Help With Rental Property Decision

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Alana888
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Help With Rental Property Decision

Post by Alana888 » Mon Sep 18, 2017 2:58 am

I am having to make a decision regarding a rental property I own and would appreciate any input.
About 15 years ago I purchased a rental condo for investment out of state. It seemed like a good idea at the time. I put down $60,000 and got a 6% mortgage.
All went ok for a few years, but I later discovered the property wasn't in the best area and tended to attract not the best renters. I had a succession of horrible tenants who didn't pay rent, trashed the place and worse. At the same time property values had plummeted.
Finally about 6 years ago (after the latest renter disaster) I was ready to sell, though the property was underwater and I would have lost a lot of money.
Instead I ended up renting to wonderful tenants who have been there 6 years now. Their rent covered all but between $30 and $100 per month of my costs (not counting repairs), they took care of most repairs themselves and property values recovered to about what I originally paid for the condo, maybe a little more. I was glad I waited instead of selling.
Now these tenants are moving next month.
In the best of situations I don't like being a landlord and would love to sell this property but the logistics are problematic.
The HOA doesn't allow month to month rentals, a minimum 6 month lease is required.
It is very difficult to sell a condo that is occupied by tenant with a lease.
Without a tenant, I don't have the $ to pay the $1600 per month mortgage, property, insurance and HOA costs while the condo is on the market, unless I take it from my retirement savings which I prefer not to do.
Condos in the complex have taken anywhere from 3 months to over a year to sell, so the cost of it being empty while for sale could be significant.

These are the 3 options I am considering~

Option 1- Find a new tenant, (there is a lot of interest) continue as I have been. Hope for the best.

Option 2- I have a CD that is maturing at the end of the month for a little more than I owe on the mortgage. I can use those $ to pay off the mortgage, reducing the monthly payment to about $700 instead of $1600 (again not including repairs). I could then put the condo on the market and pay the $700 per month until it sells. This would work ok if the condo sold in a couple of months, but could still be quite expensive if it took 10 months to sell. Again that money would have to come out of my retirement savings

Option 3- Cash in the CD and pay off the mortgage. Rent the condo out again for 1 year. With the mortgage gone, my monthly cost will be about $900 less than the rent I receive, and if I put that money aside, by the end of the year I will have over 10,000 which I can use to pay the (now reduced) expenses while I sell the condo without a tenant.
Numbers wise this seems like the best option. Its the only one where I don't lose money or spend some retirement savings.
However my concern is that with this plan, instead of having $60,000 invested in an awful investment that I regret, I will now have almost $200,000 invested. If something were to go wrong or there was a housing market crash or for whatever reason I was unable to sell the condo next year for what I can sell it for now, I have a lot more at risk to lose. It would also mean another year of dealing with potential renter drama and possible unexpected repairs and costs. These risks may not materialize or may be minor if they do, but there is no way to know in advance.

I would love to hear input and suggestions and if you see anything about any of these options that I am missing.
By the way I am 60 years old if that matters (I think it does- it seems to take a lot more energy to manage a rental property 2500 miles away than it used to)

Thank you!

novillero
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Re: Help With Rental Property Decision

Post by novillero » Mon Sep 18, 2017 4:50 am

No answers (yet). A few questions though:

- What is the fair market value of the condo?
- Have you paid attention to this market and understand how fast or slow others have sold?
- how much do you still owe on the mortgage?
- have you refinanced since originally getting the mortgage? You could lower costs.
- isn't there a hybrid option 4, where you take only part of that CD and use it to cover expected costs while you attempt to sell the condo? (I am assuming that the CD and retirement are different accounts).

tampaite
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Re: Help With Rental Property Decision

Post by tampaite » Mon Sep 18, 2017 6:41 am

Deleting my messages on this forum
Last edited by tampaite on Mon Jun 03, 2019 9:08 am, edited 1 time in total.

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Alana888
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Re: Help With Rental Property Decision

Post by Alana888 » Mon Sep 18, 2017 11:03 am

What is the fair market value of the condo?
- Have you paid attention to this market and understand how fast or slow others have sold?
- how much do you still owe on the mortgage?
- have you refinanced since originally getting the mortgage? You could lower costs.
- isn't there a hybrid option 4, where you take only part of that CD and use it to cover expected costs while you attempt to sell the condo? (I am assuming that the CD and retirement are different accounts).
Thank you for the response. The condo would likely sell for about $210,000. I owe about $115,000 on the mortgage. With realtors fees, closing costs and other costs to sell, I should just about get my down payment back. Yes other condos in the complex have sold in anywhere from a few months to over a year. A refinance only makes sense if I were going to keep the condo for a good while. It would not be easy for me to qualify for a new mortgage. The CD is part of the retirement savings. With the option 4 you mention, If it took a year to sell, I would go through almost $20,000, paying $1600 per month in expenses while its on the market which I would not recoup, so I'd prefer not to take that loss.

chevca
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Re: Help With Rental Property Decision

Post by chevca » Mon Sep 18, 2017 11:24 am

Cut your losses and sell anyway possible.

Don't even bother running the numbers, or worry about getting the down payment back. This thing has done nothing but lose you money from the start between general costs, bad renters, repairs, and whatever else. Get rid of this anchor.

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Sandtrap
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Re: Help With Rental Property Decision

Post by Sandtrap » Mon Sep 18, 2017 11:41 am

Distance ownership where there is no economy of scale can be very difficult.
There are many factors to consider and many options and opinions based on individual experience and circumstance.

Reasons to sell:
Anxiety and stress relief (you will no longer have to worry about this, and this is priceless).
Once sold you can focus your resources elsewhere.
Cut your losses.
Get rid of something you do not enjoy.

Reasons to not sell:
You have financial "staying power" and substantial assets that can offset a white elephant until the market should prosper in that area.
You love rental properties and being a landlord and this is the lst step in building a R/E business.
etc,
etc.
Wiki Bogleheads Wiki: Everything You Need to Know

Topic Author
Alana888
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Re: Help With Rental Property Decision

Post by Alana888 » Mon Sep 18, 2017 8:17 pm

Thank you for the responses.
Yes it looks like option 2 or 3, leaning toward 2 to sell sooner rather later regardless of the expense.
I appreciate the input

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unclescrooge
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Re: Help With Rental Property Decision

Post by unclescrooge » Tue Sep 19, 2017 2:49 am

Get a tenant in with a 6 month lease.

After 3 months, put the house on the market. Tell tenant if he cooperates with showing the house, keeping it clean and tidy, you'll pay him $2,500 at close of escrow if it occurs while he is still an occupant.

After 6 months switch him to month-to-month.

Alternatively, advertise the condo as a rent to own. Charge $100 more than market rent with a larger than normal security deposit. Excess funds go towards the tenants down payment, providing he pays on time and is responsible for all repairs. Fix the purchase price for 2-3 years and help the tenant figure out how to own the property. There's a good chance the tenant will flake and bail. Rinse and repeat.

If they do end up buying the condo, then you've saved yourself a broker's commission and downtime to sell the condo. Win win!

BanquetBeer
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Re: Help With Rental Property Decision

Post by BanquetBeer » Tue Sep 19, 2017 5:08 am

I would sell. Time to sell depends on price vs market value. If you drop the price 10k it will likely go quickly.

If you are not making fair compensation for your investment and it is causing you stress - take the loss and move on. Sounds like you have cash flow issues and don't have any cash savings/emergency fund. You should really allocate 5-10k of condo proceeds to start that.

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djpeteski
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Re: Help With Rental Property Decision

Post by djpeteski » Tue Sep 19, 2017 6:30 am

If there is a lot of interest in the condo, then I would look over the applicant pool. If you can find a really good tenant, then you can probably "kick the can down the road" for a year or two by renting. I would then position myself to be ready to sell, have 6 months worth of payments sitting in a savings account and start looking for realtors.

If all the applicants appear sketchy, then you really have no choice but to sell now.

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Alana888
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Re: Help With Rental Property Decision

Post by Alana888 » Tue Sep 19, 2017 3:01 pm

unclescrooge wrote:
Tue Sep 19, 2017 2:49 am
Get a tenant in with a 6 month lease.

After 3 months, put the house on the market. Tell tenant if he cooperates with showing the house, keeping it clean and tidy, you'll pay him $2,500 at close of escrow if it occurs while he is still an occupant.
After 6 months switch him to month-to-month.
Yes this is a good plan but I am thinking a year lease and put it on the market after 9 months. Moving is expensive and inconvenient so I would feel bad to tell the new tenant 3 months after they move in that they were going to have to move again. But after 9 months would be fine. The incentive of $2500 at the close of escrow as incentive to stay month to month is a great idea. Thank you! That amount will feel like much less to me at the close of escrow than coming up with $ every month to pay for
unclescrooge wrote:
Tue Sep 19, 2017 2:49 am
Alternatively, advertise the condo as a rent to own. Charge $100 more than market rent with a larger than normal security deposit. Excess funds go towards the tenants down payment, providing he pays on time and is responsible for all repairs. Fix the purchase price for 2-3 years and help the tenant figure out how to own the property. There's a good chance the tenant will flake and bail. Rinse and repeat.

If they do end up buying the condo, then you've saved yourself a broker's commission and downtime to sell the condo. Win win!
Very unlikely to find anyone from the prospective tenant pool who could buy it and the laws of the state its in only allow me to take the equivalent of 1 months rent as security deposit. Even if I found someone who wanted to do it, at $100 per month it would take a really long time to accumulate enough for a down payment. But I really appreciate the creative suggestion. Thank you

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unclescrooge
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Re: Help With Rental Property Decision

Post by unclescrooge » Tue Sep 19, 2017 3:09 pm

Alana888 wrote:
Tue Sep 19, 2017 3:01 pm
unclescrooge wrote:
Tue Sep 19, 2017 2:49 am
Alternatively, advertise the condo as a rent to own. Charge $100 more than market rent with a larger than normal security deposit. Excess funds go towards the tenants down payment, providing he pays on time and is responsible for all repairs. Fix the purchase price for 2-3 years and help the tenant figure out how to own the property. There's a good chance the tenant will flake and bail. Rinse and repeat.

If they do end up buying the condo, then you've saved yourself a broker's commission and downtime to sell the condo. Win win!
Very unlikely to find anyone from the prospective tenant pool who could buy it and the laws of the state its in only allow me to take the equivalent of 1 months rent as security deposit. Even if I found someone who wanted to do it, at $100 per month it would take a really long time to accumulate enough for a down payment. But I really appreciate the creative suggestion. Thank you
The goal is not to find a buyer per se, but rather find a better quality tenant - one with ownership aspirations. You're providing an incentive to become a model tenant while improving your profitability.

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Alana888
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Re: Help With Rental Property Decision

Post by Alana888 » Tue Sep 19, 2017 3:12 pm

BanquetBeer wrote:
Tue Sep 19, 2017 5:08 am
I would sell. Time to sell depends on price vs market value. If you drop the price 10k it will likely go quickly.

If you are not making fair compensation for your investment and it is causing you stress - take the loss and move on. Sounds like you have cash flow issues and don't have any cash savings/emergency fund. You should really allocate 5-10k of condo proceeds to start that.
Thank you for the reply. Yes this is the lowest stress option. It will cost a little more now and then I will be done with it.
Its nice to hear everyones input. Most are leaning toward selling now regardless of the cost. It is tempting but I am still having a little hesitation to take the chance of having to pour lots of $ into it while its on the market empty (though to sell low to generate a quick sale is a good suggestion). I would be interested in hearing what people think about paying off the mortgage with the CD proceeds to minimize that.

I do have an emergency fund, about 6 months worth of living expenses. But being self employed with very unpredictable income, I prefer to keep that for emergencies such as lower than expected income, Medical or dental needs, car or house issues or other things where I have no choice but to spend it. So technically I have the $ to pay the mortgage and HOA while its on the market in my emergency fund if I had to, but I would prefer not to deplete my emergency fund it for that unless I have no other options

psteinx
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Re: Help With Rental Property Decision

Post by psteinx » Tue Sep 19, 2017 3:16 pm

You bought this 15 years ago, but don't have enough taxable savings to cover $1600/month?

Something's out of whack with your finances generally.

You probably have too high a % going into retirement savings, and not enough going into taxable that you can readily access for situations like this.

Can you borrow against your retirement savings?

Bottom line - I would sell this condo.

I would not refinance the loan.

I would try to make adjustments to minimize any tax hit/penalties from dipping into retirement savings. Substantially reduce retirement contributions for a few months, borrow from them in a way that does not incur penalties, or whatever.

psteinx
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Re: Help With Rental Property Decision

Post by psteinx » Tue Sep 19, 2017 3:20 pm

Alana888 wrote:
Mon Sep 18, 2017 2:58 am
Condos in the complex have taken anywhere from 3 months to over a year to sell, so the cost of it being empty while for sale could be significant.
Also, in a normal to prosperous market (which I suspect is the case for most, though not all, US real estate markets these days), a fairly standard property like a condo that sits on the market for 12 months was probably mispriced.

If you've got a weird property that needs a special buyer, then I could see 12 months. But condos are fairly standard - there's (roughly) a going rate for a given sized condo in a given area, presumably with some adjustment for condition and the minor positives/negatives of the for-sale unit relative to others. Price it right, and if it doesn't get interest fairly quickly, drop the price.

(Caveat: I'm not a real estate expert nor a condo owner. But I think the above is mostly fairly well recognized general advice and information.)

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Alana888
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Re: Help With Rental Property Decision

Post by Alana888 » Tue Sep 19, 2017 3:22 pm

djpeteski wrote:
Tue Sep 19, 2017 6:30 am
If there is a lot of interest in the condo, then I would look over the applicant pool. If you can find a really good tenant, then you can probably "kick the can down the road" for a year or two by renting. I would then position myself to be ready to sell, have 6 months worth of payments sitting in a savings account and start looking for realtors.

If all the applicants appear sketchy, then you really have no choice but to sell now.
Yes this is sort of the process I am using to decide. If there are some good seeming tenants (though you never really know) that would push me toward waiting and saving up the $ to keep it empty while it is for sale in about a year. If all of the prospective tenants seem like a nightmare waiting to happen, I will bite the bullet and sell now and absorb the cost of it being empty for as long as that takes. I already have a realtor who is ready whenever I am. There are currently 2 prospective tenants (out of 45 people who are interested) who seem like they could be good. We will see if they want to go forward.

I am still curious about what people think about paying off the mortgage from a maturing CD in my retirement fund to either lower the monthly cost while it is empty and for sale or to lower the my monthly cost while there is a tenant in there for a year, enabling to save the difference to pay the cost of it being empty while on the market next year. If all goes well I would recoup those $ and put it back in a CD once the condo sells. Thank you so much for the input. I have no one to talk with about these things so it is very helpful.

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Alana888
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Re: Help With Rental Property Decision

Post by Alana888 » Tue Sep 19, 2017 3:27 pm

Just to be clear, the maturing CD I would cash out to pay off the mortgage is part of my savings for retirement, but is not in a tax deferred "retirement account" like and IRA or 401K. Please forgive me if I am not using terminology correctly.
It is in a taxable account and there would be no penalty to access it. But since it is earmarked (and necessary) for retirement and I am 60, I am hesitant to risk it, though I am not sure how big a risk this would be.

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Alana888
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Re: Help With Rental Property Decision

Post by Alana888 » Tue Sep 19, 2017 3:32 pm

Very unlikely to find anyone from the prospective tenant pool who could buy it and the laws of the state its in only allow me to take the equivalent of 1 months rent as security deposit. Even if I found someone who wanted to do it, at $100 per month it would take a really long time to accumulate enough for a down payment. But I really appreciate the creative suggestion. Thank you
[/quote]

The goal is not to find a buyer per se, but rather find a better quality tenant - one with ownership aspirations. You're providing an incentive to become a model tenant while improving your profitability.
[/quote]

Maybe I'm not understanding, but I am confused about the logistics of this. Would I be obligated not to sell the condo to anyone else with the arrangement? Seems like it could take decades for them to accumulate enough to really buy it. What would be the motivation for the tenant?
They can rent a place for $100 less a month and save the $ toward ownership and not have to be responsible for repairs. Can you clarify how this would work? Thank you

ClemsonBogle
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Re: Help With Rental Property Decision

Post by ClemsonBogle » Tue Sep 19, 2017 3:38 pm

I offer a 3rd option...i didn't see someone offer this.

You had 7-8 years of bad experiences
you have had 6 years of good that are more recent?

There is now interest in your condo, perhaps you should offer slightly below market rent to get as large a tenant pool as possible. If this is by far the best place they can get for the money then 1. they will be unlikely to tear it up and 2. will be less likely to move. If absorbing 200 a month means a good stable tenant i would take that every day.

I am surprised that you aren't leaning towards trying to find another 6 year tenant and still feel anxiety over things that happened in 2010..2011. If it causes stress sure sell it, but have the last 6 years been stressful?

I have scars from being through 2 market bubbles...doesn't make me exit the market now?

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Alana888
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Re: Help With Rental Property Decision

Post by Alana888 » Tue Sep 19, 2017 3:48 pm

[quote=psteinx post_id=3539193 time=1505852418 user_id=1124

If you've got a weird property that needs a special buyer, then I could see 12 months. But condos are fairly standard - there's (roughly) a going rate for a given sized condo in a given area, presumably with some adjustment for condition and the minor positives/negatives of the for-sale unit relative to others. Price it right, and if it doesn't get interest fairly quickly, drop the price.

(Caveat: I'm not a real estate expert nor a condo owner. But I think the above is mostly fairly well recognized general advice and information.)
[/quote]

Yes its a little bit of a weird situation. This is a formerly low end condo complex where about 2/3 of the units have been extensively upgraded and remodeled and these sell and rent for a lot more and more quickly than the "original, non upgraded units. The upgraded units almost always sell quickly. I have an original not upgraded one and these are harder to sell. Sometimes they hit the market at a good time and someone is looking for something they can remodel themselves or something inexpensive and they go quickly. But other times they sit on the market for a while, even if the price is lowered, because the pool of prospective buyers looking for these is small. I have been tracking the sales of these originals and some sell in 2- 3 months for more than others that sat on the market for a year despite several price lowerings. Its just timing. I have considered doing the remodel but in terms of the goal of reducing stress and limiting the investment in the property, it would be going in the wrong direction.

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Alana888
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Re: Help With Rental Property Decision

Post by Alana888 » Tue Sep 19, 2017 4:06 pm

ClemsonBogle wrote:
Tue Sep 19, 2017 3:38 pm
There is now interest in your condo, perhaps you should offer slightly below market rent to get as large a tenant pool as possible. If this is by far the best place they can get for the money then 1. they will be unlikely to tear it up and 2. will be less likely to move. If absorbing 200 a month means a good stable tenant i would take that every day.
Yes this is what I have done (its being advertised for about $150 per month less than market value) and its giving me 45 inquiries in 2 days. However most of the prospective tenants are people who struggling financially and couldn't afford it at market value so not the best tenants, but still worth it as it gives me a wide pool to choose from and makes the more financially stable tenants appreciate the good deal.
ClemsonBogle wrote:
Tue Sep 19, 2017 3:38 pm
I am surprised that you aren't leaning towards trying to find another 6 year tenant and still feel anxiety over things that happened in 2010..2011. If it causes stress sure sell it, but have the last 6 years been stressful?

I have scars from being through 2 market bubbles...doesn't make me exit the market now?
Thank you for this alternative perspective

Yes you are correct in that some of my stress is self induced by the fear of possible future stress based on past experience. In retrospect the last 6 years have been relatively stress free, but there is always the underlying stress that any day the tenants can call me with an urgent and expensive emergency and I have to drop everything and take care of it. Even if I am out of the country, even if I am busy working, even if I dont have the extra $.

It might be worth it if there was a good return on my investment, but the rent will just cover expenses without repairs so there is no positive cash flow and with repairs probably some negative cash flow. Though I am making the $350 or so per month of the mortgage payment that goes to principle, so I guess that would count as return on my investment.
Prices are rising slightly, but that can change anytime.
I have had $60,000 in this condo for 15 years and it is worth about $10,000 more than I paid for it and I have almost that into it. If I had that $60,000 in mutual funds over those 15 years I would have probably made more and they would have never called to yell at me that the air conditioner isn't working in July.

But yes if I get a good tenant in there it might be worth it for a bit longer while they pay down the mortgage enough to give me extra after the sale to pay for the cost while it was on the market. Assuming property values don't go down in that time.

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boomer
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Re: Help With Rental Property Decision

Post by boomer » Tue Sep 19, 2017 7:50 pm

Just wondering if you have talked to your tax professional regarding what your tax liability will be when you sell? Not trying to stress you out, but you will want to know what to expect.
Even if you don't have a profit on the condo when you sell, I believe that there will be 25% recapture tax on the depreciation that you have taken.
Good luck on your decision. Having a rental 2500 miles away is not a fun situation.
I'm curious, are you still employed and working where you are living now? If not, another idea is that you could sell your personal home, which you wouldn't owe any tax on, and move into the condo and live there two years and then sell it as your personal home. You would still have some tax to pay but not as much. That way you would only have one payment and after it was sold you could buy the home that you want. Just an idea.
Of course, that doesn't work if you need to stay where you are now for work or for other reasons.

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Pajamas
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Re: Help With Rental Property Decision

Post by Pajamas » Tue Sep 19, 2017 7:56 pm

If you price it right, you can sell it quickly. Price it right and sell it quickly. Walk away from the hassle with money in your pocket.

Sounds like you got lucky with that last tenant. It seems like a good time to sell in general. You don't sound like you really want to be a landlord and it also sounds like it would be better for you not to have money tied up in a rental property.

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Alana888
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Re: Help With Rental Property Decision

Post by Alana888 » Tue Sep 19, 2017 8:08 pm

Thank you for the responses
Yes I am aware that I will have to pay tax on recaptured depreciation. Another reason to sell sooner rather than later
For many reasons its not an option for me to move there.

I appreciate all the various perspectives on reasons to sell and to wait.

I would love some more input about whether people think it makes sense to cash out the CD and pay off the mortgage to minimize the expenses either while its for sale empty or while its rented for another year to accumulate the $ to sell it empty next year. Or is it too risky to have that much money in this kind of an investment, even for a few months? I am not sure if this is a good idea or not and would love to hear what people think. Not having the expense of mortgage interest would make it easier to pay the expenses until it sells.

Thank you.

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boomer
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Re: Help With Rental Property Decision

Post by boomer » Tue Sep 19, 2017 8:50 pm

Alana888 wrote:
Tue Sep 19, 2017 8:08 pm
Thank you for the responses
Yes I am aware that I will have to pay tax on recaptured depreciation. Another reason to sell sooner rather than later
For many reasons its not an option for me to move there.

I appreciate all the various perspectives on reasons to sell and to wait.

I would love some more input about whether people think it makes sense to cash out the CD and pay off the mortgage to minimize the expenses either while its for sale empty or while its rented for another year to accumulate the $ to sell it empty next year. Or is it too risky to have that much money in this kind of an investment, even for a few months? I am not sure if this is a good idea or not and would love to hear what people think. Not having the expense of mortgage interest would make it easier to pay the expenses until it sells.

Thank you.
Honestly, I would not cash out the CD. The money is completely illiquid in the condo and the interest is tax deductible, as well. Also, right now the bank is sharing the risk with you on the investment. You may have already done this, but when opening a CD, do four-$25,000 ones instead of one $100,000 one. That way you can just cash in one if you get strapped and need the money.
Here is what I would do: rent the condo to the best tenant possible by screening well, as in credit reports, paystubs, background check. Do a six-month lease. Then in six months, when it is spring and usually the best time to sell, put the condo on the market. You could do as someone else suggested and offer your current tenants an incentive to stay in the condo renting until it sells. That would be a win-win for both of you.

TTBG
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Re: Help With Rental Property Decision

Post by TTBG » Tue Sep 19, 2017 9:21 pm

Personally, I would not put another 100K into the condo. You would be moving 100K from the safety of a CD into a much riskier real estate investment; how does that change your overall investment allocation? I am pretty risk averse, so I wouldn't make such a big change in my allocation even if I expected/hoped it was temporary -- stuff happens.

Maybe take 10K out of the CD when it matures and use that to pay expenses until you can sell it?

Jim Beaux
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Re: Help With Rental Property Decision

Post by Jim Beaux » Tue Sep 19, 2017 9:38 pm

Ive been a homeowner most of my life, but 20 yrs ago I sold my home & moved into a upper middle class duplex complex for 1 yr before buying another home. I was surprised at the mindset of most of my fellow tenants-'not mine, not my problem'. No one took any interest in the property & viewed it as disposable. Many were people unsettled, either going through a life change, ie. divorce, recently married, or recovering from a financial situation.

I suggest you focus on tenants that have differing needs. Research the local industries. Many times the big companies are transferring people in, either for short term assignments or permanent positions. I contracted with a large corporation & they kept a block of properties on long term lease for people like me. Invest the time & target these firms & make inquiries. Touch base with property management firms, just to get a feel (not suggesting you employ them)

Is there a military base, Coast Guard, Home Land Security, or a big hospital? Many doctors now work as contractors to hospitals & rotate to different cities. Think, research, make phone calls, you will be surprise at the markets for your condos.

Thoroughly vet potential tenants, get their credit history, previous land lords, banking info, references. If they refuse or balk, walk away smiling, because you just dodge a bad experience.

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Alana888
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Re: Help With Rental Property Decision

Post by Alana888 » Wed Sep 20, 2017 12:39 am

Thank you so much for the opinions regarding the CD. I had a feeling that might not be a smart move and just needed some feedback.
Thank you also for the suggestion about finding a better tenant.
The high season for selling where the condo is is the wintertime. Summer is very slow, so I am leaning toward interviewing prospective tenants for the next week or so and if I find a good one I will rent for another year and save the $ to sell with it empty next year. If I can't find a good tenant I will bite the bullet and pay the $1600 per month while its empty and put it on the market, priced low enough to hopefully sell quickly.

I really appreciate the feedback. It is really helpful
Thank you

CurlyDave
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Joined: Thu Jul 28, 2016 11:37 am

Re: Help With Rental Property Decision

Post by CurlyDave » Wed Sep 20, 2017 2:29 am

1. Don't use the CD to pay of the mortgage. If you must, try a variation on this which I will call "use the CD on the installment plan". Keep the mortgage and roll over the CD into a number of bite-sized pieces which can be used to pay the mortgage for a few months each. Do this with about 2 years worth of payments. Use for this purpose as necessary. When/if the place sells put the pieces remaining into higher return investments.

2. As a landlord with 4 or 5 decades worth of experience, I can tell you that the strategy of advertising at below market rents will usually bring you grief. A rental at a substandard rate will attract hordes of substandard tenants.

If I were renting this unit, I would just tell all of the prospects that I had changed my mind and not even interview a single one of them. There might be some grains of wheat in there, but you have advertised in a way to attract mostly chaff. If you are going to keep renting the unit, re-advertise at market rate and select from tenants who can actually afford the place.

3. The state law limiting deposits makes my blood run cold. This is a very landlord-unfriendly state and I would never consider owning a property there. Sell it now, take your lumps and get out.

4. I have been successful in the small-time landlord sideline, but one of the reasons is that I have always owned properties within an hour drive of my home and have always managed them myself. One property 2500 miles away is a recipe for disaster. Sell it now, take your lumps and get out.

5. The HOA rule about 6 month leases makes my blood run cold also. This is a very landlord-unfriendly rule. A lease protects a tenant, but there is no practical way it protects a landlord. If the tenant moves out, you are obligated to make a good-faith effort to re-rent and the damages you can theoretically win in court are limited to the amount of rent lost. Most tenants have nothing to attach and are judgement-proof so the odds on a landlord actually collecting anything are about the same as my dog learning to write novels in French. Plus you are 2500 miles away. How would you enforce any part of a lease from that distance? Small claims court requires appearances. You will loose more in plane tickets and hotel rooms than you will gain in a judgement. An attorney is even more expensive. Sell it now, take your lumps and get out.

Topic Author
Alana888
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Joined: Thu Apr 10, 2014 3:50 am

Re: Help With Rental Property Decision

Post by Alana888 » Wed Sep 20, 2017 2:51 am

Thank you Curly Dave.
The rental is a desirable vacation state and the 6 month lease rule is to keep landlords from using their property for vacation rentals, which is very lucrative for the landlord but makes life miserable for the long term tenants.

Yes I am attracting many many many interested potential tenants but most sound like a nightmare waiting to happen, though there are 2 that sound like potential good tenants. If neither of those pan out I will likely sell. I am still having trouble throwing $1600 per month at it for an unlimited/unknown amount of time while its for sale when I could be collecting rent, but I understand that is probably being "penny wise and pound foolish"

I've had several tenants break their lease in the past and yes, as you say, there is no way to even find them, let alone collect anything. It is mostly protection for the tenant

Thanks again for you input

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BolderBoy
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Re: Help With Rental Property Decision

Post by BolderBoy » Wed Sep 20, 2017 10:25 am

CurlyDave wrote:
Wed Sep 20, 2017 2:29 am
Sell it now, take your lumps and get out.
This is the wisest counsel you will get. Follow it.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

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