Am I overlooking something?

Question

For a cross-country move, we desperately need to sell our residence within 2 months.
Paid $139k in 2007.
Have a $15k rehab loan that let us put on steel siding and new windows.
Have $99k left on mortgage.

Market has tanked here in St. Cloud, MN.

5 months on the market with the top rated realty company in the area.

Struggling to sell at $124,900 after starting at $129,900. 10 showings, no offers.

I was looking at renting this place out (since I already have 1 rental property) & waiting for the market to continue it's rebound.

But the 50% rule is scaring me off now, as the house barely cash-flows when only considering PITI and PropMgt. $1100/mth income vs. $940/mth outgo.

Am I overlooking viable options for moving this property? Contract for Deed? Rent to Own? Craigslist?

[b]Please be candid. Eyes wide open.

Thanks BP. I love this online community! Bonkers in St. Cloud

Eric Tait · Answer

Owner finance (similar to contract for deed if that is legal in your state) is a good way to get out of your situation, with the possibility of making some money on the deal.
Ask for at least 10% down and figure out what interest rate you would like to charge (depends upon their credit, I suggest nothing less than 8% even with impeccable credit.)
You can use a mortgage loan calculator online to get the amortization table, and there are companies out there that will 3rd party service the loan and report to the credit bureaus for you.
I suggest finding a real estate attorney in your area that has done these to structure it correctly for you.
I hope this gives you some ideas.

Brian Knox · Answer

Great feedback, all! I appreciate you giving your time. Still hoping to sell at $119,900. Open to renting as last resort.

Even though we're not Catholic, we even tried burying a statue of St. Joseph in the yard. The urban legend is that it works because he's the "Saint of House Sales." : )

Mary B. · Answer

Are you willing to offer any seller's assistance on the purchase?

Have you considered offering it on the terms of a lease/purchase in say... 1 yr?

Many people want to but can't buy homes write now and need some time to upgrade or establish their an acceptable FICO.

They'll be required to handle any minor repairs if you write it up in the agreement. Make sure all mechanicals are good. If not, write up an agreement that they pay for 50% of any major repairs 100% of minor repairs. You still get a nice down payment from them in the process and they pay a bit more per month because of the option to buy.

Kudos, Mary

William Strong · Answer

Elizabeth Colegrove if I'm understanding your post right you ensure atleast $300 in cash flow to see if renting is a good idea?

I'm in the military myself and have a house that will most likely need to be rented out soon and was trying to figure out if I should sell or rent. I might employ a similar strategy to yours.

Steven Hamilton II · Answer

Terence Nash,

You are required to depreciate as when you sell you wll face recapture on the depreciation that you did take or should have taken.

-Steven

Elizabeth Colegrove · Answer

My husband and I move often because of the military. Therefore we have a "different" rule for personal property. I take expenses (monthly) - profits. If the different is $300 or more in the positive, I rent it. This has worked really well for us, to date. The $300 makes sure that repairs don't cost me anything out of pocket. Someone else is paying my mortgage.

My investment houses follow a different rule.

Terence Nash · Answer

If you can claim the interest and depreciate the property, you may have enough to have a small surplus to dampen vacancy and maintenance. I did some calculations as an example.
Interest $6000 = $1800 return
Depreciation (note 1) $4800 = $1440 return
Rent cash flow = $1920.
for a total of $5160/year
This looks like enough to keep you from bleeding if it's going to be a rental.

Note 1: If you depreciate, you will have to pay this back if you sell the property later on. You can't claim these losses if you make over $150k and you're not a "real estate" professional.

Mark Ferguson · Answer

If I used the 50% rule I would never be able to buy anything. I look at many variables when Buying rentals and when you already own a place everything changes. I would not look at rules and what everyone else says you need to make it work. I would run numbers yourself on both scenarios; selling low and renting out. There are a lot I variables you will have to guess about like what the market in st cloud will do in the future. That is pretty tight cash flow, I you have any vacancies or repairs you probably won't make anything.

Am I overlooking something?

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