[Calc Review] CoC ROI - 54%?

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[Calc Review] CoC ROI - 54%?

Tashina Taylor
Gillette, WY · Member since 2019 · 85 posts · 18 votes

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*This link comes directly from our calculators, based on information input by the member who posted.

So this is an assessment of the house I currently live in. We've had some CRAZY appreciation in prices from the pandemic and people wanting to move to more rural areas. I am stuck between wanting to sell it and be done with it and never forgive myself for selling real property (lol) and using the money to pay off my consumer debt that I've racked up from losing my job in April due to COVID, or attempting to get it refinanced based on potential rental earnings if I can convince a bank to let me do that without a real job. We have a house to move into, so doing either one is viable but I am looking at the numbers and trying to decide which is better overall. One is a quick payoff of debt which is a heavy load on a jobless person going to grad school for the next two years. The other is a gradual payoff if I can swing making minimum payments on my cards I used to fix up the house and deal with it until I get a job again, using the extra $500 towards debt payoff and maybe doing some Door Dashing on my time off.

Anyways, I currently owe $187k on it. I bought it for $189k two years ago, and it has since appreciated to $240k+. I can refi and get out of PMI at this point. Insurance just paid for a new roof and new paint on the house (it's like a totally different house!) and I paid for a new water heater out of pocket. Contractors are currently retiling and painting the bathrooms and I think I'll be out about 5k from that. Overall 12k max if I decide to put better countertops and a new fridge. I've been fixing it up to sell in general and realized I may be able to ask for a very good rental price because of that.

I am basing the rent on what's available in the neighborhood. There is a townhouse that is smaller than this one that is asking $1700/month. There is a VERY fancy house that is 300 sqft bigger than this one that is asking $2000/month. I figure $1800 would be a safe number to ask for. I would ask $2k/month if they wanted to bring in dogs. Pet rent ftw! Rental inventory in this town is low, let alone rentals that allow big dogs. Because of this, I feel like I could guarantee the rental asking price. 

What are your thoughts?

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Karen O.
NYC, NY · Member since 2016 · 617 posts · 456 votes
5y

Were I in your shoes with an alternative housing option, outstanding debts, and no crystal ball telling me the mkt will continue to appreciate, I'd sell it. 

Figure out what the planned improvements will add to today's FMV. If more than cost, decide if you have time to get updates done quickly. If not, sell as is while the mkt is hot.

Use the proceeds for debt payoff and current living expenses if necessary.  What you don't need, set aside for future investment. 

There will be opportunities in the future to buy another rental. 

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  • Tchaka Owen
    Real Estate Agent · Merritt Island, FL · Member since 2017 · 974 posts · 1k+ votes
    5y

    @Tashina Taylor- to me, this is a very easy decision. What's your hesitation to rent it?

    1. You have a place to move to, let's assume it's the same price as your current mortgage. If you sell and move, you're still paying the same each month. If you rent the home, the renter will pay the mortgage and you'll have cashflow of $500/month.

    2. Commit the $500/month to your debts. That way your renters are paying it off for you and you're maintaining (and possibly increasing) your equity in the home.

    3. If the home has appreciated so much, call the lender and ask that the MI be removed. As long as you've owned it 2 years and have (I believe) 22% equity, they're required to remove it.

    Good luck!

    0Reply
  • Tashina Taylor
    OP
    Gillette, WY · Member since 2019 · 85 posts · 18 votes
    5y
    Originally posted by @Tchaka Owen:

    @Tashina Taylor- to me, this is a very easy decision. What's your hesitation to rent it?

    1. You have a place to move to, let's assume it's the same price as your current mortgage. If you sell and move, you're still paying the same each month. If you rent the home, the renter will pay the mortgage and you'll have cashflow of $500/month.

    2. Commit the $500/month to your debts. That way your renters are paying it off for you and you're maintaining (and possibly increasing) your equity in the home.

    3. If the home has appreciated so much, call the lender and ask that the MI be removed. As long as you've owned it 2 years and have (I believe) 22% equity, they're required to remove it.

    Good luck!

     We actually will not be paying rent at our new place.

    0Reply
  • Tashina Taylor
    OP
    Gillette, WY · Member since 2019 · 85 posts · 18 votes
    5y

    Unfortunately, the banks I've talked to around town will not let me refinance using rental income unless I've had established rental income for 2 years already....

    0Reply
  • Tchaka Owen
    Real Estate Agent · Merritt Island, FL · Member since 2017 · 974 posts · 1k+ votes
    5y

    @Tashina Taylor:

    1. What is the root of your desire to refinance? Is your rate poor?

    2. You're not going to have to pay rent, thus stand to bring in $1300-1400/month that will help pay off your debts and you're not sure what to do? Hmm....

    0Reply
  • Tashina Taylor
    OP
    Gillette, WY · Member since 2019 · 85 posts · 18 votes
    5y
    Originally posted by @Tchaka Owen:

    @Tashina Taylor:

    1. What is the root of your desire to refinance? Is your rate poor?

    2. You're not going to have to pay rent, thus stand to bring in $1300-1400/month that will help pay off your debts and you're not sure what to do? Hmm....

    How would I bring in $1300-1400 a month? I would still have a mortgage payment of $1200 or so.

     The root of my desire to refinance is because I am locked into a mortgage through my state that does not allow me to rent out my house. The only way I am allowed to do that is to refi with a conventional mortgage. 

    0Reply
  • Karen O.
    NYC, NY · Member since 2016 · 617 posts · 456 votes
    5y

    Were I in your shoes with an alternative housing option, outstanding debts, and no crystal ball telling me the mkt will continue to appreciate, I'd sell it. 

    Figure out what the planned improvements will add to today's FMV. If more than cost, decide if you have time to get updates done quickly. If not, sell as is while the mkt is hot.

    Use the proceeds for debt payoff and current living expenses if necessary.  What you don't need, set aside for future investment. 

    There will be opportunities in the future to buy another rental. 

    2Reply
  • Tchaka Owen
    Real Estate Agent · Merritt Island, FL · Member since 2017 · 974 posts · 1k+ votes
    5y

    i) there wasn't any mention of a special mortgage that does not allow you to rent out your house. What would I do? Rent the house out. One of three things will happen: a) you'll have rental income and will then be able to refi, b) you'll get caught by the state and they'll force you to refi immediately if you don't want to be in trouble (ooooooh!), or c) nothing will happen and they'll never even know. The best and most likely option is "a". I like to play by the rules so I would refi as soon as a lender allows. But if getting there means renting it, that's what will happen.

    ii) perhaps I should have termed it differently. The rent that you're not paying is what I counted towards monies available to pay off your debts. 

    1Reply
  • Tashina Taylor
    OP
    Gillette, WY · Member since 2019 · 85 posts · 18 votes
    5y
    Originally posted by @Karen O.:

    Were I in your shoes with an alternative housing option, outstanding debts, and no crystal ball telling me the mkt will continue to appreciate, I'd sell it. 

    Figure out what the planned improvements will add to today's FMV. If more than cost, decide if you have time to get updates done quickly. If not, sell as is while the mkt is hot.

    Use the proceeds for debt payoff and current living expenses if necessary.  What you don't need, set aside for future investment. 

    There will be opportunities in the future to buy another rental. 

    That was my general feeling on the matter as well. Thank you. I needed a voice of reason!

    0Reply
  • Praveen Kumar
    Austin, TX · Member since 2018 · 17 posts · 10 votes
    5y

    Also, while it is still your primary and you have about 50k equity, I would also look into getting a HELOC. The line wouldn't be substantial but would be a good way to pay down your CC debt.

    What is this house that you are moving into that you don't have to pay for? That seems like a no-brainer.

    1Reply
  • Tashina Taylor
    OP
    Gillette, WY · Member since 2019 · 85 posts · 18 votes
    5y
    Originally posted by @Praveen Kumar:

    Also, while it is still your primary and you have about 50k equity, I would also look into getting a HELOC. The line wouldn't be substantial but would be a good way to pay down your CC debt.

    What is this house that you are moving into that you don't have to pay for? That seems like a no-brainer.

    My MIL won a house in an auction, which is cash only (no HML's allowed). We'll be moving into that one since it's owned outright now.

    0Reply
  • Praveen Kumar
    Austin, TX · Member since 2018 · 17 posts · 10 votes
    5y
    Originally posted by @Tashina Taylor:
    Originally posted by @Praveen Kumar:

    Also, while it is still your primary and you have about 50k equity, I would also look into getting a HELOC. The line wouldn't be substantial but would be a good way to pay down your CC debt.

    What is this house that you are moving into that you don't have to pay for? That seems like a no-brainer.

    My MIL won a house in an auction, which is cash only (no HML's allowed). We'll be moving into that one since it's owned outright now.

    Ah. We need another category on this forum to network with people with wealthy mothers in law :)

    0Reply
  • Tashina Taylor
    OP
    Gillette, WY · Member since 2019 · 85 posts · 18 votes
    5y

    @Praveen Kumar

    Haha I wish! She used equity from selling her house in California. It sounds like a lot, but the house was only 60k and needs minimal work. It's also pay back for letting her live with me rent free ;)

    1Reply
  • Tchaka Owen
    Real Estate Agent · Merritt Island, FL · Member since 2017 · 974 posts · 1k+ votes
    5y
    Originally posted by @Karen O.:

    Were I in your shoes with an alternative housing option, outstanding debts, and no crystal ball telling me the mkt will continue to appreciate, I'd sell it. 

    Figure out what the planned improvements will add to today's FMV. If more than cost, decide if you have time to get updates done quickly. If not, sell as is while the mkt is hot.

    Use the proceeds for debt payoff and current living expenses if necessary.  What you don't need, set aside for future investment. 

    There will be opportunities in the future to buy another rental. 

    Strongly disagree. 

    Whether the market goes up or down is missing the golden goose in front of you: rents will (much) more than cover mortgage. Which means that regardless of what the market does, she continues to get the mortgage paid and positive cashflow to cover the accrued debts. It's like Kiyosaki 101. 

    0Reply
  • Karen O.
    NYC, NY · Member since 2016 · 617 posts · 456 votes
    5y

    I gave my suggestion.  You and others gave yours.  I think it's great that she's got options and can pick the one best for her. Or not.

    1Reply
  • Tashina Taylor
    OP
    Gillette, WY · Member since 2019 · 85 posts · 18 votes
    5y
    Originally posted by @Tchaka Owen:
    Originally posted by @Karen O.:

    Were I in your shoes with an alternative housing option, outstanding debts, and no crystal ball telling me the mkt will continue to appreciate, I'd sell it. 

    Figure out what the planned improvements will add to today's FMV. If more than cost, decide if you have time to get updates done quickly. If not, sell as is while the mkt is hot.

    Use the proceeds for debt payoff and current living expenses if necessary.  What you don't need, set aside for future investment. 

    There will be opportunities in the future to buy another rental. 

    Strongly disagree. 

    Whether the market goes up or down is missing the golden goose in front of you: rents will (much) more than cover mortgage. Which means that regardless of what the market does, she continues to get the mortgage paid and positive cashflow to cover the accrued debts. It's like Kiyosaki 101. 

    I think you should look into the dynamics of a boom and bust town before making the golden goose claim. 

    0Reply
  • Tchaka Owen
    Real Estate Agent · Merritt Island, FL · Member since 2017 · 974 posts · 1k+ votes
    5y
    Originally posted by @Tashina Taylor:
    Originally posted by @Tchaka Owen:
    Originally posted by @Karen O.:

    Were I in your shoes with an alternative housing option, outstanding debts, and no crystal ball telling me the mkt will continue to appreciate, I'd sell it. 

    Figure out what the planned improvements will add to today's FMV. If more than cost, decide if you have time to get updates done quickly. If not, sell as is while the mkt is hot.

    Use the proceeds for debt payoff and current living expenses if necessary.  What you don't need, set aside for future investment. 

    There will be opportunities in the future to buy another rental. 

    Strongly disagree. 

    Whether the market goes up or down is missing the golden goose in front of you: rents will (much) more than cover mortgage. Which means that regardless of what the market does, she continues to get the mortgage paid and positive cashflow to cover the accrued debts. It's like Kiyosaki 101. 

    I think you should look into the dynamics of a boom and bust town before making the golden goose claim. 

    I think you should look at your own writing: "Because of this, I feel like I could guarantee the rental asking price" so that readers don't scratch their heads when you later write counter to earlier script. If you couldn't guarantee rents, the solution(s) could easily change. 

    0Reply
  • Tashina Taylor
    OP
    Gillette, WY · Member since 2019 · 85 posts · 18 votes
    5y
    Originally posted by @Tchaka Owen:
    Originally posted by @Tashina Taylor:
    Originally posted by @Tchaka Owen:
    Originally posted by @Karen O.:

    Were I in your shoes with an alternative housing option, outstanding debts, and no crystal ball telling me the mkt will continue to appreciate, I'd sell it. 

    Figure out what the planned improvements will add to today's FMV. If more than cost, decide if you have time to get updates done quickly. If not, sell as is while the mkt is hot.

    Use the proceeds for debt payoff and current living expenses if necessary.  What you don't need, set aside for future investment. 

    There will be opportunities in the future to buy another rental. 

    Strongly disagree. 

    Whether the market goes up or down is missing the golden goose in front of you: rents will (much) more than cover mortgage. Which means that regardless of what the market does, she continues to get the mortgage paid and positive cashflow to cover the accrued debts. It's like Kiyosaki 101. 

    I think you should look into the dynamics of a boom and bust town before making the golden goose claim. 

    I think you should look at your own writing: "Because of this, I feel like I could guarantee the rental asking price" so that readers don't scratch their heads when you later write counter to earlier prose. If you couldn't guarantee rents, the solution(s) could easily change. 

    I had also mentioned earlier that I couldn't get refinanced without previous rental history if you were paying attention :)

    0Reply
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