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Hive Landlords, Advice Please!


YaelAldrich
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It appears, we are moving (please G-d) to Boston from Indianapolis.  We have a 3BR/2BA home that we could sell in May once we vacate it (to go overseas for the summer).  A family in our synagogue who needs to move to the community (for religious reasons) for 6 mos-1.5 years asked if they could rent our home since there are no rental homes in our area for less than a two year lease.  We hadn't really thought about renting; the RE market in our immediate area is very sparse (maybe 4 properties in 3-4BR homes within a .5 mile radius of our home up on the market right now).  

 

We just bought this house 18 mos ago (!) and thought we'd be here longer.  We have had to put in a new floor/sub-floor (10K), new sewer line out to the main (10K), and waterproofed the crawl space (7K). We know we won't get that back at all in the sale of this home, but we hope to at least get what we paid for the house and maybe 5K more.  

 

We kind of need the 40K we used as the down payment as a much smaller down payment on a house in Boston (we could break into our emergency fund instead).  For those who don't know the Boston market, houses of comparable size run about 800K-1.4MIL.  This will be our "forever" home.  However, the RE market in the part of Boston we wish to live is VERY, VERY tight - things go on the market and are gone within hours and for at least asking price if not over.  We know we may not be able to buy something this year, especially since we will be out of the US from April-August; our Realtor told us to find a rental as a backup now.  So we are doing that and if we take the rental, we will have to hold off looking at houses until closer to the end of the lease (1 yr).

 

The only reason I would consider this rental is that the husband is a contractor and does the work around our home (painting, small remodel for the sale of the house).  I know he could do any repair work around the house and would be honest about telling us how much it would cost, etc.  We're not close friends or anything but the Jewish community here is small and they have stayed in our home numerous times while we are out of town.

 

Suggestions?  Advice?  We don't want to get ourselves into something crazy, we realize that interest rates will be going up sometime in the next year or two, don't want to worry if we need to sell the house at a bad time of year.

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Do you think your house will increase enough in value to cover the increased projected interest rates? I mean, do you think you'll get more for your house in a year, and that it would be enough to make up for the interest rates on the $ you will borrow for a mortgage next year when you buy?

 

If it makes financial sense, I think it'd be ok to rent it out.

 

But then you'd have to rent yourselves for a longer time before you buy, because you won't have a downpayment.

 

Hmmm.

 

Tough choice.

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Do you think your house will increase enough in value to cover the increased projected interest rates? I mean, do you think you'll get more for your house in a year, and that it would be enough to make up for the interest rates on the $ you will borrow for a mortgage next year when you buy?

 

If it makes financial sense, I think it'd be ok to rent it out.

 

But then you'd have to rent yourselves for a longer time before you buy, because you won't have a downpayment.

 

Hmmm.

 

Tough choice.

Chris, good questions. I think I will have to call the guy we think we are going with for a Realtor on this side and the one in Boston for advice on the interest question.

 

Thanks for the advice!

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Sell it to them instead of renting it to them.

 

You will be too far away to supervise or stage the house for sale after they leave.  Housing in Boston is ridiculous.  Rental housing is even more ridiculous.  You are going to need your down payment.

ITGWN, I would sell it to then in a hot minute if they would take it.  They are planning on making aliyah (moving permanently to Israel) and are waiting for some paperwork that will take some time (6 mos- 1.5 years) to get.

 

We are leaving the house empty and selling it from afar as it is no matter what.  At least I don't have to show the house while living in it!   :party:

 

As of now there is nothing in our desired neighborhood at any price.  Our Realtor tells us some people wait years to find a house.  She does say we are willing to pay enough to find one within a year or two (!!!!!).

 

My husband would rather take a sure thing (a rental) rather than waiting, possibly in vain, for a home that may or may not show up.  He's already asking when he can put the good faith reservation payment on a place for July-August (we would even pay for an extra month of rent ($3300)).  So unless the house of our dreams shows up in the next couple of weeks, we're renting for a year.

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Remember that the 'profit' you make on the home (sale price-purchase price, regardless of how much you spent on upgrades) is taxed as capital gains, if the home is not your primary residence for two of the last five years.  Since you only lived there 18 months, you'll have a tax bill to consider.

 

http://www.irs.gov/publications/p523/ar02.html

 

If you hope to make back your purchase price, plus upgrades, and an extra $5k, and use that money for a down payment, are you factoring in the taxes you'll likely have to pay?

 

Maybe renting your current home for a while (and renting in Boston) and building up more cash for a better down payment is the way to go?

 

 

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I'd let them rent it as long as they are okay with showing it. That will give you some financial cushion while you wait for it to sell. Please believe me, it could take a while to sell...

 

Samantha,  that's what I am worried about, but until yesterday we were ready to just put it on the market (after the husband of this family did the painting and work on the master bath) in May.  This may help both of us.

 

I'm going to call our Realtors, unless one of you want to buy a house in Indianapolis!

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Remember that the 'profit' you make on the home is taxed as capital gains, if the home is not your primary residence for two of the last five years.  Since you only lived there 18 months, you'll have a tax bill to consider.

 

http://www.irs.gov/publications/p523/ar02.html

 

If you hope to make back your purchase price, plus upgrades, and an extra $5k, and use that money for a down payment, are you factoring in the taxes you'll likely have to pay?

 

Maybe renting your current home for a while (and renting in Boston) and building up more cash for a better down payment is the way to go?

Random,  oh, I know  we will NOT make any profit.  We don't anticipate that the repairs we have had to do will be recouped at all in this sale, whether it is sold in May 2015 or May 2016.  This market is not Boston. :)

 

 

We just want to get back the down payment to use as the next down payment (but not knowing if we will find a house to buy for this fall - likely not).

 

Most people in Boston put down 5% and take a jumbo mortgage.  Even with my husband making in the top 10 percent of US households, we just cannot buy a house outright.  That's Boston for you!   :glare:

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It appears, we are moving (please G-d) to Boston from Indianapolis.  We have a 3BR/2BA home that we could sell in May once we vacate it (to go overseas for the summer).  A family in our synagogue who needs to move to the community (for religious reasons) for 6 mos-1.5 years asked if they could rent our home since there are no rental homes in our area for less than a two year lease.  We hadn't really thought about renting; the RE market in our immediate area is very sparse (maybe 4 properties in 3-4BR homes within a .5 mile radius of our home up on the market right now).  

 

We just bought this house 18 mos ago (!) and thought we'd be here longer.  We have had to put in a new floor/sub-floor (10K), new sewer line out to the main (10K), and waterproofed the crawl space (7K). We know we won't get that back at all in the sale of this home, but we hope to at least get what we paid for the house and maybe 5K more.  

 

We kind of need the 40K we used as the down payment as a much smaller down payment on a house in Boston (we could break into our emergency fund instead).  For those who don't know the Boston market, houses of comparable size run about 800K-1.4MIL.  This will be our "forever" home.  However, the RE market in the part of Boston we wish to live is VERY, VERY tight - things go on the market and are gone within hours and for at least asking price if not over.  We know we may not be able to buy something this year, especially since we will be out of the US from April-August; our Realtor told us to find a rental as a backup now.  So we are doing that and if we take the rental, we will have to hold off looking at houses until closer to the end of the lease (1 yr).

 

The only reason I would consider this rental is that the husband is a contractor and does the work around our home (painting, small remodel for the sale of the house).  I know he could do any repair work around the house and would be honest about telling us how much it would cost, etc.  We're not close friends or anything but the Jewish community here is small and they have stayed in our home numerous times while we are out of town.

 

Suggestions?  Advice?  We don't want to get ourselves into something crazy, we realize that interest rates will be going up sometime in the next year or two, don't want to worry if we need to sell the house at a bad time of year.

My rule is to only rent to strangers.  If this goes south, you have to see these people again in synagogue. 

 

Unless you have seen his work, I would never want a tenant doing work on my house.  It is prohibited in my Leases. 

 

How were they as guests?  Neat.  How are their cars?  The house will look like their cars very quickly. 

 

Do you want to come back?   If not, just sell.  April- June is the best time anyway. 

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My rule is to only rent to strangers.  If this goes south, you have to see these people again in synagogue. 

 

Unless you have seen his work, I would never want a tenant doing work on my house.  It is prohibited in my Leases. 

 

How were they as guests?  Neat.  How are their cars?  The house will look like their cars very quickly. 

 

Do you want to come back?   If not, just sell.  April- June is the best time anyway. 

Thank you TM for your questions.

 

I won't see them again in synagogue - they are moving to a different continent in fewer than two years.  The Jewish world is small but I doubt we'll cross paths again.

 

He has worked on our house before (doors, steps, installing locks).  He does very good work and always tries to UNDERCHARGE us.  My husband pays him the going rate anyways.  He is going to do the small fix-it jobs when we get ready to sell (now or when they leave).  He's good and fair and that makes him very popular.

 

They were neat and tidy as guests.  They've stayed here five or six weekends when we weren't home.  Their cars (as far as I have seen) are neat as a pin too. 

 

We are not coming back except for celebrations of the close friends we made here, so maybe once next year?

 

I know the late spring - early summer is the best time to sell.  I will have to talk to our Realtors to get some more information.

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