Sell or Rent House

[LisaInNc]

When one door closes.....

I am going to give you the background. I have a house that I have lived in for 12 years. It is over 100 years old and we planned on restoring it but infertility took almost all of our resources. Fast forward through a divorce and a recent remarriage and a knock at my door.

A Realtor asking me if I would be interested in selling my home. He had someone interested. We had talked about it and actually planned to have someone in around Christmas to give us an idea of the market and go over a renovation plan, what we needed to fix and what would give us the most in sale price. I figured it to be a 2 year plan, it would take that long to save and do some of the work ourselves. We wanted to get into more of a neighborhood setting for my daughter. I love this house but it need renovation badly and we didn't have the money to do it on the scope it needed.

So I said yes, I was interested. These buyers would take the house as is and even though it was not in prime showing status (rooms cleaned out, etc.) they didn't care. All they cared about was location and if it was structurally sound.

I live on a busy street in the commercial district the last house in the historical district and the county just broke ground to put a new library across the street. I knew that would increase my value.

We moved forward I started to look at a house, found one we loved slightly less smaller but with a garage and really terrific neighborhood, just what we wanted and the buyers of my house came in, home inspections were done. I had quotes for the work we needed done on the new house and after 6 week, on the absolute last day they could, my buyers backed out. We then had to back out of the new house. This happened Christmas Eve.

No time to feel bad it was Christmas but the day after I sat with a calculator and a pencil and blew myself away with what I had. The thing is I had about 100,000 more in equity that I realized. I knew my house had increased but I had no idea it was worth as much as it was!

here is the plan and I want to know what you all would do

My mortgage is less than most car payments. Under this plan it doubles but we take money to pay off our one car payment with an all too high interest rate and that equals the increase in our mortgage. Now I don't love that because the truck will be paid off in 4 years and this is a new 30 year mortgage. But there is a plan.

What got me started was I was selling the house 20,000 under appraisal and it was costing me around 20,000 for the closings and commissions. That meant and instant "credit" of 40,000 if we chose to stay here.

We refinance with a lower interest rate. We will leave the majority of the equity in the house but take out about 35%. We are left with a double the original house payment which we can afford. Taxes are going up as we were just reassessed so that figures into the increase.

Then we take the money and renovate the house. I had a long talk with my Realtor about what to do. In 6 months work will be complete and we will be able to do three things

1. sell it and buy a new house having more than 75,000 more available to us in equity at this house to buy another if we choose
2. Stay in the newly renovated house which will be a palace when I am done
3. Pull out 80% equity and rent out the house. We can rent if for more than double the new higher mortgage payment. That will pay the mortgage and equity payment leave extra for any repairs we have to do.

I take the equity and use it to but the new house putting as much down as possible to keep the mortgage as low as I can. I really need to keep a new mortgage in check so we can cover the one at the rental house is anything ever happens with the renters.

So I am thinking that renting will be what to do. It almost seems to good to walk away from. What am I missing besides the regular hassle with tenants. My Mom rents property so I have seen what that can be like our big difference is we are renting to a commercial business and will only do it with a long lease. Rental property is almost non existent and I am right in the center of town, a block from the county courthouse. My location is perfect.

I guess what is messing me up is I never wanted to touch the equity and we wanted to do all these renovations but we never dreamed we could afford them.

We are closing this week. Since we had an almost identical deal money wise with the bank for the house we were buying we were all approved so making the change was surprisingly easy. I have onctractors coming all this week for quotes and forward we go into renovation hell!

 

[etwinchester]

If you really like the house, I'd rent it out. You can always have it back or in time, pass it onto a child especially if the renovations are going to be that nice.

 

[seashoreCM]

Do you really need to move?

One good answer: "I want to own more real estate for an investment, every so often I will move again and rent out the house I vacated. If I can do some renovation work myself I can try to buy a bargain house each time and the increase equity I end up with is all mine."

You should not pull out equity in the form of a new 80% mortgage loan because you have equity. You should have a sound financial reason such as investing in more real estate (or you cannot help having an urgent problem such as medical bills).

Disney hints:
http://members.aol.com/ajaynejr/disney.htm

 

[LisaInNc]

I was only pulling out the 80% to buy the next house we will live in. So I have this house reted with a positive cash flow but I still need somewhere to live with a reasonable mortgage payment so that equity goes right into the new place.

 

[barkley]

i would not do major renovations to a house and then rent it. rotton renters can do far more damage than can ever be recouped.

depending on the zoning, could you possibly rent it out as a commercial space to a professional who for a good rental price would do some of the restoration on their dime?

i ask this because in our area we have lots of professionals (lawyers, cpa's, insurance agents) who operate out of historical houses. they do not change the physical structure of the homes, but often go in and repaint, landscape...to make the place more appealing for their clients. they like being in a place where they have a driveway and garage for parking, kitchen facilities for their staff, and NOSY NEIGHBORS who keep an eye out for them on evenings and weekends.

you could contact a property managment firm in your area and find out what the going rate for commercial real estate is, check with your zoning division to see what is permissable, and then evaluate if it might be better than renting to residental tenants.

 

[mickeyfan2]

If it is a palace when you are done, then stay. If you want to rent it out, then just do enought renovations and rent it. Don't make it into a palace and then rent it.

From what you say, I think renting is the way to go.