My monthly mortgage is $2300.
MOnthly taxes are $300.
I pay $100 to my gardner – who I would keep on so my yard stays intact.
I pay a bit less than $100 for insurance, and I honestly don’t know if it would stay the same, or go up/down slightly once I convert to a rental. Assume it stays the same.
So monthly CASH needed to keep the property going is $2800.
I can rent it for $1500-1600. $1600 would be the max. $1500 is very realistic, and I have no doubt I could have it rented in less than a month for $1500-1550.
As to depreciation, I don’t know what my basis would be on the home – I know you calcualte it via the value of the *structure*, not the land…and I believe my house/structure assessed at $200k on my tax statement – but my home is “worth” about $425k – so maybe I could fudge the number up a bit….assume a $200k basis, which I believe i depreciate over 27.5 years.
So about $7200 of additional “losses”.
Also factor in that my mortgage is NOT one of those ARMs, or interest only loans. I think about $300 a month goes to principal on my loan right now. So each year, I would be paying down my loan by about $3600.
I have a payoff of $365,000. My house is on the market for $425k. So assuming it’s really worth that much, I have $60k in equity.
IF I sell, I lose 6% to the agents, plus another $5k in escrow fees. So assuming I sold at current list price – I’d walk away with about $25k.
I honestly don’t think it would sell for list price right now. Maybe it would sell between $400-$415k. So I could sell it at $400k, and between the realtor fees and escrow fees, I’d just unload the debt, and walk away with no cash in hand. I might get $10-15k out of it if I sold on the high side.
If I rent it out – I am going to have to come up with $1300 in cash each month, but I would technically get $300/month back into my equity, and I would have some tax writeoffs/deductions to offset some of the loss/pain.
I make enough money that I would be able to rent an ok house in the area I’m moving to. I probably wouldn’t be able to buy, and I’m not sure I want to at this point. The only thing I could comfortably afford would be a small condo/townhome in the $330-350k price range. I”ve found some that my family and I would be ok living in – but we wouldn’t want to be in one long term.
I’m partly concerned about the tax implications. If I rent my hosue out, and try to factor in all the losses and the small pricnipal pay down – I can find myself rationalizing keeping the house – albeit LONG term.
I then wonder if I did rent it out – should I rent or buy in the new market. If I rent a house, I wont’ be able to write off what I pay in rent. I can’t buy the house I would want, but I probably could easily rent the house I would want to live in. I could afford to buy a condo that I would be tolerable of – and get a write off – but it would not be the place I would want to live long term.
I can rent a nice house for $1600-1800 in Temecula or Murrieta. That same house would cost $500-550 to buy. I’d have to do 100% financing to buy a house that expensive, and my monthly payment would be $4000 a month at least. I can’t afford that and rent my house out.
Given the above numbers, does it make financial sense to rent my house out? How much would it actually “cost” me – when tax breaks, depreciations, principal pay down, etc are all factored in?
Given I can rent a house that I would genuinly LIKE – for $1800 – does it make any sense to buy for $500k – even if I coudl afford it?? Seems no since renting is cheaper.
Would it be better to rent the hosue I like at $1800 a month, or buy a condo I would “tolerate” at $3000 a month – given that the condo would have a write off and effectively cost me less than $3000.
I am the sole breadwinner. My wife stays at home with our two small children and does not work or earn an income. I make $125k a year working for the gov’t.
