Should I sell my houses now or wait for "recovery"

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Topic Author
jmzf1958
Posts: 58
Joined: Sun May 02, 2010 6:32 am

Should I sell my houses now or wait for "recovery"

Post by jmzf1958 »

Hello. I've got myself in a situation with owning two houses and land, and I'm not sure what to do. Any advice would be appreciated! I live in a suburb of Syracuse, New York. I own the house I live in that is has been for sale for a year and a half. I started out asking $329,000 and have reduced it to $289,000. (Real estate agent did not price it correctly). I have a heloc of $90,000 on it at 4%, variable, due to adjust (no more than 2%) August of 2011, 25 year heloc with payments of around $450 a month. $50,000 of this heloc has been/will be used for improvements to the house below.
Last August, I bought another house that has a one bedroom apartment intending to live in the house and rent the apartment for $600 a month after my house sold. It has a $100,000 mortgage, fifteen years at 4.125%. It can be sold for around $160,000, I hope. I have been renting the house out at $950 a month. Tenants pay all utilities. I pay for mowing ($60/month). I had been renting the apartment out at $600 a month and the monthy costs of $1600. (This includes about $275 for part of the heloc payment). So most expenses were covered.
Since neither my real estate agent or lawyer neglected to tell me I couldn't rent out this apartment to anyone but relatives of the tenant in the house (ridiculous, but that's the zoning law in our little village), two of the neighbors complained and I had to let the tenant go. Now I'm out of pocket around $650/month.
Since I can't rent out the apartment, I don't want to keep the house because if I move in there, only a relative can live there, and I don't have a relative who wants to live there. My purpose in buying this house was to have the extra income. If I sell this house at $160,000, I'll come out even.
It's in a desireable neighborhood, but as everyone knows, the market is horrible. My realtor says I should do more improvements to be able to ask $169,900 for the house. I have a tenant in there who hopefully will be agreeable to having them done while she's living there since she will benefit from the improvements, for awhile, anyway. It's a month to month lease. My new realtor says it would be better not to have the tenant there for resale purposes, but i need the $950 a month towards expenses. I could give her a month notice, do the improvements, and get a tenant that will pay more per month (around $1200 or so, or more if they needed the apartment) and do a month to month lease. Chances are if the house doesn't sell by Thanksgiving, it won't sell until the spring. There are very few houses for rent in this town so I think I'd be able to rent it. Or should I leave it empty so it will sell easier?
Unfortunately, I don't have an emergency fund ( I can borrow on the heloc, if I have to, but I don't want to). I'm just about making my bills - many other expenses right now, also. I'm just house poor.
My plan is to sell the house I'm in, sell the rental, coming out with $430,000, pay off the loans totaling $190,000 and netting around $240,000. I will then buy or build a house in the $150,000 range. I have land I can either build on or sell worth $75,000. I would have about $90,000 left over for an emergency fund and to invest. I would be mortgage free, and I could save around $2500/month.
So I know this is just a temporary situation, things will improve when both houses sell. I just need to figure out how to handle this in the meantime. Stress level is high. I cannot believe I got myself into this situation, and I'm worried if I don't sell now, things will get much worse.

Does anyone have any suggestions on what I should do? Thanks! Judy
Topic Author
jmzf1958
Posts: 58
Joined: Sun May 02, 2010 6:32 am

Post by jmzf1958 »

Another question, with the loss I'm taking and what I'm putting into the rental, does anyone have any idea how much I'll get back on taxes?
Honobob
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Re: Should I sell my houses now or wait for "recovery&q

Post by Honobob »

jmzf1958 wrote: I started out asking $329,000 and have reduced it to $289,000. (Real estate agent did not price it correctly).

Since neither my real estate agent or lawyer neglected to tell me I couldn't rent out this apartment

My purpose in buying this house was to have the extra income.

It's in a desireable neighborhood, but as everyone knows, the market is horrible.

My realtor says I should do more improvements to be able to ask $169,900 for the house.

I cannot believe I got myself into this situation

Does anyone have any suggestions on what I should do? Thanks! Judy
Judy, Judy, Judy

First, you should own up to your participation in creating this mess.

Did you even ask your agent HOW they priced your property? If they used the best comps at the time and made a reasonable estimate of the direction of the market then they did their job. If they just told you what they thought you wanted to hear and you didn't question that then it's on you.

Were both your agent AND lawyer aware of your plans to do a rental? If so, and you can document you have an action against both. Still, you should have confirmed with city on legality of second unit. I'm surprised the appraisal or the lender didn't catch this. If I thought they weren't total incompetents I would negotiate a reduced fee from them to help you sell your house.

I'm very pro real estate because I've done very well but when I look at neighborhoodscout.com I see that Syracuse has had average annual appreciation since 1990 of only 3.04%! Last ten years 5.82% Last 5 years 5.27% Last two years 2.94%.. I'd say 3% is about your MEAN appreciation. Not much upside. If your market improves I only see you selling quicker, not for much more money. I think I'd suggest renting for anyone in that area. NY as a state appreciated 6.41% since 1990 and 5.36 over the last 5 so the mean looks to be about 5% for the whole state with Syracuse dragging that number down while areas like Great Neck Plaza had average annual appreciation since 1990 of 17.37%!!

Have you thought about solving your cash flow problem by advertising your property as one rental with an in-law/teenagers quarters/parents, single mom arrangement?

How much is your realtor thinking about spending to MAYBE get $10,000 more in sales price? You should definitely clean and declutter and minor repairs but I would not spend more than $5,000 in anticipation of a possible $10,000 gain.
It's slowly dawned on me that we won the real estate lottery!
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dm200
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Post by dm200 »

Concerning the house with the (former) rental apartment, I suggest looking very, very closely at the EXACT zoning rules and see if there are any loopholes that you might utilize. For example, while a "separate" apartment may be in violation, perhaps (if this matches your lifestyle) a house sharing with up to a certain number of others might be ok within the zoning. If you can do that, perhaps the right tenants and some minor modifications to the house might do the trick.

I know from my days as a single person, I shared several single family homes with up to 3 other unrelated folks and that met both the letter and spirit of the zoning where I lived.
Honobob
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Post by Honobob »

Good point dm200. And maybe it's that there can't be TWO tenants in the two units that are not related BUT there CAN be an owner occupant and an unrelated tenant. Maybe the lawyer and agent thought you'd be moving in at purchase and renting ONLY the one unit.

Definitely should be aware of the actual law as dm200 says.
It's slowly dawned on me that we won the real estate lottery!
Topic Author
jmzf1958
Posts: 58
Joined: Sun May 02, 2010 6:32 am

Post by jmzf1958 »

I do take responsiblity for all of this. I usually cross the t's and dot the i's, but didn't this time. I live in a small town and everyone knows each other, so I wouldn't bring a lawsuit against them. I decided to ask my tenant to leave and luckily, I have a tenant who is going to rent both the house and apartment for $1500/month. It will work out well for them.

I still have the house I live in for sale. The same real estate agent had it listed for a year starting in May of 2009. I switched to a much better agent in March of this year and have had quite a few showings. Everyone loves it but nobody has put an offer in. The price started out at $329,000 (too high to begin with) and is now down to $279,900. I won't go any lower. My realtor thinks it's priced where it should be considering the economy. My question is should I keep it on the market and try to sell it or take it off and wait until real estate prices go up and then list it? I don't want to be here another ten years, but I don't want to take a huge loss, either. If I sold it, I could move into the house I'm renting out.

Any opinions anyone?
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RJB
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Post by RJB »

Perhaps if the legal wording denies you "renting", maybe you can "lease" the property? I am not an attorney and am curious about this.
RobG
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Location: Montana

Post by RobG »

bummer... this is why it is important to read the covenants.

rg
Valuethinker
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Re: Should I sell my houses now or wait for "recovery&q

Post by Valuethinker »

jmzf1958 wrote:He

Does anyone have any suggestions on what I should do? Thanks! Judy
The opportunity cost is key, NOT the sunk cost.

ie not what you made/ lost but what you would do with the money next and the expected returns.

Short sales complicate that picture. You either have to go bankrupt (and please, please, please consult a good attorney and do not rely on anything we say here regarding that course of action) or find other resources to fund loss.
kerry75
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Post by kerry75 »

Regarding your comment on only related family members being able to rent together: the town in which I used to live had similar, and very enforced, laws. After a few well-publicized run-ins with non-traditional families and families of immigrants they've completely dropped enforcement of this issue.

It was so bad where I lived that many years ago a neighbor once complained to the town that my father-in-law who lived with us for a while was not part of our family and said so in a town hearing called on the matter. Nice place in which to live.... Even for this place it was a ridiculous issue but this neighbor got his hearing.
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Birdie Num Nums
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Syracus Zoning Ordinance

Post by Birdie Num Nums »

Whenever some government person tells me that I must or cannot do something, I ask him/her to cite the legal authority. In your case, ask the zoning folks to cite the section of the Syracuse zoning laws that prohibits what you did with the rental. Then read it for yourself, to see if there are any loopholes. (No attorney fees at this point.)
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giacolet
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Zoning Enforcement

Post by giacolet »

The law is one issue. Enforcement is another. If the law is not enforced equally in all situations, not only ones in which a citizen has complained, you may be free of the problem.

We live in a constitutional democracy and laws have to be enforced so that all citizens have equal protection under the laws. The laws cannot be enforced selectively.
May your heart always be joyful. | May your song always be sung. | May you stay forever young. | ----Bob Dylan
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