Author Topic: Real Estate Choices  (Read 640 times)

52cents

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Real Estate Choices
« on: September 24, 2018, 01:22:54 PM »
Hi there, thought I might look here for some help.

My wife and I recently moved into a house we re-built. After 3 years of sweat equity, all we owe on the place is a $70k HELOC which we pay off as much as possible every month.
We also own the house next door which we owe about $250k of principal. The house is worth about $350K and there's 29 years left on the mortgage as we refinanced last year. We rent it out for $1700 per month which covers the cost of mortgage payments, insurance and property taxes.
I'm a general contractor and would like to build a shop (garage) with a one bedroom apartment above it which we could rent out long term for about $1000 per month. Unfortunately, we don't have the money to do this at present.
Our renter recently inquired if we were willing to sell the house he rents from us as he loves the location and the house. He is a good guy and a perfect neighbor. (He's been renting for a year).

If we sold, we would wipe out all of our debt and then be able to build the shop which would immediately start generating income as we live in a very desirable neighborhood (since Trader Joe's and Wholefoods moved in down the street).

Seems like an easy decision but we are nervous about selling the other house as prices just keep climbing as more wealthy people move in. Is there something we are not thinking of? This present government makes me nervous and we're long overdue at least a hiccup in the market.

Sibley

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Re: Real Estate Choices
« Reply #1 on: September 24, 2018, 01:55:18 PM »
Are you making a profit off the rental? Or just breaking even?

I'm not sure why you're so worried about selling it. If you sell it, you're debt free, free up cash flow for investments, etc. You don't have a crystal ball. Either hold onto the house, potentially selling it later for more (but not guaranteed), or sell it now.

52cents

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Re: Real Estate Choices
« Reply #2 on: September 24, 2018, 02:01:17 PM »
Are you making a profit off the rental? Or just breaking even?



We are just breaking even.

Thanks for your thoughts, we just get a bit nervous making these decisions. Sure would feel good to have no mortgage or other debt.

thd7t

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Re: Real Estate Choices
« Reply #3 on: September 24, 2018, 02:18:38 PM »
It sounds like you're breaking even only if nothing goes wrong with the house.  Based on that, it seems more like a liability than an asset.  I also think you should sell it.

Cwadda

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Re: Real Estate Choices
« Reply #4 on: September 25, 2018, 11:15:32 AM »
Quote
We rent it out for $1700 per month which covers the cost of mortgage payments, insurance and property taxes.
If it covers the mortgage, insurance and taxes, and you haven't factored in vacancies, capital expenditures, and repairs: you are NOT breaking even. You are losing money.

Quote
Our renter recently inquired if we were willing to sell the house he rents from us as he loves the location and the house. He is a good guy and a perfect neighbor. (He's been renting for a year).
Sell it to him and save 6% not using a broker. Seems like a no brainer to me.

MKinVA

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Re: Real Estate Choices
« Reply #5 on: September 25, 2018, 12:24:25 PM »
Sell. Don't try to time the market. Selling now fits with your future plan. Keep moving forward.

nurseart

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Re: Real Estate Choices
« Reply #6 on: October 09, 2018, 01:19:44 PM »
I'm also on team sell. Do remember in your weighing of choices that you aren't guaranteed him as a neighbor forever. Since he will, well, own the place he could sell to not perfect neighbors.

Jon Bon

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Re: Real Estate Choices
« Reply #7 on: October 09, 2018, 01:25:00 PM »
My guess is you are doing all the property management stuff yourself since you live next door? And you are just breaking even?

Drop it like it's hot.

But yeah look up your states purchase contract, and just fill that out together and save some realtor stealing 6% from you.

Megma

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Re: Real Estate Choices
« Reply #8 on: October 10, 2018, 01:57:05 PM »
I'm also on team sell. A 350k house that rents for $1700 is a terrible rental. Owning the garage+apartment that rents for 1,000 sounds much better to me.

Kl285528

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Re: Real Estate Choices
« Reply #9 on: October 10, 2018, 02:06:32 PM »
Iíll pile on and recommend sell.

Papa bear

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Re: Real Estate Choices
« Reply #10 on: October 10, 2018, 03:34:15 PM »
Sell it. You don’t have a good rental there. It’s worth more to sell it and use that equity to make you more money somewhere else. Like that workshop with an apartment.


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kenmoremmm

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Re: Real Estate Choices
« Reply #11 on: October 10, 2018, 10:42:57 PM »
nationwide, real estate markets are flipping. some areas haven't caught the new yet. the frenzied seller's market days are limited for this cycle.

SBuck

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Re: Real Estate Choices
« Reply #12 on: October 11, 2018, 07:52:27 AM »
I agree with the majority here. You have a break even investment property that is not generating income- either increase the rent or sell it. A couple of other factors to consider, you have a renter that wants to buy it directly from you- FBO, no 3rd parties involved- hard to beat $$$ this scenario and you didn't have to put any time in to get an offer- advise your tenant to get a loan pre-approval, complete a Purchase Agreement- find a Title company. If your renter has limited finances to secure the purchase or maybe you want more than a break even scenario on this investment property- consider offering some seller financing- so that you can generate some additional residual income after you've sold this property and paid off your debts.