Hello all, and thank you in advance for your expertise and insight.
My Dilema – in 2006 I moved out of my primary residence in Seattle and bought a new primary residence in Portland.
Carrying 2 mortgages seemed doable given the rising prices of houses, and I struck an informal rental agreement with my brother to rent the place in Seattle. That went bad, and now I need to know whether I should dump the house, possibly losing all equity just to get out, or if I should try to covert it to a rental.
Here are the numbers :
2006 – Seattle house has 200k mortgage (1600 / mo with all costs associated). Was getting a 800 / mo rent, losing approx 800 month in negative cash flow. Seattle house appraised at 300k. Classified as a VACATION HOME.
Today – Seattle house has 195k mortgage (1600 / mo with all costs associated). Getting no rent, as I've evicted my brother for lack of payment. Seattle house appraised price unknown, suspect 250k. Classified as a VACACTION HOME.
….
Have spoken to a realtor. The house is in an unfavorable spot with many foreclosures. They suspect it would only fetch around 220k, which after costs, would leave me with almost nothing leftover except positive cashflow once again.
I've also researched rental rates. It appears I could rent the house on a lease for approx $1400 / mo, which would fix my cash flow problem as well, helping me hold until better times. I'm unclear about what the tax implications, mortgage implications might be in doing that.
Any advice is appreciated. I hope this scenario was laid out well. Let me know if I can clarify anything…
You're in a quite a difficult situation here but the good thing is you have options…
What ever you decide, don't let the house stand empty for a long time. Try to see if you can anyone to rent it for the max price possible. Put out an offer, look around, negotiate… you can always say NO if they aren't offering you enough to make it worth while.
If you can't find anyone to rent it for a price that fits you, then sell it. There's no point in having to tolerate the negative cash flow for years to come on the mere hope of the better times.
Not being a USA investment site I can only suggest what seems to be a common practice in the USA where you offer a Lease to Buy.
You charge more than the normal rent and place the extra collected into an account for the tenant so the tenant can save up a deposit which comes off the purchase price and you give them an option to be able to purchase the property after a number of years renting.If you like risk you can do a Wrap which is more common in the USA if the bank will allow you to do it.
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