of the house and pays regularly on time there is even more incentive to keep it.
0 votes Thank Flag Link Fri Oct 16, 2009
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
Contact
My answer is still the same. Talk to an accountant. The new consideration might be a reverse mortgage as well to consider because you are over the age of 62, and have limited cash flow. This is applicable to a home you are living in, not an investment property but there are ways to structure this in the scheme of things....and make both you and your daughter's life easier.

If you have an accountant call them. If not, Call Ed Cook. He can address any of these questions over the phone at no charge. But it's worth laying out all of your options to see what makes the most sense.
Web Reference: http://www.suearcher.com
0 votes Thank Flag Link Fri Oct 16, 2009
If this is an investment ,you ahould leverage it and buy more property
0 votes Thank Flag Link Fri Oct 16, 2009
Maybe it is just me, but it looks like you are making at least $300 a month on this after all expenses. Unless you have to have the money I would look at it as steady retirement income.

If you want to sell no matter what look up 7 million foreclosures. The alt-a trouble is coming in 2010. Just like subprime came it will have similar results. You may be able to sell it for more now than 3 years from now. But perhaps in 10 years when you are 85 you will do a lot better. Plus by then have no mortgage and still be getting a nice rental income.

The one thing I would NOT do is a reverse mortgage even if possible. The interest rates and fees are just to redicilous. It rules out ever being able to pass the house on in your estate also.

Since we have hit the idea of estate I would recommend talking to someone about estate planning. You may find out there are great incentives for you to sell OR to retain this property. But personally, I like the idea of a reliable income from the rental. I would also look at paying off extra each month so in 4-5 years it would be all free and clear if possible.
0 votes Thank Flag Link Fri Oct 16, 2009
THANK YOU for all the great responses. I am 75 years old and currently reside with my adult daughter out of state. She takes care of her mortgage and utility concerns so I don't worry about that while being with her. I also am raising a 14 year old great granddaughter. I'm retired w/ small pension and social security. The home balance is about 39-40K (small). I paid 70K w/ 20K in upgrades in 1987-88 when the house was new construction. I receive 1200.00/month in rent (lady from my church) and my original (and only) FHA note is 700.00/month. I shoud have sold the home 2006-2007 when I could have got $350,000.00 but did not do it (myy bad). With this information, would you keep it or sell it when the market picks up. What is considered a good rate of return with a 22 year old house? You all are a collective wisdom!
0 votes Thank Flag Link Fri Oct 16, 2009
My questions to you would be:
1. How long have you used it as a rental?
2. Have you pulled equity out?
3. Is the rent covering the expenses and leaving a some to put in your pocket?
4. Do you need the income or would you be happier with a bigger bank balance?
5. Do you enjoy being a landlord?
I would advise as others have that you talk with a CPA/tax advisor to see how keeping or selling it helps or hurts you.
The people I know that are the most comfortable in their retirements did it by investing long term in property, you don't say how old you are, but that would be a consideration also.

Teri Andrews-Murch, Realtor®, SRES®
DRE CA Lic # 01734030
Lyon Real Estate
1900 Grass Valley Highway, Suite 100
Auburn, Ca, 95603
Direct Ph: 530-798-0215
0 votes Thank Flag Link Tue Oct 13, 2009
Short answer: keep it. The market is at the bottom, has been for a year, and will be for another year.

Long answer: Would need to know:
1) Do you need the proceeds for personal use or would you plan to re-invest?
2) Does it provide you with positive cash flow averaged over the year.
3) Is your income very low this year so that the capital gain will be taxed at an extremely low rate?
4) Are you able to have someone manage it for you and still have positive cash flow averaged over the year?
5) If you plan to re-invest, how will the new investment compare to this one, for leverage, cash flow, internal rate of return based on realistic aprreciation assumptions.?
0 votes Thank Flag Link Tue Oct 13, 2009
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
Contact
HI there...

We manage some property down that way.. and it is a decent rental area. You have some schools and open space within walking distance of your street which I think is a good thing...

But... With that said... you don't indicate what your equity position is. If you are receiving enough rent to cover the expenses including the mortgage, I'd keep it, maintain it and wait until the market is a little better.

Nothing wrong in paying down debt in this climate.

Now if you are close to having a mortgage near zero, then you might consider selling and doing a 1031 exchange into another single family home, or better yet, my favorite... a duplex.

They've pretty much stopped building any new homes in the area and while we do have some unemployment that is depressing rents, this will not last and rents are going to go up because of natural causes..which is the increase in family formations.

You've received some pretty responses so far... I just thought I'd chime in and add a little more... Let us know what you decided to do....

I hope this helps...

Make it a great day....
0 votes Thank Flag Link Tue Oct 13, 2009
I think the answer best lies with your tax accountant because there's many factors to consider. You can depreciate your home for 27.5 years so you still have some tax advantages to keeping the property. With prices low, you would be selling at a time where you'll get multiple offers, but they will be at prices that could be close to what you paid for it. Are you tired of managing it? Is it in need of maintenance that you can't afford to fix? Does it cashflow each month?

I would call your tax accountant and discuss the tax consequences of selling a home currently. They can discuss the items above as well as the option of a 1031 tax deferred exchange, (how about selling one and buying more than one with the proceeds, increasing your cash flow, and profit opportunity?), and any other factors involved in your personal situation. You may want to have a current valuation of the property when you go in for that discussion. So call if I can help get you that.

If you don't have an accountant that you can discuss it with, call Ed Cook at (916) 705-4958. He's a whiz at all of those items. You'll have your best decision when all the facts are on the table to consider.
Web Reference: http://www.suearcher.com
0 votes Thank Flag Link Tue Oct 13, 2009
Are you making money from your rental ? Is it being kept up? Do you need to sell It? Is it a business that you like? Owning rental property is one of the best ways to invest in your future. Use your equity wisely but re-invest it. If you like the rental business consider buying another property or 2 . This is a great time to be buying rental property.
0 votes Thank Flag Link Tue Oct 13, 2009
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