All Forum Posts by: Sean Craigg

 So you do NOT recommend rent-to-own in Texas for landlords?

Hi @Sean O'Keefe

I would also like to get a copy of the real estate professional logbook. Thanks in advance!

Thanks KC and Joshua,

Seller financing is interesting but seems complicated.

Total loss on sales would materialize ~90K after transaction fees, value decrease etc.

3,5k includes mortgage,tax, insurance, maintenance. 

I'm unfamiliar with a land contract in TX. Let me look into this.

Trying to see if it's worth holding on to it in case the housing market recovers.

Asking for some numbers analysis.

Landlord work is work and risk but I had experience. I'm hoping housing markets will pick up again in Austin/TX area.

1. SELL: ~720K (loss ~30K), 2.5% mortgage rate 27 yrs left. Total monthly house cost ~3500

2. RENTAL: ~3500/mo market rate. House in great shape

Cashflow may not be much but the LOW mortgage rate + deductions may help

How should I approach this calculation?

What other factors should I consider?

Current lease ends on July 31. 

That's toward the very end of the peak season for renting and selling.

It's also the beginning of the slow season for real estate transactions.

When is the ideal time to end (or renew) a lease for the next contract?

Thank you!

Thank you Alan - good question. 

Since the house is sitting on a lot of equity and rent is returning less than CDs (5%), and the prices seem flat, I thought it was a good time to cash out with the cap gains exclusion

And use it for a better return with less work. 

I have a primary residence (for 2 years) and then rented out (for 1.5 years) and lease renewal is coming up at the end of July.

Tenants want to extend another year for a higher rate but I want to sell it before the cap gain exclusion (121) expires.

I want to ensure the house is vacant so I have a month to prep before selling it in Spring of 2024. Which month is the best month to sell?

Then I can determine the lease end date. 

Do you think after the 2020-2021 increase, there will be another increase on the horizon in the Round Rock area in the foreseeable future? Would it be worth keeping it as a rental long-term?

It's a (>4k sqft) SFH at a top school district.

Regarding the cap gains exclusion (121) - is the 5 year period back-calculated based on the date of the final sale? And 2- years primary residence period based on your physical presence (and no documents?)

Thank you in advance!

I'm sharing to check my calculations are correct 

and to see what a wise investor would do.

Situation:

SFH near Austin, TX area was a primary residence for 2.5 years, moved to another house nearby.

It is being rented out for 1.5 yrs. Lease term ends September 1. Tenants want to extend lease next year.

But Cap Gains Tax exclusion as primary residence would expire. Also property taxes increases x 2.

Now the numbers (rounded up for simplicity):

bought at 500K, now valued at 1M

Cap gains tax bill would be 100K.

Currently, the rent is 3.5K
New property tax increases dramatically to 2K/month next year.

As such, next year PITI would be 4K (PI will still be 2K)

Tenants pay on time. New roof, new AC, well maintained in a good school district.

CHOICES: - Cap Gains Tax exclusion expires on 2 and 5

1) sell when the lease ends (problem is - it'd be in September, after the peak season)
2) increase rent and continue to rent - how much to increase?

3) Extend lease for 6 months to prepare sale for spring. (within Capital Gains Tax exclusion)

4) Sell to tenants ?

5) do a 1031 exchange? (unlikely)

6) any other options?

As an investor, what would you do?

You are both right that Cap Gains Tax is the primary concern.
It's being rented out now, but I'll have to make this decision before the lease term ends.

For simplicity, the cap gains tax bill would be ~100K. 
Currently, the rent is around 3.5K
With a new property tax increase, and with no homestead exemption, taxes alone will be more than 2K.

Tenants pay on time and are low maintenance. 

Options are:
1) sell when the lease ends next year
2) do a 1031 exchange next year
3) continue to rent with an increase in rent

As an investor, what would you do?

Thank you for your replies. I bought it at around 550K about 3 yrs ago and now should sell around 850-950k according to comps. Mortgage is almost paid off and I looked at cash-out refinance but with the higher rates of 3.5% and that you can't deduct taxes on it (unless you do improvements or invest in another rental property). I also have another mortgage for a new primary residence. 

I don't think multi rooms will be the demographics here. Families live here for the school district.