Condo – sell or rent out?

[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.

[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.

[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.

[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.

[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.

[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.

[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.

[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

[SD Realtor]

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

SD Realtor

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