US Home Sale or Rent dilemma

satbab · Post by **satbab** » Sat Oct 30, 2010 10:58 pm

We are planning to move back to India in March 2011 and have tried to sell our house by ourselves for a month now. We did not engage a real estate agent mainly to avoid paying that 6% commission. We are unable to sell so far mainly due to our price. We do not want to take too much of a loss. We had two houses foreclose in our cul-de-sac in the past year. We are looking to lose about 25k - 40k on the price of the house, if we get lucky and sell the house. The house is about 14 yr old now.
If i rent this house and move to India then there are a lot of hassles. The age of the house is another factor. I *personally* don't see the house prices going up by 10 - 15% within the next 2 years. They are going to remain where they are today. I don't need the equity in the house for immediate consumption. It will be a bit tight but i will able to manage the move and settling down without dipping into this equity.
Please help me to decide if i should rent this house forever and leave this as an investment or take the whatever loss and invest elsewhere. If i rent how long should i rent for? Are there tax implications of renting this house? How to derive at my net cash flow every month? I believe the rent would cover my mortgage. If i engage a property management company then 10% of the fees has to come out of my pocket. Any maintenance has to come out of my pocket too. Am i trying to see what else i am missing?
To think of it, i was one of those *nuts* who put 20% down on the mortgage instead of 0% down and interest-only loan.

hydcat · Post by **hydcat** » Sat Oct 30, 2010 11:16 pm

OP,
Cashflow = (Rent - Expenses)
Expenses = (Mortgage Int + Assoc fee(if any) + Maint expenses + Insurance etc etc)

If I were you, I would take the loss and move on.
Managing a rental property remotely, that too an older one lilke yours is going to be too much hassle.
Sell the house and invest the equity in India.
GL.

PS: I've owned various primary/secondary/investment properties in USA and the above comments are based on my experience.

kkr · Post by **kkr** » Sun Oct 31, 2010 12:07 am

satbab;344608We are planning to move back to India in March 2011 and have tried to sell our house by ourselves for a month now. We did not engage a real estate agent mainly to avoid paying that 6% commission. We are unable to sell so far mainly due to our price. We do not want to take too much of a loss. We had two houses foreclose in our cul-de-sac in the past year. We are looking to lose about 25k - 40k on the price of the house, if we get lucky and sell the house. The house is about 14 yr old now.
If i rent this house and move to India then there are a lot of hassles. The age of the house is another factor. I *personally* don't see the house prices going up by 10 - 15% within the next 2 years. They are going to remain where they are today. I don't need the equity in the house for immediate consumption. It will be a bit tight but i will able to manage the move and settling down without dipping into this equity.
Please help me to decide if i should rent this house forever and leave this as an investment or take the whatever loss and invest elsewhere. If i rent how long should i rent for? Are there tax implications of renting this house? How to derive at my net cash flow every month? I believe the rent would cover my mortgage. If i engage a property management company then 10% of the fees has to come out of my pocket. Any maintenance has to come out of my pocket too. Am i trying to see what else i am missing?
To think of it, i was one of those *nuts* who put 20% down on the mortgage instead of 0% down and interest-only loan.

I see no reason to hang on to the property. Why not go for a short sale? Price it aggressively (say about 10% below the comps in your area). Moving to India permanently is a reason you can use as a hardship and the banks usually approve short sales in these situations. The bank will pay all the closing costs and fees. You will pay nothing from your pocket. You will also get nothing back, but since you are underwater you were not going to get anything anyway from a traditional sale.

satbab · Post by **satbab** » Sun Oct 31, 2010 4:55 am

hydcat;344610OP,
Cashflow = (Rent - Expenses)
Expenses = (Mortgage Int + Assoc fee(if any) + Maint expenses + Insurance etc etc)

If I were you, I would take the loss and move on.
Managing a rental property remotely, that too an older one lilke yours is going to be too much hassle.
Sell the house and invest the equity in India.
GL.

PS: I've owned various primary/secondary/investment properties in USA and the above comments are based on my experience.

Any tax expenses...I am a USC...

hydcat · Post by **hydcat** » Sun Oct 31, 2010 8:50 am

satbab;344636Any tax expenses...I am a USC...

Tax consequences depend on various factors so I suggest you to consult a CPA on this.
GL

kkr · Post by **kkr** » Sun Oct 31, 2010 10:58 am

satbab;344629I have about 80k equity on the house. If i sell the house today at the market price, i would lose 50% of it. I am just afraid to lose that money and trying to hang on to the house hoping to minimize the losses.

The house is in an excellent school district and a planned community. Since my R2I plans are March 2011, I can be in the market until summer next year and make a quick trip back to complete the sale. That option is not desirable but can think about it.

Okay, that makes your situation clearer. With the lower value on the house plus commissions (assuming you will end up signing up an agent and pay 6%), you probably won't get much back. On the other hand, if you keep the house, you likely won't see much appreciation anyway, but will need to go through the pain of managing it from India. I think you should get past the loss and sell it off. You can move on a little quicker and have peace of mind.

dbs · Post by **dbs** » Sun Oct 31, 2010 1:58 pm

Sell it.
There is a time for persisting and there is a time to cut the losses and run.

venkat786 · Post by **venkat786** » Sun Oct 31, 2010 3:55 pm

No Risk No reward. When Australians are buying see link below, being USC why cannot you take this risk?

http://money.cnn.com/2010/10/29/news/economy/australians_real_estate/index.htm

Remember, everyone here are asking you to sell and run. That's a sign for you to do the opposite. Remember Buffet quote -
"The time to get interested is when no one else is. You can’t buy what is popular and do well."

r2i_by_2010 · Post by **r2i_by_2010** » Sun Oct 31, 2010 6:50 pm

Will renting home cover your expenses ? (mortgage, property taxes, maintenance, insurance etc) I think next spring maybe better for listing your home and selling.

Entrust a reliable agent to sell the home after you do R2I -- I think you dont need to do a second trip.. all signatures can be handled via fedex. Selling a home in this market without an agent is difficult.

You are the best judge on how big the 40K loss means to you. I believe the pundits are not predicting any quick recovery, so waiting will only result in more heartburn. Yesterday I heard Google CEO say on TV that the economy should take 7 yrs to turnaround and that we are in year 3.

kkr · Post by **kkr** » Sun Oct 31, 2010 8:30 pm

venkat786;344678
Remember, everyone here are asking you to sell and run. That's a sign for you to do the opposite. Remember Buffet quote -
"The time to get interested is when no one else is. You can’t buy what is popular and do well."

Good point. However, Buffett also holds on to investments for decades. Is the OP willing to hold on to the house for at least 10 or 20 years managing it from India and incurring potential monthly losses to cover any difference between rent and mortgage? If so, there MIGHT be decent enough growth in house value to benefit in the long term. How about the opportunity cost? And the value of the stress?