All Forum Posts by: Jeremiah O

Thanks everyone.

One last question, if we hold the house and sell in say 10 years after renting in out, will the capital gains still be based on the original purchase price (the price that we paid for the house as our primary residence)? If so, in 10 years if the house appreciates back to the price we originally purchased it for this would mean zero capital gains.
Or is it somehow based on the market value at the time we turn it into an investment property.

Thanks for all the responses. Looks like HARP requires your mortgage to be a Fannie Mae or Freddie Mac, unfortunately ours is not. We have a private mortgage.

Brett,
Thanks for all the great ideas.

If we rented this house for say 10 years, and then decided to sell (for a profit!) how is the home treated. Since we lived here as our primary residence for 7 years, will we fall under the tax exemption? Or is it now treated as an investment property?

Brian,
Current reason for moving is simply to get to a different area. A couple years down the road we will need to move to a bigger house to make room for kids.

Jonathan,
I will take a look at HARP. Thanks.

Matt,
Thanks for the feedback. I will look into refinancing with a program like you suggest. I was under the impression I could not do that.

You are right, each year we stick it out the better the situation gets. We are in southern NH, so not sure how properties are appreciating right now, but I wanted to be sure I was realistic (even is conservative) with my numbers.

Yes, we do qualify for another mortgage with the payment. I appreciate you pointing that out though.

We do not need to move. We have wanted to move for a couple years, but always stumble upon this dilemma.

Our mortgage payment=$1675/month
I estimate we could rent for $1500.

Thanks for writing back Ali.

We could refinance but that we require we need to put down a lot of money to get some equity in the property. This would essentially be the money we are looking to use on a new home.

The $10,000 loss/year assumes that the house is not rented out the full year and some maintenance costs, but yes, it is quite high.

Hi all,

My wife and I purchased a home 7 years ago (at the high point of our market). We still owe more on the home than it is worth. We are considering moving and I am trying to analyze each option. My 2 options are (1) sell our current house at a loss and buy a new one or (2) turn our current property into a rental property (which we would be renting at a loss) and buy a new house. Here is the info.

Option 1 - sell now:
Since we will be selling at a loss, this would require us to pay about $30k at close, which reduces our savings for the down payment on the new house.

Option 2 - rent:
As stated above the rent will not cover our expenses on the property, we will have about a $10,000 loss per year on the rental. To analyze this option, I looked at if we sold the house 5 years down the road and then 10 years. I assumed a 3% appreciation of the current house value.
With those assumptions I calculate:
After 5 years=$14,000 loss on sale
After 10 years=$19,000 profit on sale

I know that in general investors do not hold a rental property that does not cash flow, so maybe the answer is cut my losses now. The downside of that is that we lose $30k that we could be putting into a down payment on the new house. Any advice is appreciated.

Thanks,
Jeremiah

Thanks for laying this out clearly. I appreciate the help. I will make some phone calls and see what happens.

Thanks again.

The family member that holds the private mortgage is willing to be the 2nd mortgage but the bank seemed to have a problem with that, even though they would be the 1st mortgage. Perhaps I should try talking to other banks or a credit union.

Is a promissory note an option? How would this work? At our closing with the bank they write say a 200K check to our private mortgage holder. Say we owe 240K in principle, how does the new 40K private loan get recorded? Thanks for the help.

Hi,
We purchased a house 4 years ago and financed it with a private mortgage. The private mortgage is with a family member and was for 100% of the purchase price. We were looking at refinancing the loan with a bank, but since the market tanked, we owe more than the home is worth. I wanted to get a 80% mortgage with a bank and keep the remainder of the principal as a loan with the private mortgage holder. I spoke with a bank who said that the original mortgage needs to be paid off in full, therefore this is not possible. Do we have any options other than pay off the remainder of the private mortgage with cash? Thanks in advance.