advice needed: sell the house now, or rent it out?

[The-Shoveler]

Unless you are going someplace you will really hate, it is unlikely you will pick up and move back once you are settled.

But it does remind me of that song “walk on the Ocean”

Most people I have kept in contact with after they left really regret leaving Socal.

[CDMA ENG]

My question to the room and the OP would be…

“How likely is it to rent a 1.1 million dollar home?”

I have no experience in this area but being an avid watcher of the market I see no end of million dollar plus homes being on the MLS for a very long time though the OP is at the lower spectrum of that and it would make things easier.

Now I know the readers are going “wait this guy just shifted gears between the last two sentences”.

But what I am thinking is that the selling and renting scenerios could be similiar in this price range. Anyone agree or disagree? There are a lot of million dollar homes for rent. Especailly on the beach front.

At the 500K to 700K there is a lot of roboust activity for sales and rentals but, agian, what is at the million plus?

SDR, sdr? I would think you two would have the wisdom in this area.

CE

[spdrun]

From my read, expenses on the home ex-utilities would be about $2750/mo. Home is at least a 4-bd/3-ba, I’d guess — would it really be that difficult to find a tenant for $2500/mo in a nice area? Keep in mind that even one bedrooms in nice areas are renting for at least a grand a month if not $1250.

[livinincali]

[quote=spdrun]I didn’t read this as a 5-yr amortization period. I read it as a loan with a 30-yr amortization period (or perhaps interest only) where the rate resets after five years.

In the 30-yr case, I’m getting $1879/mo through the end of the 5-yr period.[/quote]

It says it’s a 5 year loan right in the first paragraph.

[quote]
We own a good house in a desirable part of San Diego, purchased for about 700K, now worth about 1100K. The mortgage of 500K is five year fixed at 2.125%, since I refinanced 1.5 years ago when rates were lowest.
[/quote]

[livinincali]

[quote=livinincali][quote=spdrun]I didn’t read this as a 5-yr amortization period. I read it as a loan with a 30-yr amortization period (or perhaps interest only) where the rate resets after five years.

In the 30-yr case, I’m getting $1879/mo through the end of the 5-yr period.[/quote]

It says it’s a 5 year loan right in the first paragraph.

[quote]
We own a good house in a desirable part of San Diego, purchased for about 700K, now worth about 1100K. The mortgage of 500K is five year fixed at 2.125%, since I refinanced 1.5 years ago when rates were lowest.
[/quote][/quote]

Did the OP mean it’s a 5 year ARM instead, maybe. It just seems like ARM weren’t a very popular refinancing option 1.5 years ago. It’s certainly possible.

[spdrun]

I read “5-year fixed” as “fixed for five years.” ARMs definitely always existed, even one or two years ago.

[livinincali]

[quote=spdrun]I read “5-year fixed” as “fixed for five years.” ARMs definitely always existed, even one or two years ago.[/quote]

I know they existed. They just haven’t been popular products with rates this low.

[Coronita]

[quote=SD Realtor]All all of the short term fixed rate loans are amortized over 30 years to make a reasonable payment. A 15 year fixed rate mortgage is generally amortized over 15 years but the 3/5/7/10 year notes are usually not.

If it were my home and I realized at least a 50% chance of returning I would refi it into a longer term at a fixed rate while I still lived there and then convert it to a rental.

Alternative to that I would keep the current loan and then revisit the refi choice over the next 2 years but that choice will become less appealing because you don’t live in the home anymore and will not get as good a rate on the refi. That is unless rates drop in the future but that seems unlikely.[/quote]

+1

What I’m looking at is the roughly $400k capital gains tax free on the primary… Anyone think this might eventually be removed?

[SD Realtor]

That is a good point FLU. Gotta keep them tax revenues rolling in.

CDMA you also brought up a good point about the viability of getting tenants due to the market value. This is something the OP would have to test out by looking for advertisements in the same area for comparable rentals. Subsequently then test it out by running advertisement and measuring the responses.

As for all those not understanding the mortgage payments… find a friend with a 5 or 10 year fixed rate loan, and ask them what their amortization period is.

Post the results of how many come back and say they had a 5 or 10 year amortization period. I will be quite surprised if we get an answer above 0.

[Coronita]

[quote=SD Realtor]That is a good point FLU. Gotta keep them tax revenues rolling in.

CDMA you also brought up a good point about the viability of getting tenants due to the market value. This is something the OP would have to test out by looking for advertisements in the same area for comparable rentals. Subsequently then test it out by running advertisement and measuring the responses.

As for all those not understanding the mortgage payments… find a friend with a 5 or 10 year fixed rate loan, and ask them what their amortization period is.

Post the results of how many come back and say they had a 5 or 10 year amortization period. I will be quite surprised if we get an answer above 0.[/quote]

Basically, the way I am thinking $400k capital gains free is like $60k tax free currently (assuming if it were to be taxed later would be at the 15% bracket)…

I wonder how long that will last…Remember the already changed the rules *slightly* when you change your property into a rental and back…

Plus I’m not sure floating a 1.1 million home as a rental property would work out better than selling, and buying better cash flow property…if the person doesn’t actually move back here….

[CA renter]

[quote=UCGal]I guess my questions would be about what your plans on for housing in your new location.

Since it might be temporary (since you might move back here) – does it make more sense to rent. (Transaction costs on short term ownership can kill you.)

If you plan to buy where you’re going – do you have the downpayment/credit bandwidth to finance the new purchase without selling your existing house.

My gut says that if you plan to come back to San Diego, hang on to it.[/quote]

Agree with this, especially if you can cover all of your costs with the rental income.

What are the terms of your 5-year ARM? What are the interest rate caps, annually and over the life of the loan?

What are your **total** monthly costs (PITI, HOA, MR, maintenance, etc.), and what is a very reasonable rent estimation for a house just like yours?

As other posters have mentioned, though, there are a lot of benefits to selling now, too. The selling assistance and tax-free gains are tempting, and we have no idea what prices in the $1MM+ range will be like in a few years. I think they’re as likely to go down as up. You’re far less likely to get “priced out” at those levels.

[scaredyclassic]

It seems excessive to rent a million dollar home.

[paramount]

[quote=scaredyclassic]It seems excessive to rent a million dollar home.[/quote]

That’s basically what I said, but depending on where it is it could be rented out as a vacation type property.

That can be very lucrative as I understand…

[an]

I’m a little late to the party but I personally would sell, keep the free cap gain and buy two $550k house in San Diego. The tax free $400k is too good to pass up. My gut is also telling me that 2 $550k houses would probably cash flow better than the $1.1m house.

[Jazzman]

You might want to sit it out a bit longer. Last year, prices shot up very quickly, and over half the cities in the Case Shiller index went negative in November. SD was not one of them, but soCal saw some of the bubbliest activity. It will interesting to see if current pricing is sustainable into this year.

[Author]

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