Should I RENT it or SELL it?

Question

I bought a house in 2009 and took a loan out for 190k

I have it down to 169k

(I was getting a good deal because it was selling for 239k back then and the seller was DESPERATE due to personal reasons.)

Now the market is BLEEK and my agent wants to put it up for $179,900 but I DOUBT I will get that. Comp prices are around 120-130k. It's TERRIBLE.

I thought, why not rent it out until things get better? Agent thinks 2000 per month is fair but I looked at comps around town and the home rentals are for 1200 per month at best. What is he thinking?

My mortgage is $1600 per month.

Should I rent and HOLD or SELL and take a loss? What would you do?

Steve Vaughan · Answer

I'd rent it if the numbers work, but that's what I do.  Remember how expensive and difficult it was to purchase your home?  I wouldn't sell at no or not much gain if I didn't have to.

Some intangibles to consider though are how personal you will take it when the yard dies, all your screens are torn up and the renters don't take care of it like you would have.  If that will bother you guys too much, sell it.  Good luck with your decision Account Closed!

James Wheeler · Answer

You could try to FSBO it without using your realtor, or lease option, or Sub2 or any other number of creative strategies. There is a buyer for every property, the trick is to get them into it... The market should not determine if you make money any more than the wind tells a sailboat which way to travel. Personally, under these circumstances, I would probably sell with a lease option, get at least 15% down... So you are above market, who cares - the buyer you want probably can't get conventional financing anyways. You wrote that you owe 169K on the property, and comps are running at 130ish, no problem.

1st, what is your credit like, what are the terms of your loan?

2nd, IF you sold it FSBO you would have zero commissions, I understand that New York is a lawyer closing state so I would contact a closing attorney and find out what it costs to close a property with title work etc. [lets pretend it is $2500 for combined buyer and seller, I like numbers and atm I have none... ;)  ] Ok so you NEED 169,000 + Closing Costs (2500) so you know that is 171,500 You market it for 179,900 as an FSBO and offer easy terms with Credit 560+, If the bank said "NO" we may say "Yes!"

Now you have the buyer who loves it and is qualified (ie Credit Score and Verified income) so you get the down payment of 15% ($26,985). You take that and pay your closing costs, leaving you $24,485, take your wife to a nice dinner, $24,400... From the numbers you gave us you have an effective 11% interest rate on your existing mortgage, assuming a 30-year original note... and about 24 years left on it. So let's assume you have a 900 mortgage payment with 600 in taxes and Insurance at the moment if you offer the Lease Option a 7% Mortgage over 20 years on the balance of $152,915 that they owe after their 15% down, you get $1,186 plus the 600 for taxes and insurance, you still make your payments to your bank and put 20K on the principal from this transaction bringing your owing amount to 149,900 (keep your payment the same and adding in $100 to the principal every month) leaves you with $186 every month for 207 months (17.25 years) and the entire $1186 per month for the remaining 33 months of the mortgage you provided, Net Profit before tax?

$186 x 207 = $38,502

$1186 x 33 = $39138

$38502 + $39138 = $77,640

Not bad for "creative real estate," all in a days work! - If you love the idea and it works I won't even charge a fee for the advice ;-) (but won't say no if you offer either, lol)

If you sold it tomorrow with a realtor for the same $179,900, assuming the 6% commission and 2500 in closing costs divided you have a net out at -$1144. Yes, that is right unless you pay more in closing than $1250 or can get the buyer to pay all closing, then you might get enough for a cup of coffee.

As for the "Due on Sale Clause," I have not heard of a bank enforcing it on a performing note... as long as you make the payments, the bank is usually pretty happy - they have bigger problems than you selling your house.

** Please note that I am not an attorney or a CPA, the data I provide is from personal experience and knowledge of finance and industry and should not be construed to be legal or financial advice in any way. **

Bob E. · Answer

I would check Rentometer.com and HotPads.com to see what local rent look like.  You might be able to sell it with a lease option, get an upfront payment and apply that to the principle.

Chi Kanu · Answer

You stated that when you bought it, the value was at $239,000 and now it is at $120,000 to $130,000. I bet your realtor knows that and only wants to give you false hope because he wants the listing. My suggestion is you keep it and continue renting it or do a FSBO and seller finance it at $180,000.00 with 10 to 20% down and make sure the monthly payment is covering your mortgage and invest the down payment on something else.

Scott W. · Answer

you don't mention where these area is but I would think the value should start coming back soon. my experience is, even if an area gets killed, it becomes attractive eventually when the surrounding area prices keep increasing to a point of unaffordability for one's income levels.

Ubaldo M Gomez · Answer

Taking a Loss in any Real Estate is not an option unless you are desperate due to financial hardships. It does not appear you are desperate. I would rent it until you have a nice equity on your property use it for another Real Estate deal in the future. Have you ever considered :

“New Every Two” Primary Residence Flip –Many investors simply invest only in their own home, adding value and reselling every two years. The reason behind this is that in the US, the IRS allows a tax-free sale of a primary residence every two years. If you don’t mind moving often, this might be a great option for you.

Hope this helps.

Should I RENT it or SELL it?

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