Just bought a townhome .... but should I rent it out ?
I just bought a town home via a short sale and got a good deal for my area . It has all come together so fast . According to the comparative sold homes, I have some decent equity already because of the lower bank price of this one . It appraised well above what I paid.
My big struggle with this property is whether or not to live there. I live in a rental property that a family member owns they give me a great deal . They give me such a good deal that I can afford to live alone and sock away other $ in my other investments.
So .... I have a 4 bedroom townhome now that's 1800 square feet. That's plenty of room to have a roomate , but I have lived alone for 5 years ! I stay around 4 nights a week at my bf's and my place is used heavily as my office since I work from home part time. To keep my bills that same , I would need a roomate in the townhome. I need to keep the bills the same because I don't want to work more hours. I have someone offering to rent the townhome for $100 more than I'm paying for my costs ( mort., insurance ect. ). She is ready to sign a lease and give me $.
What should I do ? I feel good about the person that is going to be a potential renter , but I also feel sad about not living in my place. I have to let the potential renter know asap if I don't want to rent to her to allow her plenty of time to find somewhere else.
Living there alone is an option, but I'm exhausted from the hours I already work.
Re: Just bought a townhome .... but should I rent it out ?
Congrats!
Rent it on 1 year lease and use the next year to decide what to do.
Re: Just bought a townhome .... but should I rent it out ?
Agreed, 1 year lease ....
But first you need to check the fine print of the mortgage loan you just signed. If there is a provision that you must reside in the town house, and if the bank discovers that you are not doing so, this could be problematic under new regulatory guidelines.
Re: Just bought a townhome .... but should I rent it out ?
^^^ Exactly, if the mortgage was given under the auspices of a residency instead of an investment, it is mortgage fraud. Long enough the bills get paid, I doubt they will hold it against you. If something happens where the bills don't get paid, the state police may be knocking on your door.
Re: Just bought a townhome .... but should I rent it out ?
^^^ actually, issues such as a homeowner who had signed a primary residence mortgage (and who had received a lower interest rate as a result) that is not actually residing in the property, and who is instead using the property commercially (by renting or leasing) are a pretty big deal right now. The reason is that US banks see themselves as being caught between a rock and a hard place if proposed 'mortgage bailout' rules are put into effect by (a new) US gov't which would force a multi-year ban on foreclosures. Since these US banks are primarily 'middle men' between a US homeowner and a foreign investor who actually put up the mortgage money, these US banks are subject to potential lawsuits from those foreign investors who can potentially force the US banks to 'buy back' the mortgages they sold to foreign lenders if there is any whiff of fraud or other legitimate legal grounds to challenge the validity of the mortgage resold by the US banks. If US banks were forced to pay foreign lenders back for mortgages they sold, but if at the same time US banks are legally prevented from foreclosing on the US homeowner for the next 5 years in order to (partially) recover this money, that spells potentially bankruptcy for the US banks.
In order to try and pre-emptively deal with this unintended consequence of an upcoming US gov't 'bailout' package, US banks now have an army of attorneys and accountants working feverishly behind the scenes to try and identify mortgages they have written and resold to (foreign) lenders / investors that contain potentially fraudulent provisions. The idea is that if US banks hurry up, they will be able to pre-emptively foreclose on mortgages that contain potentially fraudulent provisions BEFORE a new gov't 'bailout' plan can be enacted that would prevent them from doing so in the future.
Re: Just bought a townhome .... but should I rent it out ?
I too agree to rent it. I'd try to eat the mortgage up with as much as you can to pay it off.
Re: Just bought a townhome .... but should I rent it out ?
You gotta run the numbers to decide which is better. You may have to choose between cash flow and debt payment. These days I would focus on cash flow.
Add up your bills under one scenario and under the other. Then subtract out from them the incomes under each scenario.
The numbers will tell you what to do.
Re: Just bought a townhome .... but should I rent it out ?
Maybe so, Deogol- good advice! I was just assuming (dangerous word, there...) that she had good cash flow presently and would need to tap into cash flow later in life. By reducing debt, she would allow herself a greater cash flow if delayed.
Re: Just bought a townhome .... but should I rent it out ?
Thank you for responding to my thread. I will keep you posted ! The nerves have worn off and I'm glad I did this ..... just tired. The purchasing process jabbed it way in to an already full schedule. I had no idea how much time this would take, but I think maybe it's just because this is the first one I've done. ;)
Re: Just bought a townhome .... but should I rent it out ?
I've just rented a room in my place. I say room because as part of my mortgage that I just refinanced this has to be my primary residence. So as far as they know, I'm in L.A. 1/3 of my time. Hopefully this keeps me safe?
Aren't there several tax right offs for renting out a place or will I not be elligible for them because it's still technically ( i think ) my primary??
bad thread jack.. sorry.
Re: Just bought a townhome .... but should I rent it out ?
Quote:
Originally Posted by
carmen_b
... My big struggle with this property is whether or not to live there. I live in a rental property that a family member owns they give me a great deal . They give me such a good deal that I can afford to live alone and sock away other $ in my other investments.
....Living there alone is an option, but I'm exhausted from the hours I already work.
From all you've said and considered and the above advice, I'd suggest that you'd do better by taking the rental income. It's more house than you need now and roommates are a pain, no matter what. "Don't take off the market what you don't need."
Re: Just bought a townhome .... but should I rent it out ?