First time poster...found this site today and have been GLUED to my computer all afternoon!
I am so confused about what I should do in my current situation. I own three houses free and clear in Florida but have been renting a house to live in here in TN for over 2 years now since I don't have cash for a down payment. Two of my FL houses are rented and one has family in it.
If you were in my shoes and you were sick of being a renter, what would you do? Sell the houses at a HUGE loss (100K loss on one, 90K loss on second), take out equity for a down payment, sell as owner financed, etc. I go back and forth on various scenarios and end up doing NOTHING.
I love being debt free but I would love to own my own home again instead of being a renter.
Would love any thoughts/opinions from all of you wiser, more seasoned real estate pros.
Hey Jessica. Welcome to BP. Technically, you're not debt free. Wanna know why?? Every month you have a financial obligation called rent. What's the difference if you have to pay rent or a mortgage? Either way, ya gotta pay to stay. My advice is to take some money out of one of the free and clear properties. This is tax free money you can use to put down on a property. Not only that, but the intersest is a tax write off. You can either buy your primary with this cash so you still only have one debt obligation, or use it to leverage and get a mortgage. You'd then have two mortgages, but two write offs as well. Personally, I'd try to take out enough to pay cash for the primary if you're worried about debt. Good luck!
Know idea what your job situation is. How easy would it be to move to Florida and find a new job?
Hard to offer any advice. I might consider looking for a fixer in Tennessee that you could purchase for less and pull out enough equity from a free and clear property for a down payment. You have many financing options with an owner occupied home.
Over time you can fix this home and build some sweat equity and no that your payments are building some equity.
Find a motivated seller where you are at right now, and see if they will offer you to get some form of owner financing (subject to, land / installment contract, rent to own). Doing that, there is no need to mess with any of your other properties.
Find a motivated seller where you are at right now, and see if they will offer you to get some form of owner financing (subject to, land / installment contract, rent to own). Doing that, there is no need to mess with any of your other properties.
I have been giving that some serious thought. Spending lots of time on Craigslist looking for really motivated sellers. Thanks for your thoughts!
Hey Jessica. Welcome to BP. Technically, you're not debt free. Wanna know why?? Every month you have a financial obligation called rent. What's the difference if you have to pay rent or a mortgage? Either way, ya gotta pay to stay. My advice is to take some money out of one of the free and clear properties. This is tax free money you can use to put down on a property. Not only that, but the intersest is a tax write off. You can either buy your primary with this cash so you still only have one debt obligation, or use it to leverage and get a mortgage. You'd then have two mortgages, but two write offs as well. Personally, I'd try to take out enough to pay cash for the primary if you're worried about debt. Good luck!
Wish I was in your shoes...having three houses in Florida free and clear.
It appears you wish to stay in TN? I would personally take out equity in one of your FL houses for either a down payment or if possible..to purchase a home in TN to have free and clear.
I certainly wouldn't sell and suffer a loss on any of you FL homes...they're going to appreciate in time...again.
You are in a very positive financial position, take advantage of it. Paying down an equity loan on one of your Fl homes makes a lot more sense to me than paying rent (someone else's mortgage).
I'll offer a different take on this. A house is an expensive doo-dad, no different than a car or a TV. It does tend to retain more value than other doo-dads, though as you've seen with your FL properties, not always.
For many people, a house is a worthwhile purchase because it is a forced savings plan. You buy a house, live there 30 years (or whatever) and pay it off and you have a significant asset. Even if you have no other savings, you have the house.
But you've shown you already have good financial sense. Lots of folks say "look at all the money I made on this house". They compare the purchase price 30 years ago with what its worth now. Yes, that often looks impressive, though if you figure out the rate, its often quite low - 3-5%, perhaps. At only 3% appreciation, a $100K house is worth almost a quarter million after 30 years. Too often people conveniently forget what they've really spent. If you buy a $100K house and do NOTHING to it for 30 years it will be unliveable. Even if you do basic maintenance so it doesn't fall down it will be "dated" and "needs updating", cutting into the value significantly if you sell.
Of even greater significance, saying you get an interest deduction is true, but its a lot like saying "my hand feels so much better when I stop hitting it with a hammer." You're paying out a dollar and getting a tax deduction of $1. That only gets you back 28 or 33 or whatever cents. It never, ever gets your whole dollar back.
When you rent, you're renting the property. When you buy with a mortgage, you're renting money. If you have $100K to buy a house, you can almost certainly invest that money in something that will be worth more than the house 30 years from now. And, you won't have to pay anything else. A $100K, 4%, 30 year mortgage will cost you $171K over the life of the loan, not $100K. Throw in maintenance and the transaction costs and the profit from the sale at $250K gets pretty skinny. Nevertheless, you do end up with $225K (after selling costs) cash in hand. If that's the only asset you have, that's golden. You've shown it won't be the only asset you have.
So, do the math, and consider your options of rent vs. buy. There are lots of places where renting is significant cheaper than buying. Perhaps not in TN. In general, not in places any of us would be rental properties.
All that said, prices really are cheap right now. Having a home you own provides some significant benefits you never get as a tenant. Nobody can suddenly boot out. Nobody cares if you hang 1000 pictures. You can paint, recarpet and remodel to your hearts content. But those are the same sorts of things you could say about a nice Lexus or a 65" plasma TV. Nevertheless, if those things make you happy, and you can afford them, go for it. Same for buying a house.
I have 12 houses I rent out and I rent my house. I pay 900 a month for rent. The landlord pays over 8k a years in taxes. If I was to buy my own place it would cost more than renting. I dont really care though that I dont own my own home.
Sometimes renting makes more sense financially especially in nicer neighborhoods. If you have to put a downpayment to buy your own home and then it still costs more then rent each month it might not be the best use of the money. You probably could get a better return on that money in another rental.
Although all decisions can't just be financial ones. When I read your post it seems like you want your own home and the pride of ownership that comes with it. Take your time finding a great home and buy it using some of the methods described above if you haven't already.
Since this thread is over a year old, I'm guessing Jessica has already taken whatever action she decided upon. If she were still around (and it doesn't appear that she is), it would be interesting to know what she decided and how it's going...
Technically, you're not debt free. Wanna know why?? Every month you have a financial obligation called rent.
With this train of thought, one who owns real estate is never debt free. You have to pay taxes. You don't have to, but probably should carry insurance and keep up with the maintenance as well.
One of the most successful house investors I know owned 9 rental houses and was still renting a room in a house with roommates before he decided to buy his own residence. Why are you in such a hurry to put your F&C rentals at risk and take on the liability of home ownership? You can live above your means by renting. I say, enjoy your situation, focus on acquiring more rentals and increasing your cash flow, then go look for a liability to move into and call your own.