Underwater Personal Property and REI

5 Replies

Greeting everyone and thank you in advance for any help any of you can offer me.

I currently live in NY and am 1 year away from retiring. My wife and I want to move down south to FL.

We bought our home prior to the market crashing. Because of that our personal home is underwater. We bought it for about $340K and according to Zillow it is now worth about $280K.

I also want to start investing in rental properties. With that said I will be able to cash out some savings with penalty of approximately $100K.

With all this said here are my questions:

1. What do you suggest I do about my personal home? Should I rent it out? (Mortgage is pretty hefty...at least I think so, about $3K a month)

2. Should I sell it and take the loss and use some of the $100K to cover the difference?

3. Should I use the $100K or a portion of it to buy a new personal home in FL?

4. If I use a portion, should I use the other for REI?

Again, thank you all!

@Cesar Castillo

First, I wouldn’t trust Zillow’s estimate.

I don’t know about your local market, but values are being drive up, maybe not quite enough to cover your shortfall... but maybe enough you don’t mind putting up the cash to get out.

If you don’t long distance investing, renting it probably the better choice for your current residence. There is no sec121 exemption to worry about since you don’t have capital gains. Let the tenants help pay off your mortgage. This assumes your residence will serve decently as a rental.

Good to hear you are retiring and sorry about your troubles. Good luck.

I wouldn’t rent just because it’s underwater. Putting good money into bad doesn’t solve anything. BUT, if it’s a good place to rent and the rent will cover your expenses, then yes, it might make sense.

But if your mortgage is $3K/mo, once you plan for some repairs, property manager, you’ll need $3500-$4000/mo in rent. Is that doable in your area? I don’t know that I would suggest losing money on monthly rent unless there’s some reason you really believe the property will appreciate significantly.

I would start finding a good realtor. Ask friends and neighbors and find a good one - not just one who you got their card in the mail. Ask them what your house is worth to sell or to rent. Then start making decisions based on that.

@Mike McCarthy

Thank you Mike.

I will definitely ask around for a good realtor to find out exactly what my home could rent for in my market.

I’ve seen homes similar to mine in the next town over renting for about what I pay in my mortgage. However, as you stated it doesn’t account for other expenses such as a property manager.

Thankfully I have until next summer to figure out all these things. But I want to get ahead now so I can begin with getting into my first REI.

What is your current mortgage balance and interest rate, $3k/mo on a $340k property that you presumably put something down on sounds like you are still paying interest rates from 13+ years ago and presumably you've paid off at least some of that mortgage in the past 13+ years so maybe not that far underwater.