Should I Sale or Rent my Home in Washington??

Question

I currently line in Washington state. I bought my house March 2007 as a foreclosure. Then 2008 happened. So here we are in 2017. I owe $240,000 and house is approximately worth $256,000. My daughter graduates high school in June of 2018. We want to move back to Oklahoma and start investing in Real Estate. My plan is to save as much as possible and pay off as much debt as possible before the move. My questions is should I try to sell my home in Washington and try to break out of it or try to rent it out for a few years and see if the market will continue to increase? My gut is telling me to try and sell. Then I should be able to get another FHA loan on my first investment. please give me your thoughts. Thank you

Jasen

Mike B. · Answer

you may want to consider doing a lease option a rent-to-own deal. There's a lot of good info here on BP if you do a little more research that could help you decide. But in a nutshell--

You would lease your house to someone on a two or three-year term and have a separate agreement for that tenant to have the option to buy your property. The purchase price would be fixed and you would receive an option fee payment up front to secure their option to purchase. That would help get some cash in your pocket now for your move and maybe even some left over startup money for Oklahoma.

The tenants that you would place would specifically be interested in purchasing your property within that 2 to 3-year lease term, but they just need to improve their credit a little bit or save up some additional money for their down payment on their mortgage loan.  If the tenant completes the purchase within that lease option term then the option fee payment would be applied to reduce their overall purchase price. If they do not ultimately purchased the property within the lease option period, then they forfeit that option fee and move out. By that time hopefully you will no longer be under water and you could lease or sell the property then, or do another lease option again.

The lease option strategy, especially on properties that you own, is a bit more of a hassle free solution to renting your home when you're open to selling it. One of the biggest benefits of doing the lease option is that the tenants will be responsible for all utilities and maintenance. This usually means that you don't need Property Management.  Another bonus is that a realtor will not be necessary when you do the sale since you are selling your property directly to a buyer.

Good luck in your decisions. If the lease option sounds appealing to you -- then definitely do some additional research and consider consulting with a real estate attorney and title company before moving forward.

Kevin Romines · Answer

In terms of doing an FHA loan on your next purchase, you can have more than 1 FHA loan at a time, especially since your relocating. I'm not sure what your existing loan terms are, but in crunching general numbers based on what you owe, you should get close to break even on the property if you rented it?

That said, my 1st gut instinct is to try and sell it with a back up option of a lease option if you cant sell it. On the lease option you generally will set the purchase price based a little higher than current market value and closer to what the value might be in the future? You can also set the monthly lease payment higher then current market rents and best of all, collect an option fee up front, they then have skin in the game and in theory will take better care of the place.

By all things I have seen and heard and I research a lot, on a national basis and more importantly in Washington state, we have a huge lack of inventory problem. NAR  predicts this wont start to be resolved until late 2018 on a national basis. The reason for this is that all new building virtually dried up over night back after the meltdown occurred because lenders weren't lending money. And one of the hardest hit was the new construction builders. This is creating today's situation of a lack of inventory. I bet you will be surprised and can get it sold. But if not the next best thing is to sell it on the Lease option type of scenario.

Good luck and say hi to the great folks of Oklahoma, especially Antlers Oklahoma, where my dad's family is from!!!

Gallagher Wilson · Answer

You may want to consult a local realtor (who may not hang out here and see this). That's very market specific. If your location in title is correct, Spanaway is out of the big bubble of appreciation, but if you thought value was going to grow substantial in the next few years it might be worth it to hold and rent. Also consider the cost/stress of managing a rental from OK. May not be what you want to do. Based on the numbers you threw out, it doesn't sound like you've got a lot of potential for appreciation. My gut would be to sell. Good luck on your decision.