We’ve been trying to sell our primary home in the Sacramento area for the past 3 month. The market has slowed down tremendously. We reduced the price from $445k down to $399,950; a similar house was sold for $410k.
We owe in the house $272K and we are thinking to rent it for 2 years if doesn’t sell by the end of the month. We could reduce our mortgage payment from $1700 to $1100 refinincaing the house.
We could packet a profit of +/- $500/monthly if we rent the house for $1600.
What should we do, reduce our price or rent it for couple years hoping that the market level off.
I know that there has been a big boom in CA that seems to be cooling, but I don’t think that it’s time to panic yet (but, take it with a grain of salt, as I’m not in your market. Just making an educated guess.)
Is this up for sell thru a RE agent?
Personally, I think that you dropped your price too much, too fast. A $50K drop may send a signal to potential buyers that the property has a problem.
How long have you lived in the property? If you’ve been in it for at least 2 years, then it’s probably going to be better to sell it, as you’ll pay no taxes on the profit.
That may still be possible even after renting for 1-2 years, too (though check with your accountant to verify), however, you will be taxed on the profit of the rents in that period.
Raj,
We have lived at this home for more then 2 years and we rather sell it. I know that I’m panicking a little bit, but everyone is dropping the price. Even builders are starting to give incentive in the new homes.
Also, I spoke today with a lender and he mentioned that we can’t refinance the house for a least 6 month after removing the house from the market. Bummer!!!. So I have to disregard the rent option.
I’d like to know how you can have a mortgage of $1,100, rent the place for $1,600 and profit $500 a month…??? At $272K, a 5% mortgage is $1460 a month, so you must be talking an interest only loan or some other specialty program.
What about:
Taxes (it’s California, to boot!)?
Insurance?
Maintenance?
Management?
Vacancy rate?
This is more like a break-even to me (at best…). $1,600 a month for a $272K house is almost never going to be positive. That’s only a .59% factor. I shoot for at least a 1% factor as a SWAG.
This is just my opinion…other opinions may vary – however, to make “apples-to apples comparisons”, you have to know that all of the apples are really apples (if you catch my drift!)…
Well now, incentatives is just one side of a creative mind. One which your RE agent apparently doesn’t have.
Why not offer your own incentative to purchase your house? Bump that price back up to the $445K price or so and offer a “Free” brand new BMW with the purchase of this home!
You’ll likely come out with the same or more cash than the $400K price, and the car is always a negotiating point. Lower offer, no car. Cheaper car, cheaper price, etc. etc.
You are right, $500 profit was a misused of the word and I would have broken even with a loan like this (3 year ARM loan at 3.5%). One of the lenders recommended it.
The factor that I was indicating Rent divided by Purchase Price (in this case $1600 divided by $272K = .588%)…if you get 1% or more, you shuld have a positive cashflow…if it is lower, you’ll be on thin ice.
I’m up in the foothills, near Placerville. I’m seeing the same with the market. Several houses around me, all over 500k, have been sitting all summer.
Just wondering, are you trying to cash out of CA and move somewhere cheaper?
This statement couldn’t ring truer – you’d be surprised at who (me for example) is watching for just a move.
I’m with Keith on the numbers as well. Your principal amount below, is that interest only? If so, unless you are sending an additional amount your mortgage isn’t going anywhere fast.
Be VERY careful about putting yourself into a situation where the property will cost you money on the retail rental market. Are you going to rent yourself?
Hello,
I am thinking to sell my house in orlando florida for $250k, after completing my two years of residence( so I dont pay no cap gains)
I am thinking to take my appriciation which is about $100k and move to dallas or houston tx…houses there are so so inexpensive but i am afraid taxes could be too high…i went to dallas to check market out…too many forclosures and i am able to get a really nice ehouse for like $150 to $175…
Is this a good move…I wonder if housing is gona appriciate or go down even more…should i wait for housing boom to burst?? And only reason I am planning this move is hoping market in Tx will turn around…
ideas…!
I think its a fine idea. You didnt say when you’ll be there 2 years but if you want to do that I would do it sooner than later after you meet that criteria. I guess Florida is still hot? That may change any day. You see what Jorcorde is dealing with. Things that happen in CA tend to NOT stay in CA. Its a good indicator of trends to come back east, whether its jeans that display your crack, or real estate
You may pay more taxes in TX but you’ll have nice nest egg (for real estate investing of course) after the move.
Anyway, to wait because you don’t know what the market will do is increasing your risk because, well, you don’t know what the market will do. Unknown = risk.
