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Lane
Lane, JD, CFP, MBA, CRPS
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Experience:  Providing Financial, Tax & Business advice since 1986
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Basic question is to sell two homes or rent them. Here are

Resolved Question:

Basic question is to sell two homes or rent them. Here are the details:

We just moved from Texas back to Michigan. We purchased a home in Michigan and have two home on the market in Texas. The market for real estate is stable where we live, but not booming. It is also a very good rental market.

House #1: Was our primary residence. We purchased for 235,000 6 years ago, put approximately $50,000 into the home in repairs and improvements. We had it on the market for 270,000, nothing. Lowered to $250,000, some showings but no offers. On market going on 6 weeks in a area where homes sell fairly quickly. We owe $160,000 on this home. Potential rental is $2100-2400. This would cover all costs with a few hundred extra left over.

House #2: Was a home we purchased for my mother. It is owned outright, we purchased for 45,000 as a HUD home, put approximately $15,000-18,000 into the home. On the market for 84,000, one offer of 80,000 we accepted, but they backed out for personal reasons. No further offers, on market for 60 days. Realtor is suggesting a price reduction to $74,000 because a comparable property just sold first day on market for 75,000 and was in much better condition. Rental would be quick on this one for $1000 per month.

So, the question is, is it better to just sell and get what we can. Take that money and invest it elsewhere so we can try to make some of our loses back on the homes. Or, go ahead and rent the houses for a few years. The market there is on the upswing, but you never know where prices will go in a few years.

The only other issue is that we do not want to stay in the home we are in now. I want to find a home with potential income (horse boarding as we are in a horse community) of approximately $1500-2000 per month. But, this would take the sale of the two other homes because we will need a bigger down payment on the new primary residence as it will cost significantly more than the house we are in now.

So, hold onto the two Texas homes and make some rental revenue, hoping that the market value of the homes continues to increase and sell sometime in the future. Stay where we are in the home in Michigan for a year or so, save money for a new larger DP on a larger home with horse boarding facilities. Or, sell for what we can get, and move that money to another income avenue and take the loses on the other two homes.
Submitted: 11 months ago.
Category: Finance
Expert:  Lane replied 11 months ago.

NPVAdvisor :

Hi

NPVAdvisor :

You WOULD be able to exclude what ever gain you eventually get on the primary residence home (although given the market today, you may to wait a while to maximize that)....and the gain on the other looks like it may only be 15K or so (so no really SIGNIFICANT tax benefits here) ... Given that the rental market is stronger than the market for selling, the purely financially maximized thing to do is get the rent out of the houses, let things firm up more (I think that now that the excess inventory is out of the housing market, might not happen tomorrow, but over the next several years you'll see some real appreciation there) ... And when you look at the net income (rents from both less the mortgage on the one AND other rental expenses) ... along with selling for a good gain later, the Net Present Value on that, along with more certainty, out weighs selling now

NPVAdvisor :

I still don't see you coming into the chat ... I'll move us to the "Question and Answer" mode .. (We can still continue the dialogue there)

NPVAdvisor :

Let me know ... and we can dig in further

NPVAdvisor :

Lane

Expert:  Lane replied 11 months ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

What happens now?

If you haven’t already done so, please rate your answer above. Or, you can reply to me using the box below.
Expert:  Lane replied 11 months ago.

Hi Kimberly,

.. just checking back in here, as I never saw you come into the chat.

We can still continue our dialogue here though.

Let me know what you think, and we can go from there...


Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 3754
Experience: Providing Financial, Tax & Business advice since 1986
Lane and 3 other Finance Specialists are ready to help you
Customer: replied 11 months ago.

Thank you for the answer. As with any decision that is seemingly difficult, there is always pros and cons, therefore, the difficulty in making the decision. Your input is helpful.


 


I am having internet issues, that is why I cannot be on chat right now. I would like to talk a bit more, but until this internet issue is resolved, it will have to wait a day or so. Can I just contact you in the next few days for some more input? Thank you again.


 

Expert:  Lane replied 11 months ago.

Most certainly.


Just reply to this thread.

Or if you feel that this warrants a reply, then you can rate now and ask another questions where you say ... "FOR LANE ONLY," at the beginning of the question.

If you'd like to actually run the numbers, I can do a cash flow analysis that will let you compare the two scenarios in an apples to apples way, financially.

If we go to that level, I WOULD prefer that we handle it as a separate question.

But again, the profits from renting, if you fee that fairly certain, about that WHILE retaining the equity in the houses AS they appreciate back to a decent selling price will almost certainly show a higher return.


Let me know ...

Lane

Expert:  Lane replied 11 months ago.

Thank you Kimberly,

If you still feel that you need something more concrete, just ask for me and I can run the numbers for you.

Thanks again, and let me know ...

Lane

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