For those moving up and buying bigger - will you rent out your current place?
- Thread starter acf
- Start date
Perspective
Well-known member
If you'll need a mortgage for the new house, fair assumption, you'll need to qualify for that total housing monthly cost based on your real provable income. Since your current house isn't rented, you can't use prospective rental income as income for purposes of qualifying for the new mortgage. So, your income will need to support both housing costs and your total debt can't be much more than 43% of your gross monthly income.
If you are able to keep the current house as a rental, you're doubling-down on housing in your portfolio, very likely highly leveraged. Are you comfortable with this? If mortgage rates rise a point or two from ~4%, your net worth would be seriously negatively affected.
If you are able to keep the current house as a rental, you're doubling-down on housing in your portfolio, very likely highly leveraged. Are you comfortable with this? If mortgage rates rise a point or two from ~4%, your net worth would be seriously negatively affected.
woodburyowner
Well-known member
If you are moving from condo to SFR, it makes sense to rent it out. However, from SFR to larger SFR, the numbers will most likely not work out. My neighbor rents out his 1.3M house for $4k a month. It also took 2 months to find a tenant. The numbers just don't make sense.
LongIrvine
Member
Depending on after transaction costs gain on sale. Assuming you have lived there for several years, makes sense to factor in no capital gains tax. Have a year or so to decide. But wouldn't overlook.
woodburyowner said:
Agreed, it's hard to rent out when the monthly is 4k+ I think the sweet spot in the Irvine/Tustin area are the 3bed/2.5 baths, you don't compete with the all of the IAC apartments and its a good size for a new family to get into the area when they can't buy.
Our Tustin 3bed/2.5bath detached condo got 8/9 applicants within 3 days of list. Had a guy wanting to give us a cashier's check the same day it was listed if we had given him the chance.
Perspective
Well-known member
LongIrvine said:
Yep. It's a tax-free gain, up to $500K if married, if the house as been your principal residence for two of the last five years.
usctrojancpa
Well-known member
LongIrvine said:
He would actually have 3 years to decide if he wanted to sell it and get his gain exempt from tax (rule is that you have to occupy your home for 2 out of the past 5 years...any 2 years within a 5 year period).
That being said, I will put my home up for sale at a strong price. If it doesn't sell, then I will rent it out as I'll be around $1,000 cash flow positive each month.
usctrojancpa
Well-known member
akkord said:
As I always say, good tenants are worth their weight in gold.
irvinehomeowner
Well-known member
We did that, it was okay, didn't like the landlord duties.
The second time around, we just sold it, too old to worry about it and it wasn't in a really good location (plus I felt bad when our former neighbors would complain to me about our tenants). Plus, we needed the equity for the down because prices shot up in Irvine at the time we bought and what we wanted to settle on wasn't cheap (well... cheap to us).
If you can cashflow including a property manager, that would probably be best.
The second time around, we just sold it, too old to worry about it and it wasn't in a really good location (plus I felt bad when our former neighbors would complain to me about our tenants). Plus, we needed the equity for the down because prices shot up in Irvine at the time we bought and what we wanted to settle on wasn't cheap (well... cheap to us).
If you can cashflow including a property manager, that would probably be best.
usctrojancpa
Well-known member
irvinehomeowner said:
No offense to property managers, but there are not needed for rentals in Irvine. I've help rent out dozens of homes for clients and none of them used property managers over the years.
Perspective
Well-known member
acf said:
Sounds like a terrible investment. You'd be betting solely on rising rents and/or appreciation, at a time when rates are extremely low inflating all asset prices.
Perspective
Well-known member
If you had the net profit from the prospective sale of this house lying in a savings account, would you use that cash to buy this house as an investment property?
Cornflakes
Active member
Perspective said:
If you had x amount invested in bonds that pays you monthly dividends in the form of increasing your x over time, and it costs you anywhere between 6-12% (based on LTV) to cashout, would you?