Have a bit of a dilemma i'm hoping i can get your input on.
I bought a townhouse property to flip, but do to a lawsuit the HOA brought against the builder most lenders will not underwrite a mortgage until the lawsuit it over which is probably about a year away. No FHA and any buyers would have to get a non-conforming loan with 25% down. I have owned the property for six months now.
I received an offer to rent and need help deciding on what to do. Below are all the numbers.
Offer to rent is $1800 per month + all utilities. Renters are two teachers and their three small children. No pets and non-smokers.
Built in 2006 (has been vacant since 2011)
Property is in excellent condition
HOA responsible for all exterior maintenance and repairs
In a well cared for 300 unit development
Into the property for $127k (currently borrowed at 5%)
Current Property Value = $165-170k ( the property will be worth more as soon as the lawsuit is complete)
Annual Property taxes = $5400
Annual HOA= $2400
Insurance = $800
What should i do? I didn't purchase this as a buy and hold, but have had it on the market for 6 months and have had two sales fall apart because of this lawsuit. There is nothing wrong with the property as any defects were already addressed by the HOA.
Thank you in advance for all your feedback.
@Mayer M. You will be hard pressed to find someone to buy it with cloudy title. I would rent it out till the lawsuit is cleared and you can sell it. Just make sure your HOA allows rentals
There’s no cloudy title the title is perfectly fine. Rentals are permitted. It’s common that if there is a lawsuit pending lenders are reluctant to underwrite mortgages
HOA has a ratio of owned vs leased. If it has a high rental ratio, it may be difficult for VA, FHA, low down borrowers.
Your choices are: Keep it vacant until lawsuit is over; Lease it and accept wear and tear after moving out. I would think plan 2 is a better choice.
I would rent it in a heartbeat
What do you guys think about renting it and selling it privately with a tenant in place? And based on the numbers what do you think I should try to get for it?
Sam, There are barely any units in this development that are leased so the issue is not the ratio of leased vs. owned
Crazy. Just got an offer for $151k close end of April. Lender has already confirmed they would underwrite the loan. Now sell or rent?
@Mayer M. I would definitely rent it. Especially if it will be worth more in a year (as long as the law suit is really only going to take a year...as I’m sure you are well aware law suits can get drug out with continuances). Your rent to value is solid and your rent to cash invested looks really good to me. How bad do you need the cash? If you keep it as a rental would a local credit union or something do a HELOC on it? Non owner occupied HELOCs are very possible. Is this an area that is typically appreciating? Is it an A or B neighborhood? How are the schools in the area? These are all questions I would ask myself before deciding one way or the other. But if the law suit will truly be settled in a year and if the home will truly be worth more in a year than its current value then it seems like renting is a no brainer.
The cash is borrowed I don’t need it back right away and if I did I can go and get a 75% LTV from a local lender. It is an a B/A area great schools
I think the issue I’m having is based on the numbers if I do a cash out of $125,000 which is what I have into the unit and amortize it over 15 years I’m breaking even after vacancy and repair calculations. On the flipside I will have plenty of equity and be building equity every month as well as the potential for appreciation.
Honestly, I don’t know what to do I’m lost in this scenario
So based on the rental numbers and the offer to purchase rent or sell? I don’t think I can go wrong with either but not sure what the best move is.
Happy Easter to all!
$5,400 taxes on a $170,000 property lol. Maybe invest across the river in PA?
Yep. Jersey taxes are through the roof
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