Condo – sell or rent out?

[2008]

I bought a 1 bedroom condo a few years back for high 200s with 100% financing and a 5 year interest only ARM on the 80% loan. I am considering relocating for a job. Given the market conditions and seeing other condos on the market for 50K-70K less in my neighborhood than what I paid for it, would the recommendation be that I hold on to it and rent it out? I would probably lose about $500-$700/month if I rented. If I sold today, I’d have to come up with the difference between what I owe and obviously what I sell for. If I hold and rent it out, I would face a reset in a couple of years and an even larger gap in rental income vs mortgage. If I stayed put instead of leaving for a job, I could stay in the condo, but again, I’d face the reset and what is the likelihood of refinancing in a few years. Any advice?

[(former)FormerSanDiegan]

What part of town ?

When does the ARM reset ?
What is the index and margin of the reset ?

Since you are a few years into loan it is likely to increase significantly. Is the 500-700 per month negative based on the I/O loan ?

Is 8400 per year (negative cash flow) a lot of money to you ?

How much will your cash flow improve by moving ?
Raise in new job/ lower cost to rent.

If your new job pays more and your new rent (in the place you move to) is less than you can rent your old place for, you could consider keeping the place and renting it out.

1 BR condos are at the bottom of the food chain. Your unit seems to be on the leading edge of the bust (down at least 25% already). It’s value will probably drop to the point where someone could buy it as a rental and have positive cash flow. That means another 50K or more in depreciation.
That said, it might be difficult to sell at the price you want to sell it. FOr the 70K or so you might have to bring to closing, you might be able to carry the negative for about a decade. Sometimes it’s too late to sell.

Is your credit good ?

[Raybyrnes]

What about working on a rent to own program. Give soemone the purchase to buy at the end of a period of time. Structure the contract so that it is win win. You ahve income coming in , they are responsible for upkeep. Might be a decent fit for you.

[Raybyrnes]

What about working on a rent to own program. Give soemone the purchase to buy at the end of a period of time. Structure the contract so that it is win win. You ahve income coming in , they are responsible for upkeep. Might be a decent fit for you.

[Raybyrnes]

What about working on a rent to own program. Give soemone the purchase to buy at the end of a period of time. Structure the contract so that it is win win. You ahve income coming in , they are responsible for upkeep. Might be a decent fit for you.

[2008]

I’ll have to dig up my mortgage papers when I’m at home, so I don’t know the Index or Margin. The reset occurs at the end of 2010. The condo is in Rancho Bernardo. Great credit

I could probably rent out between 1100 and 1200. My cash out is $1700

New gig and situation has my income increasing slightly and I would pay in rent about what I could rent out my condo for.

Its definitely not a good situation – just trying to figure out the best route to take. My instinct is to hold on to the place and see what conditions are like in 2010. Either way, it beats coughing up the cash if I were to sell now.

[Bloat]

Your “cash out is $1700”?

Is this your total monthly payment.

While not good, holding might not be as bad as you think. You’ve got Principle of almost $400/month and you will write off int, tax, depn, hoa & expenses of close to $2k/mo that will return about $500 to your pocket.

The principle and tax write off are real money bringing your carrying cost to about $1k/month (before the reset). I’d just rent it out and hope to minimize vacancy and upkeep expenses. In 15 years you might be able to brag about it.

[Bloat]

Your “cash out is $1700”?

Is this your total monthly payment.

While not good, holding might not be as bad as you think. You’ve got Principle of almost $400/month and you will write off int, tax, depn, hoa & expenses of close to $2k/mo that will return about $500 to your pocket.

The principle and tax write off are real money bringing your carrying cost to about $1k/month (before the reset). I’d just rent it out and hope to minimize vacancy and upkeep expenses. In 15 years you might be able to brag about it.

[Bloat]

Your “cash out is $1700”?

Is this your total monthly payment.

While not good, holding might not be as bad as you think. You’ve got Principle of almost $400/month and you will write off int, tax, depn, hoa & expenses of close to $2k/mo that will return about $500 to your pocket.

The principle and tax write off are real money bringing your carrying cost to about $1k/month (before the reset). I’d just rent it out and hope to minimize vacancy and upkeep expenses. In 15 years you might be able to brag about it.

[2008]

I’ll have to dig up my mortgage papers when I’m at home, so I don’t know the Index or Margin. The reset occurs at the end of 2010. The condo is in Rancho Bernardo. Great credit

I could probably rent out between 1100 and 1200. My cash out is $1700

New gig and situation has my income increasing slightly and I would pay in rent about what I could rent out my condo for.

Its definitely not a good situation – just trying to figure out the best route to take. My instinct is to hold on to the place and see what conditions are like in 2010. Either way, it beats coughing up the cash if I were to sell now.

[2008]

I’ll have to dig up my mortgage papers when I’m at home, so I don’t know the Index or Margin. The reset occurs at the end of 2010. The condo is in Rancho Bernardo. Great credit

I could probably rent out between 1100 and 1200. My cash out is $1700

New gig and situation has my income increasing slightly and I would pay in rent about what I could rent out my condo for.

Its definitely not a good situation – just trying to figure out the best route to take. My instinct is to hold on to the place and see what conditions are like in 2010. Either way, it beats coughing up the cash if I were to sell now.

[(former)FormerSanDiegan]

What part of town ?

When does the ARM reset ?
What is the index and margin of the reset ?

Since you are a few years into loan it is likely to increase significantly. Is the 500-700 per month negative based on the I/O loan ?

Is 8400 per year (negative cash flow) a lot of money to you ?

How much will your cash flow improve by moving ?
Raise in new job/ lower cost to rent.

If your new job pays more and your new rent (in the place you move to) is less than you can rent your old place for, you could consider keeping the place and renting it out.

1 BR condos are at the bottom of the food chain. Your unit seems to be on the leading edge of the bust (down at least 25% already). It’s value will probably drop to the point where someone could buy it as a rental and have positive cash flow. That means another 50K or more in depreciation.
That said, it might be difficult to sell at the price you want to sell it. FOr the 70K or so you might have to bring to closing, you might be able to carry the negative for about a decade. Sometimes it’s too late to sell.

Is your credit good ?

[(former)FormerSanDiegan]

What part of town ?

When does the ARM reset ?
What is the index and margin of the reset ?

Since you are a few years into loan it is likely to increase significantly. Is the 500-700 per month negative based on the I/O loan ?

Is 8400 per year (negative cash flow) a lot of money to you ?

How much will your cash flow improve by moving ?
Raise in new job/ lower cost to rent.

If your new job pays more and your new rent (in the place you move to) is less than you can rent your old place for, you could consider keeping the place and renting it out.

1 BR condos are at the bottom of the food chain. Your unit seems to be on the leading edge of the bust (down at least 25% already). It’s value will probably drop to the point where someone could buy it as a rental and have positive cash flow. That means another 50K or more in depreciation.
That said, it might be difficult to sell at the price you want to sell it. FOr the 70K or so you might have to bring to closing, you might be able to carry the negative for about a decade. Sometimes it’s too late to sell.

Is your credit good ?

[Anonymous]

Long time lurker, first time poster. I just want to say, this blog is outstanding, I’ve enjoyed reading commentary on here for months, but have been shy to post. I’m only 25, and new to the real estate game, this site has taught me so much.

I am in a similar situation. My wife and I bought a condo in Carmel Mountain Ranch about 2 1/2 yrs ago. Wish I had discovered piggington before then, but thats in the past! We bought a 1 BR condo for 275k. We got a govt CHFA loan which is 30yr fixed at 4.5%. We put 20% down also. The place seemed like a great deal at the time, but now Im seeing an identical unit listed for short sale at 235k….ugh

My wife and I would like to start a family at some point, and dont know what to do with our condo. After reading this site, I think its best that we rent a house and rent our condo for several years until the market improves. I dont know if its even possible to rent a place with a CHFA loan, so we may have to refi. Our combined income now is about 95k with great credit. Our mortgage with $200 HOA is about 1600. So most likely looking at a 500 or 600 dollar expense to rent out

We are looking to move sometime summer/fall 2008. What do you guys think?

PS: sorry to hijack your thread 2008, I just dont want to post a new topic thats similar.

[Raybyrnes]

CMRJoe

I would look and see if the CHFA loan is an assumable mortgate. If you look to sell it could provide a value add and get you more money for your home. Run the numbers and see what it is worth to save 1.5% on a mortgage. If someone is willing to pay 235k but have to take out a 6.5% mortgage they ahve $1485 monthly payment. With your 4.5% rate you could charge up to 293K and the person would have the same payment. This give you a nice bargaining chip if you find the right buyer. Good Luck

[Anonymous]

I didnt even think about that, great idea.

The CHFA loan IS assumable, the person must meet the requirements for CHFA though. The main requirement is that they are a first time home buyer, and make less than 80k combined or so.

So yeah, if I could find the right buyer, I might not have to sell at a loss afterall. Very cool.

[(former)FormerSanDiegan]

2008 – OK. Since you have good credit and increasing income you have to weigh the potential future prospect of losses and carrying costs versus the guaranteed loss of selling now in the weakest market in over a decade.

Your property is already down 25%. What’s the opportunity cost of spending the 70K to unload the property versus spreading that out via negative income over the next decade ?
Assuming you make less than 150K, you’ll get a decent tax break on the rental loss. Including depreciation, I’m guessing you’ll likely get a tax loss of about 16-18K per year, saving you up to about 6K in taxes. (Depreciation of a 275K condo would equate to 10K per year in depreciation loss for tax purposes).

If your loan were a fixed rate loan and you were negative $500 per month as a rental I would recommend keeping the property at this point. The problem is that you do not know what your payments will be in 2010. You need to know this and project out what it would likely be.

The worst thing to do in my opinion would be to keep it for now, then unload it in 2010 when your payment resets and you can’t afford the escalated payment at a point when the market is near its lows another 10 or 15 % below today’s value.

[2008]

Thanks FormerSanDiegan.

If my rate resets 2 points in 2010, which I believe is the maximum reset on my 80% loan, and my payments creap up another 500-600/month, with the write-off on negative income and depreciation, it sounds like I’m better off if I just hold on till at least 2012- versus selling today and realizing an immediate 70K loss.

Not sure what the tax savings would be, but I would lose 6K the next 3 years per year and 12K the 2 thereafter totaling 42K loss in rental income. Even without the tax write-off, still ahead vs taking a 70K loss right now.

Does my logic sound about right?

[2008]

Thanks FormerSanDiegan.

If my rate resets 2 points in 2010, which I believe is the maximum reset on my 80% loan, and my payments creap up another 500-600/month, with the write-off on negative income and depreciation, it sounds like I’m better off if I just hold on till at least 2012- versus selling today and realizing an immediate 70K loss.

Not sure what the tax savings would be, but I would lose 6K the next 3 years per year and 12K the 2 thereafter totaling 42K loss in rental income. Even without the tax write-off, still ahead vs taking a 70K loss right now.

Does my logic sound about right?

[2008]

Thanks FormerSanDiegan.

If my rate resets 2 points in 2010, which I believe is the maximum reset on my 80% loan, and my payments creap up another 500-600/month, with the write-off on negative income and depreciation, it sounds like I’m better off if I just hold on till at least 2012- versus selling today and realizing an immediate 70K loss.

Not sure what the tax savings would be, but I would lose 6K the next 3 years per year and 12K the 2 thereafter totaling 42K loss in rental income. Even without the tax write-off, still ahead vs taking a 70K loss right now.

Does my logic sound about right?

[Bloat]

I say take the new job and rent it out. I wouldn’t throw money at it to get out. Invest that money in a mutual fund, then revisit all in 2010. Being a landlord is good experience too (I didn’t say fun) and a one bedroom is easy to handle.

The quick math (monthly approx):
Interest $950
Taxes $225
HOA $150
Ins $ 25
Depn $800
Tax deductable total: $2150 (x 25% = $500 savings)
Prin $350 (not an expense)

Real monthly carrying cost = $850.

Rent (est) = $1000 (incudes 15% vacancy and expense allowance) covers the real cost, plus.

Not a good investment, but what’s done is done. Rents are likely to be stable and good areas like RB will rise over time. Getting a good tenant is key along with low interest rates.

[SD Realtor]

CMRJoe and 2008 sorry to hear about your situations. djrob thanks for posting what I told you, (I think you confused me with sdrealtor)…

So guys, (both of you) my standard advice is to put it on paper (or spread sheet) to let the numbers sink in. It is a pain in the butt to do and as Raybyrnes said it may very well be an exercise in futility, but it is something you should do. I hate to be an anal engineer type but I always am surprised at decisions people make without really studying the numbers…

Okay so let’s think about the rent scenario. You guys can very well rent these homes for awhile, yes it would be a long slow bleed. How much over several years? What sort of tax benefits would you see? Can you afford it given your current and proposed future income? If you run this out over several years is it realistic? Compare this to the sell now scenario… Which makes sense to you? Be realistic when you consider the sell now scenario with regards to what you will actually sell the home for. I know all this is a chore and you may not likely gleam anything new out of it… yet it may help you decide…

Now other alternatives… Like Porkman said, you can walk away… take the credit hit… keep your money and move on. There is nothing wrong with that. Life is not 100% based on your credit rating.

I am not advocating renting, or selling, or letting it foreclose, or selling it short… I am advocating investigate, list out and study all of your alternatives in detail. When you think about where the market will be in a few years… it is likely that the market will be in a worse spot then it is now. Yes we may get a little bump between now and then but it will not be a major big run up… it will not be pervasive and cover ALL property types. It will likely be a bump in certain housing types in certain areas…

Hang in there…get that spread sheet out…

SD Realtor

ps – I am not a loan guy but I do not think CFHA is assumable. As always I could be wrong.

[SD Realtor]

CMRJoe and 2008 sorry to hear about your situations. djrob thanks for posting what I told you, (I think you confused me with sdrealtor)…

So guys, (both of you) my standard advice is to put it on paper (or spread sheet) to let the numbers sink in. It is a pain in the butt to do and as Raybyrnes said it may very well be an exercise in futility, but it is something you should do. I hate to be an anal engineer type but I always am surprised at decisions people make without really studying the numbers…

Okay so let’s think about the rent scenario. You guys can very well rent these homes for awhile, yes it would be a long slow bleed. How much over several years? What sort of tax benefits would you see? Can you afford it given your current and proposed future income? If you run this out over several years is it realistic? Compare this to the sell now scenario… Which makes sense to you? Be realistic when you consider the sell now scenario with regards to what you will actually sell the home for. I know all this is a chore and you may not likely gleam anything new out of it… yet it may help you decide…

Now other alternatives… Like Porkman said, you can walk away… take the credit hit… keep your money and move on. There is nothing wrong with that. Life is not 100% based on your credit rating.

I am not advocating renting, or selling, or letting it foreclose, or selling it short… I am advocating investigate, list out and study all of your alternatives in detail. When you think about where the market will be in a few years… it is likely that the market will be in a worse spot then it is now. Yes we may get a little bump between now and then but it will not be a major big run up… it will not be pervasive and cover ALL property types. It will likely be a bump in certain housing types in certain areas…

Hang in there…get that spread sheet out…

SD Realtor

ps – I am not a loan guy but I do not think CFHA is assumable. As always I could be wrong.

[SD Realtor]

CMRJoe and 2008 sorry to hear about your situations. djrob thanks for posting what I told you, (I think you confused me with sdrealtor)…

So guys, (both of you) my standard advice is to put it on paper (or spread sheet) to let the numbers sink in. It is a pain in the butt to do and as Raybyrnes said it may very well be an exercise in futility, but it is something you should do. I hate to be an anal engineer type but I always am surprised at decisions people make without really studying the numbers…

Okay so let’s think about the rent scenario. You guys can very well rent these homes for awhile, yes it would be a long slow bleed. How much over several years? What sort of tax benefits would you see? Can you afford it given your current and proposed future income? If you run this out over several years is it realistic? Compare this to the sell now scenario… Which makes sense to you? Be realistic when you consider the sell now scenario with regards to what you will actually sell the home for. I know all this is a chore and you may not likely gleam anything new out of it… yet it may help you decide…

Now other alternatives… Like Porkman said, you can walk away… take the credit hit… keep your money and move on. There is nothing wrong with that. Life is not 100% based on your credit rating.

I am not advocating renting, or selling, or letting it foreclose, or selling it short… I am advocating investigate, list out and study all of your alternatives in detail. When you think about where the market will be in a few years… it is likely that the market will be in a worse spot then it is now. Yes we may get a little bump between now and then but it will not be a major big run up… it will not be pervasive and cover ALL property types. It will likely be a bump in certain housing types in certain areas…

Hang in there…get that spread sheet out…

SD Realtor

ps – I am not a loan guy but I do not think CFHA is assumable. As always I could be wrong.

[2008]

Bloat – regarding tax benefit from write-off as a primary residence owner (mortgage interest and taxes) versus rental income loss ( up to 25K)….are you saying that I can achieve a comparable or even greater tax deduction via rental loss as long as it does not exceed the 25K?

Thanks

[(former)FormerSanDiegan]

Bloat – regarding tax benefit from write-off as a primary residence owner (mortgage interest and taxes) versus rental income loss ( up to 25K)….are you saying that I can achieve a comparable or even greater tax deduction via rental loss as long as it does not exceed the 25K?

You can write off more things on a rental. These include: depreciation, insurance, maintenance, and anything related to managing, marketing the rental, etc. Depreciation alone would likely be 10K per year in your case.

You deduct these against the rental income first. Any additional losses (up to 25K, if you make less than 100K) can be deducted against regular income.

This 25K limit decreases by $1 per each dollar you make over 100K. It goes to zero at 150K.

Any losses you cannot deduct are carried forward for the next tax year as a carryover loss. You can use these in the future or take all your carryover losses when yo dispose of the property.

[Raybyrnes]

I would think that with a rental you could also loosely qualify as a “real estate investment professional” which would provide you with the ability of writing off additional expenses for your transportation, subscriptions to newspapers and journals, paid for websites etc.

[(former)FormerSanDiegan]

Raybyrnes –

I am not a CPA, but have dealt with tax issues on rental property for almost a decade. I think you are mixing two concepts here.
On an investment property (which the IRS considers a passive activity) you can deduct travel expenses, cleaning and maintenance, utilities, insurance, taxes interest, points, and other items related to the management, care, maintenance, and financing of the rental property. Regardles of whether you are a real estate professional.

The “benefit” if you are a real estate professional is that you can deduct your losses, independent of the passive loss limit of 25K, which declines to zero if you make over 150K.

The IRS definition of being a real estate professioinal is more strict than “with a rental you could also loosely qualify as a real estate investment professional”. The IRS requires defines it as such :

Real estate professional. You qualified as a real estate professional for the tax year if you met both of the following requirements.

1. More than half of the personal you performed in all trades or businesses
during the tax year were performed in real
property trades or businesses in which you
materially participated.

2. You performed more than 750 hours of
services during the tax year in real property
trades or businesses in which you materially participated.

For prospective landlords, whether by choice or necessity, I recommend the following light reading:

http://www.irs.gov/pub/irs-pdf/p527.pdf

[Raybyrnes]

FormerSanDiegan

I am not a CPA either so I will go with what you said. The idea of classifying oneself as a real esate professional was introduced to me by a colleague who used it to reduce his specific tax liability.

I believe it would be a useful question to ask a CPA if I were sitting down for a consultation.

With respect to the qualification it is a fairly loose interpretation as the 750 hours. Is the time you are on piggington considered research.

[(former)FormerSanDiegan]

Raybyrnes –

With respect to the qualification it is a fairly loose interpretation as the 750 hours. Is the time you are on piggington considered research.

Probably. That would be an easy way to rack up the 750 hours.
The other problem is that RE has to be your primary line of work.

So, I think people who do not otherwise have full-time positions (or those who work in cash jobs) could more easily find a way to justify to be classified as a RE professional. The other loophole is that if you are married, just one of you has to be a RE professional. Most people who are full-time W-2 employees in other lines of work would be excluded.

[(former)FormerSanDiegan]

Raybyrnes –

With respect to the qualification it is a fairly loose interpretation as the 750 hours. Is the time you are on piggington considered research.

Probably. That would be an easy way to rack up the 750 hours.
The other problem is that RE has to be your primary line of work.

So, I think people who do not otherwise have full-time positions (or those who work in cash jobs) could more easily find a way to justify to be classified as a RE professional. The other loophole is that if you are married, just one of you has to be a RE professional. Most people who are full-time W-2 employees in other lines of work would be excluded.

[(former)FormerSanDiegan]

Raybyrnes –

With respect to the qualification it is a fairly loose interpretation as the 750 hours. Is the time you are on piggington considered research.

Probably. That would be an easy way to rack up the 750 hours.
The other problem is that RE has to be your primary line of work.

So, I think people who do not otherwise have full-time positions (or those who work in cash jobs) could more easily find a way to justify to be classified as a RE professional. The other loophole is that if you are married, just one of you has to be a RE professional. Most people who are full-time W-2 employees in other lines of work would be excluded.

[Raybyrnes]

FormerSanDiegan

I am not a CPA either so I will go with what you said. The idea of classifying oneself as a real esate professional was introduced to me by a colleague who used it to reduce his specific tax liability.

I believe it would be a useful question to ask a CPA if I were sitting down for a consultation.

With respect to the qualification it is a fairly loose interpretation as the 750 hours. Is the time you are on piggington considered research.

[Raybyrnes]

FormerSanDiegan

I am not a CPA either so I will go with what you said. The idea of classifying oneself as a real esate professional was introduced to me by a colleague who used it to reduce his specific tax liability.

I believe it would be a useful question to ask a CPA if I were sitting down for a consultation.

With respect to the qualification it is a fairly loose interpretation as the 750 hours. Is the time you are on piggington considered research.

[(former)FormerSanDiegan]

Raybyrnes –

I am not a CPA, but have dealt with tax issues on rental property for almost a decade. I think you are mixing two concepts here.
On an investment property (which the IRS considers a passive activity) you can deduct travel expenses, cleaning and maintenance, utilities, insurance, taxes interest, points, and other items related to the management, care, maintenance, and financing of the rental property. Regardles of whether you are a real estate professional.

The “benefit” if you are a real estate professional is that you can deduct your losses, independent of the passive loss limit of 25K, which declines to zero if you make over 150K.

The IRS definition of being a real estate professioinal is more strict than “with a rental you could also loosely qualify as a real estate investment professional”. The IRS requires defines it as such :

Real estate professional. You qualified as a real estate professional for the tax year if you met both of the following requirements.

1. More than half of the personal you performed in all trades or businesses
during the tax year were performed in real
property trades or businesses in which you
materially participated.

2. You performed more than 750 hours of
services during the tax year in real property
trades or businesses in which you materially participated.

For prospective landlords, whether by choice or necessity, I recommend the following light reading:

http://www.irs.gov/pub/irs-pdf/p527.pdf

[(former)FormerSanDiegan]

Raybyrnes –

I am not a CPA, but have dealt with tax issues on rental property for almost a decade. I think you are mixing two concepts here.
On an investment property (which the IRS considers a passive activity) you can deduct travel expenses, cleaning and maintenance, utilities, insurance, taxes interest, points, and other items related to the management, care, maintenance, and financing of the rental property. Regardles of whether you are a real estate professional.

The “benefit” if you are a real estate professional is that you can deduct your losses, independent of the passive loss limit of 25K, which declines to zero if you make over 150K.

The IRS definition of being a real estate professioinal is more strict than “with a rental you could also loosely qualify as a real estate investment professional”. The IRS requires defines it as such :

Real estate professional. You qualified as a real estate professional for the tax year if you met both of the following requirements.

1. More than half of the personal you performed in all trades or businesses
during the tax year were performed in real
property trades or businesses in which you
materially participated.

2. You performed more than 750 hours of
services during the tax year in real property
trades or businesses in which you materially participated.

For prospective landlords, whether by choice or necessity, I recommend the following light reading:

http://www.irs.gov/pub/irs-pdf/p527.pdf

[Raybyrnes]

I would think that with a rental you could also loosely qualify as a “real estate investment professional” which would provide you with the ability of writing off additional expenses for your transportation, subscriptions to newspapers and journals, paid for websites etc.

[Raybyrnes]

I would think that with a rental you could also loosely qualify as a “real estate investment professional” which would provide you with the ability of writing off additional expenses for your transportation, subscriptions to newspapers and journals, paid for websites etc.

[2008]

FormerSanDiegan –

You can write off more things on a rental. These include: depreciation, insurance, maintenance, and anything related to managing, marketing the rental, etc. Depreciation alone would likely be 10K per year in your case.

You deduct these against the rental income first. Any additional losses (up to 25K, if you make less than 100K) can be deducted against regular income.

I ran a few quick numbers looking at the Schedule E – and my tax write-off is a few hundred dollars more if I stay in the place, versus renting it out as the rental income is greater than what I can write off for depreciation+HOA.

So I’m back to the 70K I’ve already lost in value, plus any additional depreciation over the next 3 years.

[(former)FormerSanDiegan]

I ran a few quick numbers looking at the Schedule E – and my tax write-off is a few hundred dollars more if I stay in the place, versus renting it out as the rental income is greater than what I can write off for depreciation+HOA.

Not sure I completely follow.

Did you include the interest on the loan, the property taxes and the insurance ? These add up to considerably more than the rent, since you said you would be negative 500-700 per month. Add the HOA and depreciation and you are looking at a tax loss of probably 1200-1500 per month.

Sure you’re actual tax write off might be a bit less than if you lived in it. But, do not isolate payment of taxes as a single consideration. Compute all expenses after taxes for whatever scenarios you are considering.

E.g. – If you live in the unit and continue to pay 2000 per month and 1700 is deductible, living in the unit might cost you $1400 per month after taxes (assume 35% in tax relief, might be less). If you rent it out for $1K per month, and you have a tax loss of 1K per month (including depreciation), you have an after-tax negative cash flow of about 700 minus taxes on 1K, let’s say $350. So your after tax monthly carrying costs are 350 per month.

Again, consider everything (cash in, cash out, including income and taxes) for a complete picture. Sure you would have a somewhat lower tax break because of the 1K per momth income. But don’t ignore the fact that you would be getting the additional 1K per month of income.

Also, I want to emphasize that if your hold-and-rent strategy is based on trying to sell within the next 3 years, you might as well sell it today.

[2008]

I hear you, yes I’m looking at the full cash-in, cash-out. Just meant that the write-off I can take living in the home (mort int +prop tax), versus the additional items I can write-off renting it out (depreciation, HOA, insurance), are offset by the rental income.

Before a reset, my carrying costs are 600/mo post tax implications. Plus whatever it costs me to live somewhere else if I rent this place out.

I’m just looking at the impact over the next 3 years before the reset- not to imply that I would sell in 3 years, but I’m trying to get a financial picture before and after the reset. Once it resets, we’re talking about a bump from $1700/mo to $2400/month in cash out.

[2008]

And not to jump onto the marriage tax issue – but it does sound like if I ever get married my tax benefits from write-offs get killed by the additional income. sounds like a reason not to get married!

[(former)FormerSanDiegan]

And not to jump onto the marriage tax issue – but it does sound like if I ever get married my tax benefits from write-offs get killed by the additional income. sounds like a reason not to get married!
Maybe. Maybe not. At higher income, you may be in higher tax brackets, and the write-offs become more valuable, that is until you start crossing various income thresholds (e.g. approaching 150K) and various other phase outs of deductions and phase-in of AMT. Taxes are way too complex. The complications make it difficult to do what-if scenarios.

[2008]

In my current situation, marriage and the combined income would definitely push me into AMT. My better half is already subject to AMT

[SD Realtor]

For all I would be really careful about tax advice. In general I find that FSD seems to give the best advice out there with regards to taxes with rental/income properties. I have yet to see where his advice is not correct. Still with that said, check with a CPA. As far as the 25k loss ceiling lifted if you are a real estate professional be VERY VERY careful with that one.

SD Realtor

[Anonymous]

Just want to say thanks, especially Ray & SD Realtor for all the information.

I think the wife and I are gonna just sit tight as long as we can and save money. With our 4.5% CHFA, we can save about 2,800 a month with our lifestyle. If I do look into selling, I’ll try to sell with the assumable loan. It might be worth visiting a CPA just to see our options with renting, tax etc.

Ive started compiling everything into Numbers (Macs spreadsheet app), thanks for the advice.

One more question. I got my tax bill in the mail today. CHFA has escrow account built into mortgage payment so I dont have to pay, but on the bill it lists the total L&I (land and improvements) at 286k. This seems like a shady move by the city of SD if the property isnt worth this. Is this something I should be concerned about, or just part of life?

[ocean]

ocean…..Having been in your situation in the early 90’s,I can understand your concerns.I do have to agree with porkman on this.Is a short sale a possibility?If not ,I would bite the bullet now,clean up the place and send the keys to the lien holder.One ding on your credit isnt the worst thing in life.You should be able to get another loan,a well written letter of explanation,and a meeting with the right lender does wonders.I even had lenders tell me that they had more respect for the individuals that realized they made a bad investment and decided to move on.I was able to get new loans,at market rates,but did have to pay 20% down.It did take 7 years to drop off my credit,and now the fico is 816.Throwing good $$$ after bad makes no sense to me. I learned a lot from my experiences,and now have NO debt.Just something to think about.I’m NOT suggesting to follow this couse of action,but do realize to aren’t alone,and certainly no lesser of a person because you made a bad investment.

[Anonymous]

2008, I don’t know 1/10th of what these guys know on here, but I do know that formersandiegan is right: it won’t be any better for you in 3 years. Yeah, you’d be looking at 100k loss in three years. It was a bad investment. You might as well get out of it now.

Kiss it goodbye. Put a fork in it. You’re done.

[(former)FormerSanDiegan]

In my current situation, marriage and the combined income would definitely push me into AMT. My better half is already subject to AMT
Being subject to AMT is not the worst problem to have. I’d rather be subject to AMT than subject to refundable credits.

[(former)FormerSanDiegan]

In my current situation, marriage and the combined income would definitely push me into AMT. My better half is already subject to AMT
Being subject to AMT is not the worst problem to have. I’d rather be subject to AMT than subject to refundable credits.

[(former)FormerSanDiegan]

In my current situation, marriage and the combined income would definitely push me into AMT. My better half is already subject to AMT
Being subject to AMT is not the worst problem to have. I’d rather be subject to AMT than subject to refundable credits.

[(former)FormerSanDiegan]

In my current situation, marriage and the combined income would definitely push me into AMT. My better half is already subject to AMT
Being subject to AMT is not the worst problem to have. I’d rather be subject to AMT than subject to refundable credits.

[Anonymous]

2008, I don’t know 1/10th of what these guys know on here, but I do know that formersandiegan is right: it won’t be any better for you in 3 years. Yeah, you’d be looking at 100k loss in three years. It was a bad investment. You might as well get out of it now.

Kiss it goodbye. Put a fork in it. You’re done.

[Anonymous]

2008, I don’t know 1/10th of what these guys know on here, but I do know that formersandiegan is right: it won’t be any better for you in 3 years. Yeah, you’d be looking at 100k loss in three years. It was a bad investment. You might as well get out of it now.

Kiss it goodbye. Put a fork in it. You’re done.

[ocean]

ocean…..Having been in your situation in the early 90’s,I can understand your concerns.I do have to agree with porkman on this.Is a short sale a possibility?If not ,I would bite the bullet now,clean up the place and send the keys to the lien holder.One ding on your credit isnt the worst thing in life.You should be able to get another loan,a well written letter of explanation,and a meeting with the right lender does wonders.I even had lenders tell me that they had more respect for the individuals that realized they made a bad investment and decided to move on.I was able to get new loans,at market rates,but did have to pay 20% down.It did take 7 years to drop off my credit,and now the fico is 816.Throwing good $$$ after bad makes no sense to me. I learned a lot from my experiences,and now have NO debt.Just something to think about.I’m NOT suggesting to follow this couse of action,but do realize to aren’t alone,and certainly no lesser of a person because you made a bad investment.

[ocean]

ocean…..Having been in your situation in the early 90’s,I can understand your concerns.I do have to agree with porkman on this.Is a short sale a possibility?If not ,I would bite the bullet now,clean up the place and send the keys to the lien holder.One ding on your credit isnt the worst thing in life.You should be able to get another loan,a well written letter of explanation,and a meeting with the right lender does wonders.I even had lenders tell me that they had more respect for the individuals that realized they made a bad investment and decided to move on.I was able to get new loans,at market rates,but did have to pay 20% down.It did take 7 years to drop off my credit,and now the fico is 816.Throwing good $$$ after bad makes no sense to me. I learned a lot from my experiences,and now have NO debt.Just something to think about.I’m NOT suggesting to follow this couse of action,but do realize to aren’t alone,and certainly no lesser of a person because you made a bad investment.

[Anonymous]

Just want to say thanks, especially Ray & SD Realtor for all the information.

I think the wife and I are gonna just sit tight as long as we can and save money. With our 4.5% CHFA, we can save about 2,800 a month with our lifestyle. If I do look into selling, I’ll try to sell with the assumable loan. It might be worth visiting a CPA just to see our options with renting, tax etc.

Ive started compiling everything into Numbers (Macs spreadsheet app), thanks for the advice.

One more question. I got my tax bill in the mail today. CHFA has escrow account built into mortgage payment so I dont have to pay, but on the bill it lists the total L&I (land and improvements) at 286k. This seems like a shady move by the city of SD if the property isnt worth this. Is this something I should be concerned about, or just part of life?

[Anonymous]

Just want to say thanks, especially Ray & SD Realtor for all the information.

I think the wife and I are gonna just sit tight as long as we can and save money. With our 4.5% CHFA, we can save about 2,800 a month with our lifestyle. If I do look into selling, I’ll try to sell with the assumable loan. It might be worth visiting a CPA just to see our options with renting, tax etc.

Ive started compiling everything into Numbers (Macs spreadsheet app), thanks for the advice.

One more question. I got my tax bill in the mail today. CHFA has escrow account built into mortgage payment so I dont have to pay, but on the bill it lists the total L&I (land and improvements) at 286k. This seems like a shady move by the city of SD if the property isnt worth this. Is this something I should be concerned about, or just part of life?

[SD Realtor]

For all I would be really careful about tax advice. In general I find that FSD seems to give the best advice out there with regards to taxes with rental/income properties. I have yet to see where his advice is not correct. Still with that said, check with a CPA. As far as the 25k loss ceiling lifted if you are a real estate professional be VERY VERY careful with that one.

SD Realtor

[SD Realtor]

For all I would be really careful about tax advice. In general I find that FSD seems to give the best advice out there with regards to taxes with rental/income properties. I have yet to see where his advice is not correct. Still with that said, check with a CPA. As far as the 25k loss ceiling lifted if you are a real estate professional be VERY VERY careful with that one.

SD Realtor

[2008]

In my current situation, marriage and the combined income would definitely push me into AMT. My better half is already subject to AMT

[2008]

In my current situation, marriage and the combined income would definitely push me into AMT. My better half is already subject to AMT

[(former)FormerSanDiegan]

And not to jump onto the marriage tax issue – but it does sound like if I ever get married my tax benefits from write-offs get killed by the additional income. sounds like a reason not to get married!
Maybe. Maybe not. At higher income, you may be in higher tax brackets, and the write-offs become more valuable, that is until you start crossing various income thresholds (e.g. approaching 150K) and various other phase outs of deductions and phase-in of AMT. Taxes are way too complex. The complications make it difficult to do what-if scenarios.

[(former)FormerSanDiegan]

And not to jump onto the marriage tax issue – but it does sound like if I ever get married my tax benefits from write-offs get killed by the additional income. sounds like a reason not to get married!
Maybe. Maybe not. At higher income, you may be in higher tax brackets, and the write-offs become more valuable, that is until you start crossing various income thresholds (e.g. approaching 150K) and various other phase outs of deductions and phase-in of AMT. Taxes are way too complex. The complications make it difficult to do what-if scenarios.

[2008]

And not to jump onto the marriage tax issue – but it does sound like if I ever get married my tax benefits from write-offs get killed by the additional income. sounds like a reason not to get married!

[2008]

And not to jump onto the marriage tax issue – but it does sound like if I ever get married my tax benefits from write-offs get killed by the additional income. sounds like a reason not to get married!

[(former)FormerSanDiegan]

Before a reset, my carrying costs are 600/mo post tax implications. Plus whatever it costs me to live somewhere else if I rent this place out.

I’m just looking at the impact over the next 3 years before the reset- not to imply that I would sell in 3 years, but I’m trying to get a financial picture before and after the reset. Once it resets, we’re talking about a bump from $1700/mo to $2400/month in cash out.

Got it.

Seems like if you can rent a place in your new town for $1100 per month it is essentially a wash in the short run.

Now it just boils down to whether you want to toss away 70K now, or cross your fingers and either toss away 100K 3 years from now or break even maybe a decade or more from now, or something in between.

Moving to the new town/job likely means a bump in pay and more up-side. Whatever you do, don’t make the career choice based on your housing situation.

[(former)FormerSanDiegan]

Before a reset, my carrying costs are 600/mo post tax implications. Plus whatever it costs me to live somewhere else if I rent this place out.

I’m just looking at the impact over the next 3 years before the reset- not to imply that I would sell in 3 years, but I’m trying to get a financial picture before and after the reset. Once it resets, we’re talking about a bump from $1700/mo to $2400/month in cash out.

Got it.

Seems like if you can rent a place in your new town for $1100 per month it is essentially a wash in the short run.

Now it just boils down to whether you want to toss away 70K now, or cross your fingers and either toss away 100K 3 years from now or break even maybe a decade or more from now, or something in between.

Moving to the new town/job likely means a bump in pay and more up-side. Whatever you do, don’t make the career choice based on your housing situation.

[(former)FormerSanDiegan]

Before a reset, my carrying costs are 600/mo post tax implications. Plus whatever it costs me to live somewhere else if I rent this place out.

I’m just looking at the impact over the next 3 years before the reset- not to imply that I would sell in 3 years, but I’m trying to get a financial picture before and after the reset. Once it resets, we’re talking about a bump from $1700/mo to $2400/month in cash out.

Got it.

Seems like if you can rent a place in your new town for $1100 per month it is essentially a wash in the short run.

Now it just boils down to whether you want to toss away 70K now, or cross your fingers and either toss away 100K 3 years from now or break even maybe a decade or more from now, or something in between.

Moving to the new town/job likely means a bump in pay and more up-side. Whatever you do, don’t make the career choice based on your housing situation.

[2008]

I hear you, yes I’m looking at the full cash-in, cash-out. Just meant that the write-off I can take living in the home (mort int +prop tax), versus the additional items I can write-off renting it out (depreciation, HOA, insurance), are offset by the rental income.

Before a reset, my carrying costs are 600/mo post tax implications. Plus whatever it costs me to live somewhere else if I rent this place out.

I’m just looking at the impact over the next 3 years before the reset- not to imply that I would sell in 3 years, but I’m trying to get a financial picture before and after the reset. Once it resets, we’re talking about a bump from $1700/mo to $2400/month in cash out.

[2008]

I hear you, yes I’m looking at the full cash-in, cash-out. Just meant that the write-off I can take living in the home (mort int +prop tax), versus the additional items I can write-off renting it out (depreciation, HOA, insurance), are offset by the rental income.

Before a reset, my carrying costs are 600/mo post tax implications. Plus whatever it costs me to live somewhere else if I rent this place out.

I’m just looking at the impact over the next 3 years before the reset- not to imply that I would sell in 3 years, but I’m trying to get a financial picture before and after the reset. Once it resets, we’re talking about a bump from $1700/mo to $2400/month in cash out.

[(former)FormerSanDiegan]

I ran a few quick numbers looking at the Schedule E – and my tax write-off is a few hundred dollars more if I stay in the place, versus renting it out as the rental income is greater than what I can write off for depreciation+HOA.

Not sure I completely follow.

Did you include the interest on the loan, the property taxes and the insurance ? These add up to considerably more than the rent, since you said you would be negative 500-700 per month. Add the HOA and depreciation and you are looking at a tax loss of probably 1200-1500 per month.

Sure you’re actual tax write off might be a bit less than if you lived in it. But, do not isolate payment of taxes as a single consideration. Compute all expenses after taxes for whatever scenarios you are considering.

E.g. – If you live in the unit and continue to pay 2000 per month and 1700 is deductible, living in the unit might cost you $1400 per month after taxes (assume 35% in tax relief, might be less). If you rent it out for $1K per month, and you have a tax loss of 1K per month (including depreciation), you have an after-tax negative cash flow of about 700 minus taxes on 1K, let’s say $350. So your after tax monthly carrying costs are 350 per month.

Again, consider everything (cash in, cash out, including income and taxes) for a complete picture. Sure you would have a somewhat lower tax break because of the 1K per momth income. But don’t ignore the fact that you would be getting the additional 1K per month of income.

Also, I want to emphasize that if your hold-and-rent strategy is based on trying to sell within the next 3 years, you might as well sell it today.

[(former)FormerSanDiegan]

I ran a few quick numbers looking at the Schedule E – and my tax write-off is a few hundred dollars more if I stay in the place, versus renting it out as the rental income is greater than what I can write off for depreciation+HOA.

Not sure I completely follow.

Did you include the interest on the loan, the property taxes and the insurance ? These add up to considerably more than the rent, since you said you would be negative 500-700 per month. Add the HOA and depreciation and you are looking at a tax loss of probably 1200-1500 per month.

Sure you’re actual tax write off might be a bit less than if you lived in it. But, do not isolate payment of taxes as a single consideration. Compute all expenses after taxes for whatever scenarios you are considering.

E.g. – If you live in the unit and continue to pay 2000 per month and 1700 is deductible, living in the unit might cost you $1400 per month after taxes (assume 35% in tax relief, might be less). If you rent it out for $1K per month, and you have a tax loss of 1K per month (including depreciation), you have an after-tax negative cash flow of about 700 minus taxes on 1K, let’s say $350. So your after tax monthly carrying costs are 350 per month.

Again, consider everything (cash in, cash out, including income and taxes) for a complete picture. Sure you would have a somewhat lower tax break because of the 1K per momth income. But don’t ignore the fact that you would be getting the additional 1K per month of income.

Also, I want to emphasize that if your hold-and-rent strategy is based on trying to sell within the next 3 years, you might as well sell it today.

[2008]

FormerSanDiegan –

You can write off more things on a rental. These include: depreciation, insurance, maintenance, and anything related to managing, marketing the rental, etc. Depreciation alone would likely be 10K per year in your case.

You deduct these against the rental income first. Any additional losses (up to 25K, if you make less than 100K) can be deducted against regular income.

I ran a few quick numbers looking at the Schedule E – and my tax write-off is a few hundred dollars more if I stay in the place, versus renting it out as the rental income is greater than what I can write off for depreciation+HOA.

So I’m back to the 70K I’ve already lost in value, plus any additional depreciation over the next 3 years.

[2008]

FormerSanDiegan –

You can write off more things on a rental. These include: depreciation, insurance, maintenance, and anything related to managing, marketing the rental, etc. Depreciation alone would likely be 10K per year in your case.

You deduct these against the rental income first. Any additional losses (up to 25K, if you make less than 100K) can be deducted against regular income.

I ran a few quick numbers looking at the Schedule E – and my tax write-off is a few hundred dollars more if I stay in the place, versus renting it out as the rental income is greater than what I can write off for depreciation+HOA.

So I’m back to the 70K I’ve already lost in value, plus any additional depreciation over the next 3 years.

[(former)FormerSanDiegan]

Bloat – regarding tax benefit from write-off as a primary residence owner (mortgage interest and taxes) versus rental income loss ( up to 25K)….are you saying that I can achieve a comparable or even greater tax deduction via rental loss as long as it does not exceed the 25K?

You can write off more things on a rental. These include: depreciation, insurance, maintenance, and anything related to managing, marketing the rental, etc. Depreciation alone would likely be 10K per year in your case.

You deduct these against the rental income first. Any additional losses (up to 25K, if you make less than 100K) can be deducted against regular income.

This 25K limit decreases by $1 per each dollar you make over 100K. It goes to zero at 150K.

Any losses you cannot deduct are carried forward for the next tax year as a carryover loss. You can use these in the future or take all your carryover losses when yo dispose of the property.

[(former)FormerSanDiegan]

Bloat – regarding tax benefit from write-off as a primary residence owner (mortgage interest and taxes) versus rental income loss ( up to 25K)….are you saying that I can achieve a comparable or even greater tax deduction via rental loss as long as it does not exceed the 25K?

You can write off more things on a rental. These include: depreciation, insurance, maintenance, and anything related to managing, marketing the rental, etc. Depreciation alone would likely be 10K per year in your case.

You deduct these against the rental income first. Any additional losses (up to 25K, if you make less than 100K) can be deducted against regular income.

This 25K limit decreases by $1 per each dollar you make over 100K. It goes to zero at 150K.

Any losses you cannot deduct are carried forward for the next tax year as a carryover loss. You can use these in the future or take all your carryover losses when yo dispose of the property.

[Bloat]

Likely a greater deduction,

As a homeowner your itemized deductions need to exceed the default standard deduction for a married couple ($10,300) before you see a benefit. You probably had Int/St.Taxes/RE Taxes totaling around $16k? (best guess), so the benefit would be a write off of the difference of $5700 (maybe $120/month savings for you?). Schedule E losses (rental property) reduces your top line income regardless of your deductions.

Many first time home buyers think they will get a big tax benefit, but with low starter interest rates and a low income they may not get any benefit at all.

[2008]

I’m single and my deductions last year were higher – primarily because my 80% loan is IO. 20% loan is P&I

[Bloat]

I’ve been looking at the post by “CMRJoe” (or maybe both of you) with similar numbers & situation, but he is married. Your deduction would be only $5150.

[Bloat]

I’ve been looking at the post by “CMRJoe” (or maybe both of you) with similar numbers & situation, but he is married. Your deduction would be only $5150.

[Bloat]

I’ve been looking at the post by “CMRJoe” (or maybe both of you) with similar numbers & situation, but he is married. Your deduction would be only $5150.

[2008]

I’m single and my deductions last year were higher – primarily because my 80% loan is IO. 20% loan is P&I

[2008]

I’m single and my deductions last year were higher – primarily because my 80% loan is IO. 20% loan is P&I

[Bloat]

Likely a greater deduction,

As a homeowner your itemized deductions need to exceed the default standard deduction for a married couple ($10,300) before you see a benefit. You probably had Int/St.Taxes/RE Taxes totaling around $16k? (best guess), so the benefit would be a write off of the difference of $5700 (maybe $120/month savings for you?). Schedule E losses (rental property) reduces your top line income regardless of your deductions.

Many first time home buyers think they will get a big tax benefit, but with low starter interest rates and a low income they may not get any benefit at all.

[Bloat]

Likely a greater deduction,

As a homeowner your itemized deductions need to exceed the default standard deduction for a married couple ($10,300) before you see a benefit. You probably had Int/St.Taxes/RE Taxes totaling around $16k? (best guess), so the benefit would be a write off of the difference of $5700 (maybe $120/month savings for you?). Schedule E losses (rental property) reduces your top line income regardless of your deductions.

Many first time home buyers think they will get a big tax benefit, but with low starter interest rates and a low income they may not get any benefit at all.

[2008]

Bloat – regarding tax benefit from write-off as a primary residence owner (mortgage interest and taxes) versus rental income loss ( up to 25K)….are you saying that I can achieve a comparable or even greater tax deduction via rental loss as long as it does not exceed the 25K?

Thanks

[2008]

Bloat – regarding tax benefit from write-off as a primary residence owner (mortgage interest and taxes) versus rental income loss ( up to 25K)….are you saying that I can achieve a comparable or even greater tax deduction via rental loss as long as it does not exceed the 25K?

Thanks

[Bloat]

I say take the new job and rent it out. I wouldn’t throw money at it to get out. Invest that money in a mutual fund, then revisit all in 2010. Being a landlord is good experience too (I didn’t say fun) and a one bedroom is easy to handle.

The quick math (monthly approx):
Interest $950
Taxes $225
HOA $150
Ins $ 25
Depn $800
Tax deductable total: $2150 (x 25% = $500 savings)
Prin $350 (not an expense)

Real monthly carrying cost = $850.

Rent (est) = $1000 (incudes 15% vacancy and expense allowance) covers the real cost, plus.

Not a good investment, but what’s done is done. Rents are likely to be stable and good areas like RB will rise over time. Getting a good tenant is key along with low interest rates.

[Bloat]

I say take the new job and rent it out. I wouldn’t throw money at it to get out. Invest that money in a mutual fund, then revisit all in 2010. Being a landlord is good experience too (I didn’t say fun) and a one bedroom is easy to handle.

The quick math (monthly approx):
Interest $950
Taxes $225
HOA $150
Ins $ 25
Depn $800
Tax deductable total: $2150 (x 25% = $500 savings)
Prin $350 (not an expense)

Real monthly carrying cost = $850.

Rent (est) = $1000 (incudes 15% vacancy and expense allowance) covers the real cost, plus.

Not a good investment, but what’s done is done. Rents are likely to be stable and good areas like RB will rise over time. Getting a good tenant is key along with low interest rates.

[(former)FormerSanDiegan]

2008 – OK. Since you have good credit and increasing income you have to weigh the potential future prospect of losses and carrying costs versus the guaranteed loss of selling now in the weakest market in over a decade.

Your property is already down 25%. What’s the opportunity cost of spending the 70K to unload the property versus spreading that out via negative income over the next decade ?
Assuming you make less than 150K, you’ll get a decent tax break on the rental loss. Including depreciation, I’m guessing you’ll likely get a tax loss of about 16-18K per year, saving you up to about 6K in taxes. (Depreciation of a 275K condo would equate to 10K per year in depreciation loss for tax purposes).

If your loan were a fixed rate loan and you were negative $500 per month as a rental I would recommend keeping the property at this point. The problem is that you do not know what your payments will be in 2010. You need to know this and project out what it would likely be.

The worst thing to do in my opinion would be to keep it for now, then unload it in 2010 when your payment resets and you can’t afford the escalated payment at a point when the market is near its lows another 10 or 15 % below today’s value.

[(former)FormerSanDiegan]

2008 – OK. Since you have good credit and increasing income you have to weigh the potential future prospect of losses and carrying costs versus the guaranteed loss of selling now in the weakest market in over a decade.

Your property is already down 25%. What’s the opportunity cost of spending the 70K to unload the property versus spreading that out via negative income over the next decade ?
Assuming you make less than 150K, you’ll get a decent tax break on the rental loss. Including depreciation, I’m guessing you’ll likely get a tax loss of about 16-18K per year, saving you up to about 6K in taxes. (Depreciation of a 275K condo would equate to 10K per year in depreciation loss for tax purposes).

If your loan were a fixed rate loan and you were negative $500 per month as a rental I would recommend keeping the property at this point. The problem is that you do not know what your payments will be in 2010. You need to know this and project out what it would likely be.

The worst thing to do in my opinion would be to keep it for now, then unload it in 2010 when your payment resets and you can’t afford the escalated payment at a point when the market is near its lows another 10 or 15 % below today’s value.

[unbiasedobserver]

CMRJoe, you said you thought 275K was a good deal for a 1BR condo. As I would like to try to understand what was going on in people’s minds a few years ago, please clarify:

Did you think 275K was a good deal because that’s what 1BR condos are worth, or did you think 275K was a good deal because you would be selling it for 400K in 2 years?

I sold a 1BR condo in the early 90’s for 29K. That plus some inflation is about what a 1BR condo is worth.

[blackbox]

Well, what did you expect, afterall CMRjoe called it the real estate game. I guess when you’ve never seen real estate prices go down, it all starts becoming a game……..
Well, game over, live and learn……..

275K for a 1 bedroom condo, that is what a commom/run in the mill single family house should cost in most San diego counties.
haha, amazing what some people will do when it starts becoming a game to them. Kiss your down payment goodbye, and thank you for playing!

[blackbox]

Well, what did you expect, afterall CMRjoe called it the real estate game. I guess when you’ve never seen real estate prices go down, it all starts becoming a game……..
Well, game over, live and learn……..

275K for a 1 bedroom condo, that is what a commom/run in the mill single family house should cost in most San diego counties.
haha, amazing what some people will do when it starts becoming a game to them. Kiss your down payment goodbye, and thank you for playing!

[blackbox]

Well, what did you expect, afterall CMRjoe called it the real estate game. I guess when you’ve never seen real estate prices go down, it all starts becoming a game……..
Well, game over, live and learn……..

275K for a 1 bedroom condo, that is what a commom/run in the mill single family house should cost in most San diego counties.
haha, amazing what some people will do when it starts becoming a game to them. Kiss your down payment goodbye, and thank you for playing!

[4plexowner]

I’m not following your rationale – I’m expecting the market to bottom in 2012 so holding to sell at that point doesn’t make sense (from my perspective) – your $70K loss today is likely to be as much as twice that in 2012

1bdrm and studio condos are just about worthless from an investment standpoint – a 2 brdrm mobile home is probably a better investment

it is possible that your condo will NEVER be worth what you paid for it – assuming that the market will ever get back to 2005 levels is a fools’ bet

[2008]

4plexowner – look I’m screwed any way you look at it, I’m trying to figure out how to minimize the pain, so I’m looking at taking the obvious loss today, versus writing off the loss from rental over the next decade as FormerSD suggested. Or the next 5 years. Not buying into any rationale at this point, just trying to understand the best route to go. I do not expect my condo to go back to 2005 values.

What do you suggest I do?

[(former)FormerSanDiegan]

2008 – After 5 years your loss on monthly carrying costs is about 42K. But you still have the 70K loss as well as any additional loss/gain in value over the next 5 years. (I’m guessing another 15% loss or about another 30K).

So, you can either take a guaranteed 70K hit now, or gamble and take a 70K +/- any additional depreciation, plus another 42K loss (plus about 28 K reduction in taxes) over 5 years.

I think this is a bad 5-year bet. If you are likely to sell in 5 years, then you ought to sell now. If you plan to hold for 10 years or more, however, it would probably work out OK.

Also, if you have sufficient assets (e.g. 70K) to sell now and pay the loss, then you probably could also handle the risk of carrying this as a rental.

[(former)FormerSanDiegan]

I sold a 1BR condo in the early 90’s for 29K.

OOOps. So, we should take your advice ?

I would pay 125-150K for a unit that rents for $1000/ month.
Unless we had 10% inflation the last 16 years I don’t think 29K plus inflation from the early 1990’s gets you there.

[(former)FormerSanDiegan]

assuming that the market will ever get back to 2005 levels is a fools’ bet

Ever ?

If prices revert to 1997 levels (previous bottom), plus inflation when would we get to 2005 prices ?

[JWM in SD]

“If prices revert to 1997 levels (previous bottom), plus inflation when would we get to 2005 prices?”

Who knows, could be 5 years could 15 years. That is the problem with RE right now. The risk of it being illiquid for long time is too high given the current macro-econ picture.

[(former)FormerSanDiegan]

Who knows, could be 5 years could 15 years. That is the problem with RE right now. The risk of it being illiquid for long time is too high given the current macro-econ picture.
I agree it could be a very long time. At 12 months supply or more methinks RE is already illiquid. My guess is that those considering selling right now in San Diego will take up to a year to sell their property and will be selling about 15% below what they think today’s market value is.
I would also venture to guess that those closing escrow one year from now will be within 10% of the market bottom in terms of price.
Just my opinion.

[(former)FormerSanDiegan]

Who knows, could be 5 years could 15 years. That is the problem with RE right now. The risk of it being illiquid for long time is too high given the current macro-econ picture.
I agree it could be a very long time. At 12 months supply or more methinks RE is already illiquid. My guess is that those considering selling right now in San Diego will take up to a year to sell their property and will be selling about 15% below what they think today’s market value is.
I would also venture to guess that those closing escrow one year from now will be within 10% of the market bottom in terms of price.
Just my opinion.

[(former)FormerSanDiegan]

Who knows, could be 5 years could 15 years. That is the problem with RE right now. The risk of it being illiquid for long time is too high given the current macro-econ picture.
I agree it could be a very long time. At 12 months supply or more methinks RE is already illiquid. My guess is that those considering selling right now in San Diego will take up to a year to sell their property and will be selling about 15% below what they think today’s market value is.
I would also venture to guess that those closing escrow one year from now will be within 10% of the market bottom in terms of price.
Just my opinion.

[JWM in SD]

“If prices revert to 1997 levels (previous bottom), plus inflation when would we get to 2005 prices?”

Who knows, could be 5 years could 15 years. That is the problem with RE right now. The risk of it being illiquid for long time is too high given the current macro-econ picture.

[JWM in SD]

“If prices revert to 1997 levels (previous bottom), plus inflation when would we get to 2005 prices?”

Who knows, could be 5 years could 15 years. That is the problem with RE right now. The risk of it being illiquid for long time is too high given the current macro-econ picture.

[(former)FormerSanDiegan]

assuming that the market will ever get back to 2005 levels is a fools’ bet

Ever ?

If prices revert to 1997 levels (previous bottom), plus inflation when would we get to 2005 prices ?

[(former)FormerSanDiegan]

assuming that the market will ever get back to 2005 levels is a fools’ bet

Ever ?

If prices revert to 1997 levels (previous bottom), plus inflation when would we get to 2005 prices ?

[(former)FormerSanDiegan]

I sold a 1BR condo in the early 90’s for 29K.

OOOps. So, we should take your advice ?

I would pay 125-150K for a unit that rents for $1000/ month.
Unless we had 10% inflation the last 16 years I don’t think 29K plus inflation from the early 1990’s gets you there.

[(former)FormerSanDiegan]

I sold a 1BR condo in the early 90’s for 29K.

OOOps. So, we should take your advice ?

I would pay 125-150K for a unit that rents for $1000/ month.
Unless we had 10% inflation the last 16 years I don’t think 29K plus inflation from the early 1990’s gets you there.

[2008]

Thanks for your suggestion FormerSanDiegan, a lot to think about and consider. I am hoping that somewhere over the next 3-5 years there will be a slight upturn to sell, versus just down down down. Its tough to consider the condo losing between 30-50% of its value from 2005, but no point in crying over split milk now.

[(former)FormerSanDiegan]

I am hoping that somewhere over the next 3-5 years there will be a slight upturn to sell, versus just down down down. This is too short a time frame in my opinion. If this is your plan I would put it on the market at the end of January. (I would normally suggest to do so right now, but I think your chances to sell between now and the end of January are about zero).

[patientlywaiting]

2008 – After 5 years your loss on monthly carrying costs is about 42K. But you still have the 70K loss as well as any additional loss/gain in value over the next 5 years. (I'm guessing another 15% loss or about another 30K).

I think that the key to consider here is in 5 years, you'll STILL HAVE THE $70K LOSS of value + your carrying cost loss. 

[patientlywaiting]

2008 – After 5 years your loss on monthly carrying costs is about 42K. But you still have the 70K loss as well as any additional loss/gain in value over the next 5 years. (I'm guessing another 15% loss or about another 30K).

I think that the key to consider here is in 5 years, you'll STILL HAVE THE $70K LOSS of value + your carrying cost loss. 

[patientlywaiting]

2008 – After 5 years your loss on monthly carrying costs is about 42K. But you still have the 70K loss as well as any additional loss/gain in value over the next 5 years. (I'm guessing another 15% loss or about another 30K).

I think that the key to consider here is in 5 years, you'll STILL HAVE THE $70K LOSS of value + your carrying cost loss. 

[(former)FormerSanDiegan]

I am hoping that somewhere over the next 3-5 years there will be a slight upturn to sell, versus just down down down. This is too short a time frame in my opinion. If this is your plan I would put it on the market at the end of January. (I would normally suggest to do so right now, but I think your chances to sell between now and the end of January are about zero).

[(former)FormerSanDiegan]

I am hoping that somewhere over the next 3-5 years there will be a slight upturn to sell, versus just down down down. This is too short a time frame in my opinion. If this is your plan I would put it on the market at the end of January. (I would normally suggest to do so right now, but I think your chances to sell between now and the end of January are about zero).

[2008]

Thanks for your suggestion FormerSanDiegan, a lot to think about and consider. I am hoping that somewhere over the next 3-5 years there will be a slight upturn to sell, versus just down down down. Its tough to consider the condo losing between 30-50% of its value from 2005, but no point in crying over split milk now.

[2008]

Thanks for your suggestion FormerSanDiegan, a lot to think about and consider. I am hoping that somewhere over the next 3-5 years there will be a slight upturn to sell, versus just down down down. Its tough to consider the condo losing between 30-50% of its value from 2005, but no point in crying over split milk now.

[(former)FormerSanDiegan]

2008 – After 5 years your loss on monthly carrying costs is about 42K. But you still have the 70K loss as well as any additional loss/gain in value over the next 5 years. (I’m guessing another 15% loss or about another 30K).

So, you can either take a guaranteed 70K hit now, or gamble and take a 70K +/- any additional depreciation, plus another 42K loss (plus about 28 K reduction in taxes) over 5 years.

I think this is a bad 5-year bet. If you are likely to sell in 5 years, then you ought to sell now. If you plan to hold for 10 years or more, however, it would probably work out OK.

Also, if you have sufficient assets (e.g. 70K) to sell now and pay the loss, then you probably could also handle the risk of carrying this as a rental.

[(former)FormerSanDiegan]

2008 – After 5 years your loss on monthly carrying costs is about 42K. But you still have the 70K loss as well as any additional loss/gain in value over the next 5 years. (I’m guessing another 15% loss or about another 30K).

So, you can either take a guaranteed 70K hit now, or gamble and take a 70K +/- any additional depreciation, plus another 42K loss (plus about 28 K reduction in taxes) over 5 years.

I think this is a bad 5-year bet. If you are likely to sell in 5 years, then you ought to sell now. If you plan to hold for 10 years or more, however, it would probably work out OK.

Also, if you have sufficient assets (e.g. 70K) to sell now and pay the loss, then you probably could also handle the risk of carrying this as a rental.

[2008]

4plexowner – look I’m screwed any way you look at it, I’m trying to figure out how to minimize the pain, so I’m looking at taking the obvious loss today, versus writing off the loss from rental over the next decade as FormerSD suggested. Or the next 5 years. Not buying into any rationale at this point, just trying to understand the best route to go. I do not expect my condo to go back to 2005 values.

What do you suggest I do?

[2008]

4plexowner – look I’m screwed any way you look at it, I’m trying to figure out how to minimize the pain, so I’m looking at taking the obvious loss today, versus writing off the loss from rental over the next decade as FormerSD suggested. Or the next 5 years. Not buying into any rationale at this point, just trying to understand the best route to go. I do not expect my condo to go back to 2005 values.

What do you suggest I do?

[4plexowner]

I’m not following your rationale – I’m expecting the market to bottom in 2012 so holding to sell at that point doesn’t make sense (from my perspective) – your $70K loss today is likely to be as much as twice that in 2012

1bdrm and studio condos are just about worthless from an investment standpoint – a 2 brdrm mobile home is probably a better investment

it is possible that your condo will NEVER be worth what you paid for it – assuming that the market will ever get back to 2005 levels is a fools’ bet

[4plexowner]

I’m not following your rationale – I’m expecting the market to bottom in 2012 so holding to sell at that point doesn’t make sense (from my perspective) – your $70K loss today is likely to be as much as twice that in 2012

1bdrm and studio condos are just about worthless from an investment standpoint – a 2 brdrm mobile home is probably a better investment

it is possible that your condo will NEVER be worth what you paid for it – assuming that the market will ever get back to 2005 levels is a fools’ bet

[Anonymous]

Re:
“CMRJoe, you said you thought 275K was a good deal for a 1BR condo. As I would like to try to understand what was going on in people’s minds a few years ago, please clarify:
Did you think 275K was a good deal because that’s what 1BR condos are worth, or did you think 275K was a good deal because you would be selling it for 400K in 2 years?”

I thought that was a good deal because of how much everything was. A 2 BR in the same complex was 350k. I never bought it with the idea that it would be worth 400k, I never thought the condo would go down significantly in value though. We were paying 1200 in rent at the time, so we thought if we could buy a place we would be better off long term.

Live and learn

[Anonymous]

Re:
“CMRJoe, you said you thought 275K was a good deal for a 1BR condo. As I would like to try to understand what was going on in people’s minds a few years ago, please clarify:
Did you think 275K was a good deal because that’s what 1BR condos are worth, or did you think 275K was a good deal because you would be selling it for 400K in 2 years?”

I thought that was a good deal because of how much everything was. A 2 BR in the same complex was 350k. I never bought it with the idea that it would be worth 400k, I never thought the condo would go down significantly in value though. We were paying 1200 in rent at the time, so we thought if we could buy a place we would be better off long term.

Live and learn

[Anonymous]

Re:
“CMRJoe, you said you thought 275K was a good deal for a 1BR condo. As I would like to try to understand what was going on in people’s minds a few years ago, please clarify:
Did you think 275K was a good deal because that’s what 1BR condos are worth, or did you think 275K was a good deal because you would be selling it for 400K in 2 years?”

I thought that was a good deal because of how much everything was. A 2 BR in the same complex was 350k. I never bought it with the idea that it would be worth 400k, I never thought the condo would go down significantly in value though. We were paying 1200 in rent at the time, so we thought if we could buy a place we would be better off long term.

Live and learn

[unbiasedobserver]

CMRJoe, you said you thought 275K was a good deal for a 1BR condo. As I would like to try to understand what was going on in people’s minds a few years ago, please clarify:

Did you think 275K was a good deal because that’s what 1BR condos are worth, or did you think 275K was a good deal because you would be selling it for 400K in 2 years?

I sold a 1BR condo in the early 90’s for 29K. That plus some inflation is about what a 1BR condo is worth.

[unbiasedobserver]

CMRJoe, you said you thought 275K was a good deal for a 1BR condo. As I would like to try to understand what was going on in people’s minds a few years ago, please clarify:

Did you think 275K was a good deal because that’s what 1BR condos are worth, or did you think 275K was a good deal because you would be selling it for 400K in 2 years?

I sold a 1BR condo in the early 90’s for 29K. That plus some inflation is about what a 1BR condo is worth.

[Anonymous]

I didnt even think about that, great idea.

The CHFA loan IS assumable, the person must meet the requirements for CHFA though. The main requirement is that they are a first time home buyer, and make less than 80k combined or so.

So yeah, if I could find the right buyer, I might not have to sell at a loss afterall. Very cool.

[Anonymous]

I didnt even think about that, great idea.

The CHFA loan IS assumable, the person must meet the requirements for CHFA though. The main requirement is that they are a first time home buyer, and make less than 80k combined or so.

So yeah, if I could find the right buyer, I might not have to sell at a loss afterall. Very cool.

[Raybyrnes]

CMRJoe
If you want to find the right buyer I would contact a few of the people at the san diego Housing Commission. They ahve a lot of first time homebuyers who sometime make too much money to qualify for Moderate income Housing. Your unit with the CHFA loan would present a good alternative. They could be a gret source of referrals. I would geta few names and write them a letter. That, or stop by and let them know what you are looking to do. Again, this is win win. They are not realators they are city employees looking to help families. Your CHFA loan is designed to help families. Work together and all could make out. If this advice works out make a donation to a charitable organization. It will bring good karma.

[Raybyrnes]

CMRJoe
If you want to find the right buyer I would contact a few of the people at the san diego Housing Commission. They ahve a lot of first time homebuyers who sometime make too much money to qualify for Moderate income Housing. Your unit with the CHFA loan would present a good alternative. They could be a gret source of referrals. I would geta few names and write them a letter. That, or stop by and let them know what you are looking to do. Again, this is win win. They are not realators they are city employees looking to help families. Your CHFA loan is designed to help families. Work together and all could make out. If this advice works out make a donation to a charitable organization. It will bring good karma.

[Raybyrnes]

CMRJoe
If you want to find the right buyer I would contact a few of the people at the san diego Housing Commission. They ahve a lot of first time homebuyers who sometime make too much money to qualify for Moderate income Housing. Your unit with the CHFA loan would present a good alternative. They could be a gret source of referrals. I would geta few names and write them a letter. That, or stop by and let them know what you are looking to do. Again, this is win win. They are not realators they are city employees looking to help families. Your CHFA loan is designed to help families. Work together and all could make out. If this advice works out make a donation to a charitable organization. It will bring good karma.

[Raybyrnes]

CMRJoe

I would look and see if the CHFA loan is an assumable mortgate. If you look to sell it could provide a value add and get you more money for your home. Run the numbers and see what it is worth to save 1.5% on a mortgage. If someone is willing to pay 235k but have to take out a 6.5% mortgage they ahve $1485 monthly payment. With your 4.5% rate you could charge up to 293K and the person would have the same payment. This give you a nice bargaining chip if you find the right buyer. Good Luck

[Raybyrnes]

CMRJoe

I would look and see if the CHFA loan is an assumable mortgate. If you look to sell it could provide a value add and get you more money for your home. Run the numbers and see what it is worth to save 1.5% on a mortgage. If someone is willing to pay 235k but have to take out a 6.5% mortgage they ahve $1485 monthly payment. With your 4.5% rate you could charge up to 293K and the person would have the same payment. This give you a nice bargaining chip if you find the right buyer. Good Luck

[Anonymous]

Long time lurker, first time poster. I just want to say, this blog is outstanding, I’ve enjoyed reading commentary on here for months, but have been shy to post. I’m only 25, and new to the real estate game, this site has taught me so much.

I am in a similar situation. My wife and I bought a condo in Carmel Mountain Ranch about 2 1/2 yrs ago. Wish I had discovered piggington before then, but thats in the past! We bought a 1 BR condo for 275k. We got a govt CHFA loan which is 30yr fixed at 4.5%. We put 20% down also. The place seemed like a great deal at the time, but now Im seeing an identical unit listed for short sale at 235k….ugh

My wife and I would like to start a family at some point, and dont know what to do with our condo. After reading this site, I think its best that we rent a house and rent our condo for several years until the market improves. I dont know if its even possible to rent a place with a CHFA loan, so we may have to refi. Our combined income now is about 95k with great credit. Our mortgage with $200 HOA is about 1600. So most likely looking at a 500 or 600 dollar expense to rent out

We are looking to move sometime summer/fall 2008. What do you guys think?

PS: sorry to hijack your thread 2008, I just dont want to post a new topic thats similar.

[Anonymous]

Long time lurker, first time poster. I just want to say, this blog is outstanding, I’ve enjoyed reading commentary on here for months, but have been shy to post. I’m only 25, and new to the real estate game, this site has taught me so much.

I am in a similar situation. My wife and I bought a condo in Carmel Mountain Ranch about 2 1/2 yrs ago. Wish I had discovered piggington before then, but thats in the past! We bought a 1 BR condo for 275k. We got a govt CHFA loan which is 30yr fixed at 4.5%. We put 20% down also. The place seemed like a great deal at the time, but now Im seeing an identical unit listed for short sale at 235k….ugh

My wife and I would like to start a family at some point, and dont know what to do with our condo. After reading this site, I think its best that we rent a house and rent our condo for several years until the market improves. I dont know if its even possible to rent a place with a CHFA loan, so we may have to refi. Our combined income now is about 95k with great credit. Our mortgage with $200 HOA is about 1600. So most likely looking at a 500 or 600 dollar expense to rent out

We are looking to move sometime summer/fall 2008. What do you guys think?

PS: sorry to hijack your thread 2008, I just dont want to post a new topic thats similar.

[djrobsd]

I feel everyone’s pain on this board. I bought in 2004 at the high, $345,000 for a 2br, 1 bath detached house with no yard (practically a condo, but not quite since it’s a PUD)… And I put about $25,000 in repairs and improvements to the property, and of course another 5k in closing costs… My ARM just reset, and I’ve had the property for sale for 3 months with no offers. It’s been a tough road waiting for someone to come buy my unit (i’m just trying to break even at this point), but I finally decided to cut my losses and rent it out last month for $1650. So, the reset on my mortgage has my payment at almost $3100 w/ property taxes, and so you can easilly see the deficiency between rent and actual monthly payment…

You have to weigh everything out, and I still am. Good credit says a lot. Today I walked into SD County Credit Union, and opened an account, refinanced my car loan, and transferred one of my high rate Visa cards to their lower rate card, all in a matter of over an hour, with no hastle or fuss. In fact, I only had to show my drivers license, and 1 paycheck stub and the deal was done. That’s the beauty of having good credit, you can get stuff done with minimal hastle.

On the other hand, the temptation to walk away from my house is weighing heavily in my head… Good credit versus not having that huge burden, which do you choose?

My suggestion, which actually comes from sdrealtor, is to sit down and make a spreadsheet, and figure out ALL your options and the costs associated with those options. You can bang your head against all the wall all you want, but once you put it all down on paper, it makes it much easier to see what the best thing to do.

Don’t forget to include your tax implications. If you take an $800 a month loss, depending on what tax bracket you’re in, you’re probably looking at $350 less in taxes, so you can subtract that from your costs. This of course, assumes you ALREADY have adjusted your W2 at work to compensate for these expenses, some people claim 0 on their W2 even when they’re paying $3000 in mortgage interest a month and then get a lot back on their taxes, for me, I go the other way, and claim 9 so I can immediately see the money back, that they would have to refund me anyway when I deduct the mortgage interest.

Best wishes in whatever you decide to do, and be sure to share with all of us your story.

[4plexowner]

Bloat – are you saying that 2008 can take his entire $2K/mo loss as a writeoff? ($2K/mo loss * 27%ish tax bracket = $500/mo tax savings?)

I don’t think that is correct

As a rental the condo’s expenses, depreciation and income go onto Schedule E not Schedule A – the benefits from negative income on Schedule E are significantly less than the same deduction on Schedule A – and, as I pointed out in another thread, if you have W-2 income that puts you into AMT territory the tax benefits from losses on Schedule E are reduced even more because the bennies from Sched E are offset by increases in AMT

I’ll say it once again: be VERY conservative when making buy/sell decisions based on expected tax bennies – if the deal really hinges on the tax considerations go to a CPA and work through some real numbers

[Bloat]

I believe up to a $25k Schedule E loss carries to the 1040 if income is below $100k, and 50% is allowed between $100k and $150k. Wasn’t 2008’s income $90k?

I am a CPA with a couple of long held rentals on my Schedule E with a tiny loss that I don’t get to write off due to income. I’m rusty on the tax stuff, in fact I avoid it, so best to verify with a CPA who knows more than I.

To 2008, I say run a spreadsheet on it, get it confirmed by an accountant. If you use tax software (TurboTax, etc) run some estimates through the schedule E and see how it plays to the bottom line.

[4plexowner]

Bloat – I am probably basing my comments on having exceeded the $25K limit on losses (does ‘negative income’ sound any better?) – I was carrying some pretty hefty negative cashflow some years (what in the world was I thinking?)

[4plexowner]

Bloat – I am probably basing my comments on having exceeded the $25K limit on losses (does ‘negative income’ sound any better?) – I was carrying some pretty hefty negative cashflow some years (what in the world was I thinking?)

[4plexowner]

Bloat – I am probably basing my comments on having exceeded the $25K limit on losses (does ‘negative income’ sound any better?) – I was carrying some pretty hefty negative cashflow some years (what in the world was I thinking?)

[PorkmanDelardo]

I say ignore the pundits and walk away like all the other yahoos. What’s done is done. and you are well done, my friend. Burnt toast.
I post foreclosure notices all over the county. I will keep my eyes open for your notice and post with a sad thought in mind for you. I am not totally without empathy. Don’t shoot the messenger. However, I am a realist. You can survive a foreclosure and the bad credit that goes with it. Soon enough you will be able to jump back into the market, when prices are more reasonable and more experience under your belt. I feel your pain. Don’t prolong the agony. Porkman

[PorkmanDelardo]

I say ignore the pundits and walk away like all the other yahoos. What’s done is done. and you are well done, my friend. Burnt toast.
I post foreclosure notices all over the county. I will keep my eyes open for your notice and post with a sad thought in mind for you. I am not totally without empathy. Don’t shoot the messenger. However, I am a realist. You can survive a foreclosure and the bad credit that goes with it. Soon enough you will be able to jump back into the market, when prices are more reasonable and more experience under your belt. I feel your pain. Don’t prolong the agony. Porkman

[PorkmanDelardo]

I say ignore the pundits and walk away like all the other yahoos. What’s done is done. and you are well done, my friend. Burnt toast.
I post foreclosure notices all over the county. I will keep my eyes open for your notice and post with a sad thought in mind for you. I am not totally without empathy. Don’t shoot the messenger. However, I am a realist. You can survive a foreclosure and the bad credit that goes with it. Soon enough you will be able to jump back into the market, when prices are more reasonable and more experience under your belt. I feel your pain. Don’t prolong the agony. Porkman

[Bloat]

I believe up to a $25k Schedule E loss carries to the 1040 if income is below $100k, and 50% is allowed between $100k and $150k. Wasn’t 2008’s income $90k?

I am a CPA with a couple of long held rentals on my Schedule E with a tiny loss that I don’t get to write off due to income. I’m rusty on the tax stuff, in fact I avoid it, so best to verify with a CPA who knows more than I.

To 2008, I say run a spreadsheet on it, get it confirmed by an accountant. If you use tax software (TurboTax, etc) run some estimates through the schedule E and see how it plays to the bottom line.

[Bloat]

I believe up to a $25k Schedule E loss carries to the 1040 if income is below $100k, and 50% is allowed between $100k and $150k. Wasn’t 2008’s income $90k?

I am a CPA with a couple of long held rentals on my Schedule E with a tiny loss that I don’t get to write off due to income. I’m rusty on the tax stuff, in fact I avoid it, so best to verify with a CPA who knows more than I.

To 2008, I say run a spreadsheet on it, get it confirmed by an accountant. If you use tax software (TurboTax, etc) run some estimates through the schedule E and see how it plays to the bottom line.

[4plexowner]

Bloat – are you saying that 2008 can take his entire $2K/mo loss as a writeoff? ($2K/mo loss * 27%ish tax bracket = $500/mo tax savings?)

I don’t think that is correct

As a rental the condo’s expenses, depreciation and income go onto Schedule E not Schedule A – the benefits from negative income on Schedule E are significantly less than the same deduction on Schedule A – and, as I pointed out in another thread, if you have W-2 income that puts you into AMT territory the tax benefits from losses on Schedule E are reduced even more because the bennies from Sched E are offset by increases in AMT

I’ll say it once again: be VERY conservative when making buy/sell decisions based on expected tax bennies – if the deal really hinges on the tax considerations go to a CPA and work through some real numbers

[4plexowner]

Bloat – are you saying that 2008 can take his entire $2K/mo loss as a writeoff? ($2K/mo loss * 27%ish tax bracket = $500/mo tax savings?)

I don’t think that is correct

As a rental the condo’s expenses, depreciation and income go onto Schedule E not Schedule A – the benefits from negative income on Schedule E are significantly less than the same deduction on Schedule A – and, as I pointed out in another thread, if you have W-2 income that puts you into AMT territory the tax benefits from losses on Schedule E are reduced even more because the bennies from Sched E are offset by increases in AMT

I’ll say it once again: be VERY conservative when making buy/sell decisions based on expected tax bennies – if the deal really hinges on the tax considerations go to a CPA and work through some real numbers

[Raybyrnes]

djrobsd

As a follow up “My suggestion, which actually comes from sdrealtor, is to sit down and make a spreadsheet, and figure out ALL your options and the costs associated with those options. You can bang your head against all the wall all you want, but once you put it all down on paper, it makes it much easier to see what the best thing to do.

If you are going to create a spreadsheet determine what path you re going to take before you put the spread sheet together. By this I mean if out come x exceeds outcome y then I sell. If on the other hand the data is the opposite then I will hold tight.

Too often you can put a spreadsheet together and it is an excercise of futility of you don’t use the data to give you the best possible outcome. If the oucome doesn’t conform to the way you feel it is easy to ratiionale away the outcome or to modify the data set to support your initial feelings.

[Raybyrnes]

djrobsd

As a follow up “My suggestion, which actually comes from sdrealtor, is to sit down and make a spreadsheet, and figure out ALL your options and the costs associated with those options. You can bang your head against all the wall all you want, but once you put it all down on paper, it makes it much easier to see what the best thing to do.

If you are going to create a spreadsheet determine what path you re going to take before you put the spread sheet together. By this I mean if out come x exceeds outcome y then I sell. If on the other hand the data is the opposite then I will hold tight.

Too often you can put a spreadsheet together and it is an excercise of futility of you don’t use the data to give you the best possible outcome. If the oucome doesn’t conform to the way you feel it is easy to ratiionale away the outcome or to modify the data set to support your initial feelings.

[Raybyrnes]

djrobsd

As a follow up “My suggestion, which actually comes from sdrealtor, is to sit down and make a spreadsheet, and figure out ALL your options and the costs associated with those options. You can bang your head against all the wall all you want, but once you put it all down on paper, it makes it much easier to see what the best thing to do.

If you are going to create a spreadsheet determine what path you re going to take before you put the spread sheet together. By this I mean if out come x exceeds outcome y then I sell. If on the other hand the data is the opposite then I will hold tight.

Too often you can put a spreadsheet together and it is an excercise of futility of you don’t use the data to give you the best possible outcome. If the oucome doesn’t conform to the way you feel it is easy to ratiionale away the outcome or to modify the data set to support your initial feelings.

[djrobsd]

I feel everyone’s pain on this board. I bought in 2004 at the high, $345,000 for a 2br, 1 bath detached house with no yard (practically a condo, but not quite since it’s a PUD)… And I put about $25,000 in repairs and improvements to the property, and of course another 5k in closing costs… My ARM just reset, and I’ve had the property for sale for 3 months with no offers. It’s been a tough road waiting for someone to come buy my unit (i’m just trying to break even at this point), but I finally decided to cut my losses and rent it out last month for $1650. So, the reset on my mortgage has my payment at almost $3100 w/ property taxes, and so you can easilly see the deficiency between rent and actual monthly payment…

You have to weigh everything out, and I still am. Good credit says a lot. Today I walked into SD County Credit Union, and opened an account, refinanced my car loan, and transferred one of my high rate Visa cards to their lower rate card, all in a matter of over an hour, with no hastle or fuss. In fact, I only had to show my drivers license, and 1 paycheck stub and the deal was done. That’s the beauty of having good credit, you can get stuff done with minimal hastle.

On the other hand, the temptation to walk away from my house is weighing heavily in my head… Good credit versus not having that huge burden, which do you choose?

My suggestion, which actually comes from sdrealtor, is to sit down and make a spreadsheet, and figure out ALL your options and the costs associated with those options. You can bang your head against all the wall all you want, but once you put it all down on paper, it makes it much easier to see what the best thing to do.

Don’t forget to include your tax implications. If you take an $800 a month loss, depending on what tax bracket you’re in, you’re probably looking at $350 less in taxes, so you can subtract that from your costs. This of course, assumes you ALREADY have adjusted your W2 at work to compensate for these expenses, some people claim 0 on their W2 even when they’re paying $3000 in mortgage interest a month and then get a lot back on their taxes, for me, I go the other way, and claim 9 so I can immediately see the money back, that they would have to refund me anyway when I deduct the mortgage interest.

Best wishes in whatever you decide to do, and be sure to share with all of us your story.

[djrobsd]

I feel everyone’s pain on this board. I bought in 2004 at the high, $345,000 for a 2br, 1 bath detached house with no yard (practically a condo, but not quite since it’s a PUD)… And I put about $25,000 in repairs and improvements to the property, and of course another 5k in closing costs… My ARM just reset, and I’ve had the property for sale for 3 months with no offers. It’s been a tough road waiting for someone to come buy my unit (i’m just trying to break even at this point), but I finally decided to cut my losses and rent it out last month for $1650. So, the reset on my mortgage has my payment at almost $3100 w/ property taxes, and so you can easilly see the deficiency between rent and actual monthly payment…

You have to weigh everything out, and I still am. Good credit says a lot. Today I walked into SD County Credit Union, and opened an account, refinanced my car loan, and transferred one of my high rate Visa cards to their lower rate card, all in a matter of over an hour, with no hastle or fuss. In fact, I only had to show my drivers license, and 1 paycheck stub and the deal was done. That’s the beauty of having good credit, you can get stuff done with minimal hastle.

On the other hand, the temptation to walk away from my house is weighing heavily in my head… Good credit versus not having that huge burden, which do you choose?

My suggestion, which actually comes from sdrealtor, is to sit down and make a spreadsheet, and figure out ALL your options and the costs associated with those options. You can bang your head against all the wall all you want, but once you put it all down on paper, it makes it much easier to see what the best thing to do.

Don’t forget to include your tax implications. If you take an $800 a month loss, depending on what tax bracket you’re in, you’re probably looking at $350 less in taxes, so you can subtract that from your costs. This of course, assumes you ALREADY have adjusted your W2 at work to compensate for these expenses, some people claim 0 on their W2 even when they’re paying $3000 in mortgage interest a month and then get a lot back on their taxes, for me, I go the other way, and claim 9 so I can immediately see the money back, that they would have to refund me anyway when I deduct the mortgage interest.

Best wishes in whatever you decide to do, and be sure to share with all of us your story.

[4plexowner]

2008 – are you familiar with rent-to-own?

Google “Residential Lease with Option to Purchase” and “Rent To Own” and you will find plenty of stuff to look at

I’ve considered doing a rent-to-own but I never had to – I say ‘had to’ because I consider rent-to-own as a last ditch effort and not really a win-win situation in most cases

From what I’ve read only 20% of rent-to-own situations result in a purchase. The other 80% result in a tenant who, for whatever reason, doesn’t purchase the property and loses any benefits the option to purchase entitled him to.

In this market I think the odds of a rent-to-own resulting in a purchase are even less than 20/80 so what might you gain by doing this?

You get a higher rent – the rent-to-own tenant pays an above-market rate with the agreement that some of that money will be applied as down payment towards the purchase of the condo

Your tenant takes better care of your place because they think they will ultimately own it

At the end of the option period (two years? three?) you still own the condo but have to deal with a frustrated (and angry?) tenant.

[the dingo]

Check out acornhousing.org this is a non profit group that I just got a loan from. Believe it or not I got the following loan. 475k 100% financing, no pmi on a 40 year fixed with the first 10 years interest only. It is not an 80/20 it is all on one loan.
Here are the stipulations. You can’t make over 90k per year. You must attend two 3 hour counseling classes. It is full doc. There is also a program called the cadat, where the state of california pays three points to lower your rate even further. Also, this loan is not based on credit score at all. The only stipulation is that you cannot have a late payment in the last 12 months. I know this sounds amazing, and it is. With out it I could not have gotten my new home. The loans are serviced by BofA, so it is solid. They also do refi’s My loan officer was a gal call cori Fusselman.

[Raybyrnes]

dingo
You didn’t pay PMI but you did pay a 1.5 origination fee on the loan that went to pay mortgage insurantce. You may have missed that but it is built into the cost of the loan. It was through the Calhafa program and Acorn simply put you in contact wiht one of the lenders affiliated wiht the program . If you doubt what I am saying you can visit http://www.calhfa.ca.gov and look under the unterest rates for the 40 year 10 year IO program.

40-Year Fixed Mortgage

This conventional first mortgage loan program is designed to enhance affordability and homeownership opportunities by offering a below market, fixed interest rate . This program is intended for first-time homebuyers who meet specified low and moderate income limits and who are purchasing a new or existing home anywhere in California.

How The Program Works

This program offers up to 100% financing of the home sales price within CalHFA’s defined sales price limits. This first mortgage loan may also be combined with CalHFA junior loan programs (except CHAP), for down payment and closing cost assistance, to make owning your first home more affordable.

[SD Realtor]

Rayb thanks for that clarification. Isn’t there also a silent second that you can get with a CalHFA?

SD Realtor

[Raybyrnes]

SD Realtor

Yep

The California Homebuyer’s Downpayment Assistance Program (CHDAP) is designed to provide a deferred payment, simple interest rate junior loan of an amount up to three percent (3%) of the sales price or appraised value, whichever is less. The junior loan may be used for down payment or closing costs and may be combined with a CalHFA or non-CalHFA conventional or government first mortgage loan.

DOWN PAYMENT ASSISTANCE PROGRAMS

Term matches term of first mortgage

High Cost Area Home Purchase Assistance Program (HiCAP)4
6.750%

CalHFA Housing Assistance Program (CHAP)
6.750%

California Homebuyer’s Downpayment Assistance Program (CHDAP)
3.000%

Extra Credit Teacher Program (ECTP)
5.000%

There use to be a program called the Nehimiah program that would allow you to go over 100% with participating lender but I believe the program has been eliminated and is being investigated as to the legality of it.

[2008]

Thanks everyone. I have sat down and looked at some of the prelim numbers – a friend who is a REIT analyst sent me a cash flow model that models out my loan over 30 years, plus looks at tax implications, rental impact, etc. Last night looked at what my payment will look like starting basically in 2011 when it resets at the end of 2010, less the tax savings. It does look like I am far better off just holding on to this place – either living in it myself – which until it resets, does not carry any negative holding costs, or if I were to rent it out and take the tax write off. It does get a lot uglier in terms of holding costs starting in 2011 if I cannot refi, but I need to look into this Calhafa program and find out what my options are there.

[SD Realtor]

Thanks for the info Rayb!

2008 good for you for doing a comprehensive analysis. Looking at all of the options and doing a good study of them is a diligent manuever. Note it does not lock you into any decision, it just gives you information.

SD Realtor

[SD Realtor]

Thanks for the info Rayb!

2008 good for you for doing a comprehensive analysis. Looking at all of the options and doing a good study of them is a diligent manuever. Note it does not lock you into any decision, it just gives you information.

SD Realtor

[SD Realtor]

Thanks for the info Rayb!

2008 good for you for doing a comprehensive analysis. Looking at all of the options and doing a good study of them is a diligent manuever. Note it does not lock you into any decision, it just gives you information.

SD Realtor

[2008]

Thanks everyone. I have sat down and looked at some of the prelim numbers – a friend who is a REIT analyst sent me a cash flow model that models out my loan over 30 years, plus looks at tax implications, rental impact, etc. Last night looked at what my payment will look like starting basically in 2011 when it resets at the end of 2010, less the tax savings. It does look like I am far better off just holding on to this place – either living in it myself – which until it resets, does not carry any negative holding costs, or if I were to rent it out and take the tax write off. It does get a lot uglier in terms of holding costs starting in 2011 if I cannot refi, but I need to look into this Calhafa program and find out what my options are there.

[2008]

Thanks everyone. I have sat down and looked at some of the prelim numbers – a friend who is a REIT analyst sent me a cash flow model that models out my loan over 30 years, plus looks at tax implications, rental impact, etc. Last night looked at what my payment will look like starting basically in 2011 when it resets at the end of 2010, less the tax savings. It does look like I am far better off just holding on to this place – either living in it myself – which until it resets, does not carry any negative holding costs, or if I were to rent it out and take the tax write off. It does get a lot uglier in terms of holding costs starting in 2011 if I cannot refi, but I need to look into this Calhafa program and find out what my options are there.

[Raybyrnes]

SD Realtor

Yep

The California Homebuyer’s Downpayment Assistance Program (CHDAP) is designed to provide a deferred payment, simple interest rate junior loan of an amount up to three percent (3%) of the sales price or appraised value, whichever is less. The junior loan may be used for down payment or closing costs and may be combined with a CalHFA or non-CalHFA conventional or government first mortgage loan.

DOWN PAYMENT ASSISTANCE PROGRAMS

Term matches term of first mortgage

High Cost Area Home Purchase Assistance Program (HiCAP)4
6.750%

CalHFA Housing Assistance Program (CHAP)
6.750%

California Homebuyer’s Downpayment Assistance Program (CHDAP)
3.000%

Extra Credit Teacher Program (ECTP)
5.000%

There use to be a program called the Nehimiah program that would allow you to go over 100% with participating lender but I believe the program has been eliminated and is being investigated as to the legality of it.

[Raybyrnes]

SD Realtor

Yep

The California Homebuyer’s Downpayment Assistance Program (CHDAP) is designed to provide a deferred payment, simple interest rate junior loan of an amount up to three percent (3%) of the sales price or appraised value, whichever is less. The junior loan may be used for down payment or closing costs and may be combined with a CalHFA or non-CalHFA conventional or government first mortgage loan.

DOWN PAYMENT ASSISTANCE PROGRAMS

Term matches term of first mortgage

High Cost Area Home Purchase Assistance Program (HiCAP)4
6.750%

CalHFA Housing Assistance Program (CHAP)
6.750%

California Homebuyer’s Downpayment Assistance Program (CHDAP)
3.000%

Extra Credit Teacher Program (ECTP)
5.000%

There use to be a program called the Nehimiah program that would allow you to go over 100% with participating lender but I believe the program has been eliminated and is being investigated as to the legality of it.

[SD Realtor]

Rayb thanks for that clarification. Isn’t there also a silent second that you can get with a CalHFA?

SD Realtor

[SD Realtor]

Rayb thanks for that clarification. Isn’t there also a silent second that you can get with a CalHFA?

SD Realtor

[djrobsd]

Raybarnes,

Can programs like ACORN be used to refinance from an ARM?

[Raybyrnes]

Unfortunately this is where my knowledgee runs out. You would have to call a lender and find out what is available through these programs.

You may also want to look into the SBA program. If their was any potentail damage to you home you could try to loosely quaiify for SBA money 2.97 for a 30 year fixed up to 200K or if you have a small business 4% fixed up to 1.5 million .

During the World Trade Center many businesses were looseely extended these types of loans. You may want to speak with a banker to see how loose they would be for you.
Sorry I don’t have more for you.

[Raybyrnes]

Unfortunately this is where my knowledgee runs out. You would have to call a lender and find out what is available through these programs.

You may also want to look into the SBA program. If their was any potentail damage to you home you could try to loosely quaiify for SBA money 2.97 for a 30 year fixed up to 200K or if you have a small business 4% fixed up to 1.5 million .

During the World Trade Center many businesses were looseely extended these types of loans. You may want to speak with a banker to see how loose they would be for you.
Sorry I don’t have more for you.

[Raybyrnes]

Unfortunately this is where my knowledgee runs out. You would have to call a lender and find out what is available through these programs.

You may also want to look into the SBA program. If their was any potentail damage to you home you could try to loosely quaiify for SBA money 2.97 for a 30 year fixed up to 200K or if you have a small business 4% fixed up to 1.5 million .

During the World Trade Center many businesses were looseely extended these types of loans. You may want to speak with a banker to see how loose they would be for you.
Sorry I don’t have more for you.

[djrobsd]

Raybarnes,

Can programs like ACORN be used to refinance from an ARM?

[djrobsd]

Raybarnes,

Can programs like ACORN be used to refinance from an ARM?

[Raybyrnes]

dingo
You didn’t pay PMI but you did pay a 1.5 origination fee on the loan that went to pay mortgage insurantce. You may have missed that but it is built into the cost of the loan. It was through the Calhafa program and Acorn simply put you in contact wiht one of the lenders affiliated wiht the program . If you doubt what I am saying you can visit http://www.calhfa.ca.gov and look under the unterest rates for the 40 year 10 year IO program.

40-Year Fixed Mortgage

This conventional first mortgage loan program is designed to enhance affordability and homeownership opportunities by offering a below market, fixed interest rate . This program is intended for first-time homebuyers who meet specified low and moderate income limits and who are purchasing a new or existing home anywhere in California.

How The Program Works

This program offers up to 100% financing of the home sales price within CalHFA’s defined sales price limits. This first mortgage loan may also be combined with CalHFA junior loan programs (except CHAP), for down payment and closing cost assistance, to make owning your first home more affordable.

[Raybyrnes]

dingo
You didn’t pay PMI but you did pay a 1.5 origination fee on the loan that went to pay mortgage insurantce. You may have missed that but it is built into the cost of the loan. It was through the Calhafa program and Acorn simply put you in contact wiht one of the lenders affiliated wiht the program . If you doubt what I am saying you can visit http://www.calhfa.ca.gov and look under the unterest rates for the 40 year 10 year IO program.

40-Year Fixed Mortgage

This conventional first mortgage loan program is designed to enhance affordability and homeownership opportunities by offering a below market, fixed interest rate . This program is intended for first-time homebuyers who meet specified low and moderate income limits and who are purchasing a new or existing home anywhere in California.

How The Program Works

This program offers up to 100% financing of the home sales price within CalHFA’s defined sales price limits. This first mortgage loan may also be combined with CalHFA junior loan programs (except CHAP), for down payment and closing cost assistance, to make owning your first home more affordable.

[the dingo]

Check out acornhousing.org this is a non profit group that I just got a loan from. Believe it or not I got the following loan. 475k 100% financing, no pmi on a 40 year fixed with the first 10 years interest only. It is not an 80/20 it is all on one loan.
Here are the stipulations. You can’t make over 90k per year. You must attend two 3 hour counseling classes. It is full doc. There is also a program called the cadat, where the state of california pays three points to lower your rate even further. Also, this loan is not based on credit score at all. The only stipulation is that you cannot have a late payment in the last 12 months. I know this sounds amazing, and it is. With out it I could not have gotten my new home. The loans are serviced by BofA, so it is solid. They also do refi’s My loan officer was a gal call cori Fusselman.

[the dingo]

Check out acornhousing.org this is a non profit group that I just got a loan from. Believe it or not I got the following loan. 475k 100% financing, no pmi on a 40 year fixed with the first 10 years interest only. It is not an 80/20 it is all on one loan.
Here are the stipulations. You can’t make over 90k per year. You must attend two 3 hour counseling classes. It is full doc. There is also a program called the cadat, where the state of california pays three points to lower your rate even further. Also, this loan is not based on credit score at all. The only stipulation is that you cannot have a late payment in the last 12 months. I know this sounds amazing, and it is. With out it I could not have gotten my new home. The loans are serviced by BofA, so it is solid. They also do refi’s My loan officer was a gal call cori Fusselman.

[djrobsd]

My tenant asked me about rent to own. When I told him my mortgage reset to $3100 he ran for the exits… LOL

[djrobsd]

My tenant asked me about rent to own. When I told him my mortgage reset to $3100 he ran for the exits… LOL

[djrobsd]

My tenant asked me about rent to own. When I told him my mortgage reset to $3100 he ran for the exits… LOL

[4plexowner]

2008 – are you familiar with rent-to-own?

Google “Residential Lease with Option to Purchase” and “Rent To Own” and you will find plenty of stuff to look at

I’ve considered doing a rent-to-own but I never had to – I say ‘had to’ because I consider rent-to-own as a last ditch effort and not really a win-win situation in most cases

From what I’ve read only 20% of rent-to-own situations result in a purchase. The other 80% result in a tenant who, for whatever reason, doesn’t purchase the property and loses any benefits the option to purchase entitled him to.

In this market I think the odds of a rent-to-own resulting in a purchase are even less than 20/80 so what might you gain by doing this?

You get a higher rent – the rent-to-own tenant pays an above-market rate with the agreement that some of that money will be applied as down payment towards the purchase of the condo

Your tenant takes better care of your place because they think they will ultimately own it

At the end of the option period (two years? three?) you still own the condo but have to deal with a frustrated (and angry?) tenant.

[4plexowner]

2008 – are you familiar with rent-to-own?

Google “Residential Lease with Option to Purchase” and “Rent To Own” and you will find plenty of stuff to look at

I’ve considered doing a rent-to-own but I never had to – I say ‘had to’ because I consider rent-to-own as a last ditch effort and not really a win-win situation in most cases

From what I’ve read only 20% of rent-to-own situations result in a purchase. The other 80% result in a tenant who, for whatever reason, doesn’t purchase the property and loses any benefits the option to purchase entitled him to.

In this market I think the odds of a rent-to-own resulting in a purchase are even less than 20/80 so what might you gain by doing this?

You get a higher rent – the rent-to-own tenant pays an above-market rate with the agreement that some of that money will be applied as down payment towards the purchase of the condo

Your tenant takes better care of your place because they think they will ultimately own it

At the end of the option period (two years? three?) you still own the condo but have to deal with a frustrated (and angry?) tenant.

[Author]

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