Big decision - home own vs. rent with a twist!

**humandraydel** · 07-25-2007, 02:57 AM

I would keep the house and live in it. If you have to take an IO ARM to buy the condo, you can't afford it. And why in the world would you want to rent the house for less than the mortgage?

**cschin4** · 07-25-2007, 04:29 AM

I didn't see any income information so I can't say. Please post a little more info.
But, owning real estate is often a LIABILITY! People seem to just assume that property goes up in value, that their place will be easy to rent, and so forth.
A poor renter can do thousands of $$ in damage in a very short time. And, will you be maintaining the pool yourself? I wouldn't leave that job in the hands of a renter. Do you want to be called in the middle of the night, deal with someone who may not pay on time or even at all, have to deal with possible evictions, etc. Also, if you have renters who are drug users, your property could be seized and you held liable for this as well.
If by having a rental, you are close the edge financially, then I would say you should absolutely not do it. There are ALWAYS unplanned expenses such as a leaky roof, etc. You would be much better off to just invest in a mutual fund for your future.

**Harrison** · 07-25-2007, 05:24 AM

it seems like real estate market in your area is having some tough time because both rent out and selling will make you losing money.

But do you consult any experts? It sound like all the figures are just your thoughts. Maybe you should ask some experts about the rental and your house's value.

**dcox20** · 07-25-2007, 05:47 AM

Originally posted by humandraydel View Post

I would keep the house and live in it. If you have to take an IO ARM to buy the condo, you can't afford it. And why in the world would you want to rent the house for less than the mortgage?

We're buying the condo for reasons having nothing to do with finances. The decision to go IO is so that we can adjust the amount we pay into principal each month on our own... but in case of emergency the (required) nut we have to crack is smaller than a P&I payment

Rent in this area is at a going rate of about $1/sqft so that's where we put it.

**dcox20** · 07-25-2007, 05:52 AM

Originally posted by cschin4 View Post

I didn't see any income information so I can't say. Please post a little more info.
But, owning real estate is often a LIABILITY! People seem to just assume that property goes up in value, that their place will be easy to rent, and so forth.
A poor renter can do thousands of $$ in damage in a very short time. And, will you be maintaining the pool yourself? I wouldn't leave that job in the hands of a renter. Do you want to be called in the middle of the night, deal with someone who may not pay on time or even at all, have to deal with possible evictions, etc. Also, if you have renters who are drug users, your property could be seized and you held liable for this as well.
If by having a rental, you are close the edge financially, then I would say you should absolutely not do it. There are ALWAYS unplanned expenses such as a leaky roof, etc. You would be much better off to just invest in a mutual fund for your future.

That is another reason we're tentative on the renting side - in an ideal world we'd find friends or acquaintences to rent from us, but even that can be an issue when troubles arise or the friendship goes south.

Income info:

Him: $25k base, roughly 75k in commission each year (total 100k), also a side business that accounts for about $2000/mo so AGI for him is $124k

Her: $48k/yr

We have no problem pre-qualifying to own both homes concurrently and have pretty good credit (mid-7s) for our ages (28 & 26)

**dcox20** · 07-25-2007, 05:56 AM

Originally posted by Harrison View Post

it seems like real estate market in your area is having some tough time because both rent out and selling will make you losing money.

But do you consult any experts? It sound like all the figures are just your thoughts. Maybe you should ask some experts about the rental and your house's value.

Real estate in this area had the biggest increase it's ever had about a year ago - in the warmth of all of that "equity" (which is a fools pursuit it seems) we put in a new backyard (pool, concrete, synthetic lawn, landscaping, etc) to the tune of $100k which brought us up to a total loan amount of nearly $356k - at the time still well under our value of $410k. Then the housing market crashed and took us with it, now we'll be lucky to get $360k and likely end up near $340-$350k

We did talk toour realtor lat night (which is the impetus for my post) and have a meeting scheduled with the CPA in a few days.

**simpleyme** · 07-25-2007, 06:24 AM

my first thought was not to move,but since that appears to be something you wont do

I would sell and be done with it

6 months of renting it out and it could be unsalable without major expense to you ,we do all our own clean up and repairs on our paid for rentals and i tell you many renters are just dirty ,even people who make decent money and pay their rent do not clean their house to point of filth

it is gut wrenching to walk onto your property and see what they can do in a short period of time,and deposits do not really come close to covering what it would cost some one to come in do the work

**Ima saver** · 07-25-2007, 06:53 AM

I have had 3 rentals and I would never do that again. The houses really went down hill and we sold them all at a loss. (One for half of what we paid for it.) I also would not ever take out a mortgage with an ARM.

**anonymous_saver** · 07-25-2007, 07:33 AM

If your set on moving into a condo, I would absolutely sell your house.

However, with your total household income at $148,000, I would seriously advise against doing an interest only loan. I understand your thoughts, that in that situation you can pay whatever you can towards the principal for a particular month (probably b/c your husband gets paid commission?). However, I would seriously think of at least getting a 30 year fixed loan and just paying extra each month towards the principal if you have the money. And to be blunt, with an income of $148,000 (or so) a year, you shouldn't have problems paying a 30 year fixed mortgage on a $267,500 condo. If you do, you may want to look at your spending habits.

Maybe you should give us more information such as other debts you have, how much of an emergency fund do you have, how much are you saving for retirement? This may give us a better chance to give more specific advice.

Either way, good luck with making your decision(s).

**anonymous_saver** · 07-25-2007, 07:33 AM

If your set on moving into a condo, I would absolutely sell your house.

However, with your total household income at $148,000, I would seriously advise against doing an interest only loan. I understand your thoughts, that in that situation you can pay whatever you can towards the principal for a particular month (probably b/c your husband gets paid commission?). However, I would seriously think of at least getting a 30 year fixed loan and just paying extra each month towards the principal if you have the money. And to be blunt, with an income of $148,000 (or so) a year, you probably shouldn't have problems paying a 30 year fixed mortgage on a $267,500 condo. If you do, you may want to look at your spending habits.

Maybe you should give us more information such as other debts you have, how much of an emergency fund do you have, how much are you saving for retirement? This may give us a better chance to give more specific advice.

Either way, good luck with making your decision(s).

**dcox20** · 07-25-2007, 07:56 AM

Originally posted by anonymous_saver View Post

If your set on moving into a condo, I would absolutely sell your house.

However, with your total household income at $148,000, I would seriously advise against doing an interest only loan. I understand your thoughts, that in that situation you can pay whatever you can towards the principal for a particular month (probably b/c your husband gets paid commission?). However, I would seriously think of at least getting a 30 year fixed loan and just paying extra each month towards the principal if you have the money. And to be blunt, with an income of $148,000 (or so) a year, you shouldn't have problems paying a 30 year fixed mortgage on a $267,500 condo. If you do, you may want to look at your spending habits.

Maybe you should give us more information such as other debts you have, how much of an emergency fund do you have, how much are you saving for retirement? This may give us a better chance to give more specific advice.

Either way, good luck with making your decision(s).

You are correct - the idea behind the IO loan is to minimize the amount of "required" payments in any given month. I am the husband, btw :-) and the commission is all over the place so it ranges from $2000/mo to over $9000/mo, but evens out to about $75k by the end of the year. We do budget & save but have had some extremely unfortunate circumstances that have required that we eat up our emergency fund and nearly max out a CC ($11k) to make ends meet. Our only other source of savings is roughly $14k (between the two of us) in our 401k's which we really don't want to touch.

Other debts - total about $2000 (car leases, CC payment, etc.)

With the income we definitely wouldn't have trouble making the 30yr fixed payment, but we do like the lower rate of an IO and ability to have our "required" payment be flexible in the face of shifting commission payouts

the overall idea here is to lower the "monthly nut" and become debt free asap. saying that outloud plus the comments above really have me leaning toward selling the house and foregoing the rental headache.

**DebbieL** · 07-25-2007, 09:34 AM

Please tell me that your commission based job has nothing to do with the mortgage industry or sales of fancy cars. All of this is going down in flames in California because of the crazy credit/housing bubble bursting. I personally would stay put if I were you. If not, sell right away - this isn't going to get better for a long, long time. I would also wait for awhile to buy anything else. You could rent a similar place to what you currently own for a lot less than your mortgage payments (that's what you were considering doing for someone else - subsidizing their living arrangement basically). The housing market hasn't bottomed out yet, I would be patient and wait for the bargains.

PS - A realtor is the last person I would take this kind of advice from. They are in it for themselves - to them it is always a good time for you to sell/buy. Beware.

**dcox20** · 07-25-2007, 09:46 AM

Originally posted by DebbieL View Post

Please tell me that your commission based job has nothing to do with the mortgage industry or sales of fancy cars. All of this is going down in flames in California because of the crazy credit/housing bubble bursting. I personally would stay put if I were you. If not, sell right away - this isn't going to get better for a long, long time. I would also wait for awhile to buy anything else. You could rent a similar place to what you currently own for a lot less than your mortgage payments (that's what you were considering doing for someone else - subsidizing their living arrangement basically). The housing market hasn't bottomed out yet, I would be patient and wait for the bargains.

PS - A realtor is the last person I would take this kind of advice from. They are in it for themselves - to them it is always a good time for you to sell/buy. Beware.

lol - no thank God I don't sell either of those... but I am in an equally unstable role - I actually manage a staffing agency, and deal with placing people in temporary and permanent jobs. We experience ebbs and flows with the unemployment rate but the slow times and busy tmes are pretty identifiable so we try to be smart - some things are just unforeseeable.

Our realtor is a family friend and actually tried to pursuade us not to sell but rather go the route of keeping the house as a rental... he's also not getting anything on the purchase of the new condo because we didn't have him with us on our first visit... oh well.

I like the rental idea personally - but the wife likes stability and at times (as shocking as this may sound) can't be reasoned with, lol. she's awesome in every way but does like to put her foot down when she's passionate about something.

of course if by some miracle we did sell sooner than expected we'd move into an apartment while the condo is being finished.

I may press on the rental thing again as it makes waaaay too much sense to me to not consider... we could rent a place for $1100-$1300 and bank the remaining $1350-$1150/mo (already set aside for housing in our budget) into an interest bearing investment then figure out the condo thing at a later date.

**DebbieL** · 07-25-2007, 09:58 AM

Don't keep a house as a rental that you are losing money on every single month. That's the worst advice I've ever heard.

I would try to press on the rental idea too. It is a great plan. Rent for cheap, put away the difference in savings and you will have a nice downpayment in the future when things will be even cheaper (they will go down more before they will ever come up again - this takes years to play out).

Big decision - home own vs. rent with a twist!