please weigh in -argument with husband regarding home buying/selling

[Anonymous]

Habing our rental basically means somebody is giving us $40k/year. Yes-majority is going into the mortgage--but ever year it is rented is another 40k plus for us. Factor in the rent increases over the next 15 years and we will be making even more--ESP since our loan is fixed at 4.2percent and we already rent for $650 more a month then the rent.

[Anonymous]

Anonymous wrote:

SAM2 wrote:OP, I agree with you that it makes sense to sell the TH in order to get a better/bigger primary home. I understand what your DH is saying about not wanting to sell the TH at the bottom of the housing market, but you're just pouring that equity back into a house at the bottom of the market, so there should be no net loss. Indeed, I'd argue that a TH likely lost less absolute value in the housing market crash because it's a more fungible property, and the house you want to buy likely has more upside when the housing market does improve, so perhaps putting your equity into the high-upside property is a better bet.

I think the HELOC suggested by some PPs is also a good idea, but it would increase your exposure because you'd effectively be carrying two housing loans.

I don't think you should be mad at your husband. He's likely just trying to be conservative about what you can afford, and perhaps holding the TH is a useful method for him to keep you both from getting overextended on a house. In this rough economy, I think it's a wise idea to buy less than your maximum.

Why don't you propose to your DH that you sell the TH, but instead of increasing your maximum house budget by $175k (the full amount of TH equity), you increase your house-buying budget by only $100k? This might give him the comfort that you're not stretched too thin on the house, but also expend your house-buying budget by a nice amount.

I agree with this.

Except for the lost rental income!

[Anonymous]

Anonymous wrote:I agree about being a landlord--it sucks. I hate it and I even have a management company deal with my condo in Boston while I live in DC. But overall, after everything I have to pay, I probably only bring in about $15,000/yr from the rental. Mind you, the management company is only $75/mo but it's all the repairs/maintenance/condo fee/property taxes adding up. I can't wait till the market gets better and I can sell it well. Since it's still bringing us some income, we are not hard pressed for having it, but you'd think a rental would bring in more than that...

You're making $15,000 per year in profit (unless I'm reading this incorrectly), someone else is managing it, and you're COMPLAINING???

[Anonymous]

Anonymous wrote:I personally would not want two mortgages and the need to rent out a property. I think you are in the right on that.

That said, if you put in a nice, competitive bid and lost, more cash would have only allowed you to be foolish and overpay. That does no one any good.

You have to accept the idea that to get a house at the right price, you are probably going to lose a few. Don't blame your husband for that part of it.

Exactly. Seems like you have a couple of issues going on here that you need to get ironed out--you two need a plan, one that involves making reasonable offers, renting your current home or not.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I agree about being a landlord--it sucks. I hate it and I even have a management company deal with my condo in Boston while I live in DC. But overall, after everything I have to pay, I probably only bring in about $15,000/yr from the rental. Mind you, the management company is only $75/mo but it's all the repairs/maintenance/condo fee/property taxes adding up. I can't wait till the market gets better and I can sell it well. Since it's still bringing us some income, we are not hard pressed for having it, but you'd think a rental would bring in more than that...

You're making $15,000 per year in profit (unless I'm reading this incorrectly), someone else is managing it, and you're COMPLAINING???

Not to mention if that is profit 'above' what is going directly into their mortgage payment.

They could be netting 15K after the mortgage payment...which means they are actually making THAT much more (paying down the loan and increasing home equity)...

but even if the place is paid off...they are still making 15K.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

SAM2 wrote:OP, I agree with you that it makes sense to sell the TH in order to get a better/bigger primary home. I understand what your DH is saying about not wanting to sell the TH at the bottom of the housing market, but you're just pouring that equity back into a house at the bottom of the market, so there should be no net loss. Indeed, I'd argue that a TH likely lost less absolute value in the housing market crash because it's a more fungible property, and the house you want to buy likely has more upside when the housing market does improve, so perhaps putting your equity into the high-upside property is a better bet.

I think the HELOC suggested by some PPs is also a good idea, but it would increase your exposure because you'd effectively be carrying two housing loans.

I don't think you should be mad at your husband. He's likely just trying to be conservative about what you can afford, and perhaps holding the TH is a useful method for him to keep you both from getting overextended on a house. In this rough economy, I think it's a wise idea to buy less than your maximum.

Why don't you propose to your DH that you sell the TH, but instead of increasing your maximum house budget by $175k (the full amount of TH equity), you increase your house-buying budget by only $100k? This might give him the comfort that you're not stretched too thin on the house, but also expend your house-buying budget by a nice amount.

I agree with this.

Except for the lost rental income!

I don't agree...if it will make a good rental unit..hang onto it. This area's housing is forecasted to get increasingly tight in the coming decades...that close-in, the TH will always be desirable and a great investment.

[Anonymous]

Personally, I'd be nervous owning two properties in one real-estate market. I doubt the DC housing market will completely collapse, but stranger things have happened. I even get nervous with so much money tied up in our one house.

[Anonymous]

I've been a landlord and had a similar situation, BUT the market was hot.

We held onto our house as a rental when the market was on the up and bought a SFH with only 5% down. We sold the TH just before our capital gains excemption was about to expire (live in it 2 out of the last 5 years rule). We ended up making 215K and that was cash money....we had grown into our payment by then and used that 200k, plus the extra equity and purchased a bigger home and a vacation home.

The net is, I would only do it if I thought that I could sell the house in 3 years before the capital gains exemption expires. I would also have to think that the market would also improve in 3 years AND factor in the repairs I would have to make after the tenants. I do NOT think the market will improve much in 3 years, so I think you will be at the same place today as you are in 3 years.

Obama is changing the capital gains tax rule, I believe the tax is going up to 25%. SO, if you sell after your excemption expires, plan to lose 25% of it to uncle Sam. And given how hungry the government is to pillage taxpayers to fund their spending rampage, god knows how high that rate could climb.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I agree about being a landlord--it sucks. I hate it and I even have a management company deal with my condo in Boston while I live in DC. But overall, after everything I have to pay, I probably only bring in about $15,000/yr from the rental. Mind you, the management company is only $75/mo but it's all the repairs/maintenance/condo fee/property taxes adding up. I can't wait till the market gets better and I can sell it well. Since it's still bringing us some income, we are not hard pressed for having it, but you'd think a rental would bring in more than that...

You're making $15,000 per year in profit (unless I'm reading this incorrectly), someone else is managing it, and you're COMPLAINING???

You are assuming she makes profit, but it might not be that.

ALL rental income has to be reported as INCOME. So if your mortage is 12K/yr and you are bringing in 15K, you have to report the WHOLE 15K as income, regardless if your actual profit is 3K. If you are in a 30% tax bracket you are giving ALL YOUR PROFIT to the tax man.

[Anonymous]

Net rental income is taxable. You can subtract mortgage interest paid, but not mortgage principal paid. You can subtract RE tax, management fees, insurance, utilities, repairs, and depreciation. Most rental properties result in a loss, not in taxable income.

[Anonymous]

Anonymous wrote:Personally, I'd be nervous owning two properties in one real-estate market. I doubt the DC housing market will completely collapse, but stranger things have happened. I even get nervous with so much money tied up in our one house.

1) you could unload/sell the rental at anytime.
2) the collapse isn't overnight...gen. there are many signs/factors leading into one.
3) if the locations are very desirable,e.g., the Georgetown market has not depreciated but remained stable throughout decades, etc. it would be pretty market proof.
4) DC economy with govt and IT is not a 'one-horse town' like Detroit or Cleveland, e.g., manufacturing only.

There are so many fear mongers on these postings it's ridiculous.

[Anonymous]

It is possible that rental contracts will come down because so many people own investment properties that are under water and can't be sold. In some geographies, people are renting at a steep loss. In other words they are still bleeding but not as bad.

If you are renting your place, you may have to compete with some people who could get more and more desperate over the coming year or two. This may not have hit all of the posters because they have existing renters with rates set a year or more ago, but it would be more apparent in future rental agreements.

[Anonymous]

Anonymous wrote:It is possible that rental contracts will come down because so many people own investment properties that are under water and can't be sold. In some geographies, people are renting at a steep loss. In other words they are still bleeding but not as bad.

If you are renting your place, you may have to compete with some people who could get more and more desperate over the coming year or two. This may not have hit all of the posters because they have existing renters with rates set a year or more ago, but it would be more apparent in future rental agreements.

Again "location, location, location'.....the foreclosures in this area tend to be in the same localized area. If your rental property is in a good location there shouldn't be an issue...if it were in the outer burbs I'd be concerned...it it were in DC or very, very inner suburb..Clarendon, Bethesda, etc...again a non-issue...

frankly the same could be said about the housing market, not just the rental market. Look at the areas where property values have remained relatively constant even during the housing recession/lowest part...even during that period there were many local neighborhoods that remained solid and even appreciated a bit. We were shopping for a house over the last 2 years and every property still had multiple offers in our neighborhood and the date-to-contract was still within 1 week. Inventory is extremely low.

[Anonymous]

Anonymous wrote:I've been a landlord and had a similar situation, BUT the market was hot.

We held onto our house as a rental when the market was on the up and bought a SFH with only 5% down. We sold the TH just before our capital gains excemption was about to expire (live in it 2 out of the last 5 years rule). We ended up making 215K and that was cash money....we had grown into our payment by then and used that 200k, plus the extra equity and purchased a bigger home and a vacation home.

The net is, I would only do it if I thought that I could sell the house in 3 years before the capital gains exemption expires. I would also have to think that the market would also improve in 3 years AND factor in the repairs I would have to make after the tenants. I do NOT think the market will improve much in 3 years, so I think you will be at the same place today as you are in 3 years.

Obama is changing the capital gains tax rule, I believe the tax is going up to 25%. SO, if you sell after your excemption expires, plan to lose 25% of it to uncle Sam. And given how hungry the government is to pillage taxpayers to fund their spending rampage, god knows how high that rate could climb.

It depends..if somebody is planning to hold onto a hot rental property for the next 15-30 years (like we plan to do with a NW rowhouse) a lot of the points made are moot.

Besides, I know several ppl that have moved back in prior to selling to avoid the capital gains (meet the legal requirement).

[Anonymous]

We just bought & sold. We never considered renting our condo. Money aside I did not want the maintenance and headaches that go into it. No way.