So here is my dilemma. I purchased a home back in Dec. 2005 that my family and I are currently living in. At that time we paid $125,000 which was a good price at the time. We currently owe $120,000 on the loan. Over the last three years we have put about $10,000 into the home by adding a fence, remodeling the kitchen, re-carpeting some of the rooms, changing out all of the lighting inside, painting, and doing any minor repairs that needed to be done. We also added a play area with bark and planters outside.
Recently I was offered a job with the Bureau of Reclamation that is a really great opportunity. However we are stuck trying to figure out what is the best course of action. We were contemplating selling the home but a Realtor is telling us that we could get $145,000 at most which would leave us with about $6,000 in pocket before finishing up some projects that need to be done. Plus homes in our area are sitting on the market for 81 days on average and I am supposed to start my job in a month.
We have also been contemplating putting the house up for rent until the market corrects itself and then sell but don’t even have the first clue of where to start there. Would it be wise to refinance to get the payment lower or not?
We are not sure what direction to go in because we really would like to purchase another home where we will be moving to but don’t know how having a rental will effect that.
Any advice would be much appreciated. Thanks in advance.
I think you should first contact banks you would be using for a mortgage in the area of your new job opportunity. Give them the scenario of having your current house as a rental and see how they say it would affect you getting a house there. With the current lending market, I would want to know that first as that will probably be a big part in your decision making process. If they say having the other house on your credit is going to severely constrain your abilities to get another house there, it may be best to break even or put a couple grand in your pocket from your current house and move on.
You need to find out how long you expect to hold your current house before you decide to re-fi or not. If you’re only going to keep it for a short time, a re-fi may not make sense if you have to pay points or a couple thousand worth of closing costs. Look at the difference in your monthly payment between the new lower rate and your current rate and compare that to the amount of money it will take to re-fi. How many months would you have to keep that new loan for the total monthly savings equal your re-fi cost?
If you decide to rent your current residence and you’ll be moving far away, you’ll probably want to look at having someone local manage your property. Several Realtors will probably be willing to do this for about 10% of your gross rent amount per month. Call around and compare because some people might add in extra fees like taking 1/2 month of rent just for putting a tenant in there. The Realtor will take care of advertising, showing the house, arranging repairs, collecting rent, etc. You should set up ground rules where they have to contact you for any repairs in excess of a certain dollar amount (probably only a couple hundred dollars). Try to find reviews or get referrals for someone. There are horror stories of property managers who bilk every last penny they can out of fees and repairs so the owner gets virtually nothing.
Renting the house you live in is almost universally a bad idea. First most people live in a house that will rent for too much to attract a good tenant. People that are able to pay $1500/month will buy unless they are problem people. When the market corrects and you go in to sell your house the tenant would have trashed the house and you would have to do a make ready at best and a rehab at worst. The primary thing for me would be the concept that there is a separation between business and your life. You go into business to make money and you live your life because that is the lifestyle you choose. You buy a personal residence because of lifestyle. If you decide to move you need to move. You cut ties to the old world and move to the new world. You are not going to be going to the church you leave behind, you are not going to be sending you r kids to the old school and you don’t need to be coming back to find out why the rent checks are not getting sent on time. I would sell the house and buy a new one.
That is my advice but then again my philosophy is that you can love your job or you can hate your job but you live where you want to live. I want to be rich. Because of that I live where that is possible. It does not cost the same everywhere for everything except 1 thing. It costs the same to be poor everywhere in the USA. I say that because if you only make $1000/year you are poor in New York City and you are also poor in Borger Texas. But if you want to live where you can afford to be rich you have to ask your self how much dose it take to get a 3,000 sqft house with a 3 car garage a pool and a home theatre. In San Francisco it will be at least $600k but in Nashville I can get that for $300k. I can also get a house like that and even buy enough rental property that cash flows $200-$500/month that can fund that lifestyle in Houston. That leads me to say if I am going to move I should move with a plan in mind not just to follow a job. You should move to where it is cheap to be rich.