All Forum Posts by: Tom Giles

Next month I will be preparing my Daughter's home in Fayetteville, NC to sale. The home has been a rental for the past 7 years. I will be doing most of the rehab myself but I will need a reputable HVAC mechanic and painter. Any recommendations?

@Greg H. Thank you on the advice to sell the Colorado house. You are correct about the house supplementing my daughter's rent. I purchased the house to give her opportunity to transition out of the military and get her MBA without too much financial pressure.  Mission accomplished, she now has her MBA and a great job but on annual contract. Work in progress. In the mean time, property value projections look promising over the next several years..

@Jason V. @Daniel O. @Greg H. @Sid Leibowitz @Shane Baganz @Katie Neason @Thomas S.

Thank you for all your comments. A recent wind storm along with other considerations have influenced my decision to sell.  (I lost one side of the privacy fence costing me over a month's rent). Tuesday before last I told my property manager that I wanted to sell so she listed the house Monday. Tuesday I had 4 offers at or above asking price. Wednesday we had signed contract. Closing is scheduled several days after the end of lease.

I have decided not to pay down on either of my other two mortgages but to keep the proceeds available for reinvestment. I am now exploring investment options.

@Bart H. I am presently living in two locations. We spend 3 months, twice a year in Florida and 3 months, twice a year in the Republic of Panama near my wife's child hood home. We have homes at both locations, the Panama home is paid off and the Florida home has 25 years left on a 3.5% mortgage. I plan to keep both homes for ever. If I had the 60-80K in my pocket I definitely would not buy the property in Texas for what I could sell it today, and I immediately see you point in asking that question. The reason I kept that property when I left Texas 21 months ago was that the market value for that house was only about $110K so the math was much more favorable for keeping it as a rental. Now 21 months later, the math is much different. I have definitely decided to sell, just having decided how to use the cash.

It is my understanding that taking depreciation is an option but if you do, you must follow the rules. Taking depreciation makes sense in just about all cases for rental property except mine. I went into the rental business on this property to keep an option to cash out within the 3 year window to avoid Capitol Gains tax.

Thank you for all your input and local offers for assistance. Given the tax implication and the amount of potentially taxable equity that I have tied up in the property, I am inclined to sell. I am obligated to use my property management company to handle the sell while the property is under their management. Using them should make the transition for current tenets more palatable. Their lease expires the end of May. I have another property in a hot market in El Paso, County Colorado that my daughter is leasing from me. I have a 4.65% 30 year mortgage on that property. If I apply the proceeds from the sale of my Texas property to the Colorado property, it will immediately shorten the remaining loan period from 27-1/2 years to 5 years. The market value of the Colorado house has also grown substantially since my purchase 2-1/2 years ago, $173K to $225K.

I am 63-1/2 and I have a decent pension that I am supplementing with a small monthly disbursement of traditional (taxable) retirement savings. I intend to exhaust all my taxable savings before taking social security at about 3-1/2 years from now. The rent on this property supplements my income by an average of $300. per month. We are living comfortable, well within our monthly income before adding rental income. When my wife and I  start drawing SS, our monthly income will increase about $2K per month. Bottom line, I don't need the rental income to live on.

I am 5 years into a 30 year 3.75% conventional mortgage on our home in Florida so if I sell the rental property, I will probably apply that equity into my Florida home thus reducing the loan period 12-13 years, I will be age 74/75 and mortgage free.

Background:

April 2013, I purchased a SFH HUD repo. (built in 2007) in College Station, TX for $89K.

The loan is a 30 year conventional at 3.75%, 20% down.

Rehab costs were about $12K so total out of pocket investment was about $30K.

I lived in the home for 26 months until May 2015, when I retired and moved to Florida.

The house has been successfully rented since I moved out starting in June 2015 and I am happy with the property management company. After preparing 2016 taxes, net taxable income for the year is $4700. I am not depreciating.

Comps on the house are between $140-150K, and estimated to grow 3.5% in the next year. I presently owe $67.5K.

If I were to sell the house before June 2018 my cash out after expenses should be between $60-$70K with no capital gains tax.

Question:

Should I sell the house before June 2018 and take advantage of no taxes on the $30-40K capitol gain or should I keep the house as a long term investment property.

I just changed my policy to rental policy after moving out and leasing my prior home. The new policy is about $60 per year less expensive than the home owners policy.

Same can be said about the cost of education and health care or the rapid rise in stock market valuations, vastly exceeding the rate of inflation. Artificial economic factors will cause economic outcomes that deviate from natural market equilibrium.

I am from Florida but presently living and working in Texas. Last summer I purchased an investment home in Colorado for my Daughter and grand kids while she attends graduate school. She is paying the mortgage as rent. While searching for a home in Colorado, my daughter worked with a local realtor to show her properties. Her realtor set me up with a local loan officer with Wells Fargo to arrange a mortgage. I found the home that I ended up buying on Realtor.com. I intend to hold that property after she moves on.