Real estate advice: Buy, hold, sell, etc?

Asked by serenade (3784

) March 21st, 2012 from iPhone

I’m looking for opinions and options.

I’m 10 years in on a 30 at 5.7% fixed. I have the property rented for just enough to cover the mortgage/insurance/taxes/PMI, water/sewer & HOA fee. The tenant pays electric/gas. So, in other words, neutral cash flow.

Based on a 4% rate, I could potentially refinance into another 30 year and get $175 in cash flow. Or I could pay $35 extra a month at 3.5% and do a 15 year. That would be a difficult move, though since I could use the cash.

I could also raise the rent, but I’m reluctant to do that for anything more than $20/month. I’m a bit soft, I know. Also, the back is not landscaped still, so it seems difficult to justify raising the rent too much.

Or, I could sell. I’d clear maybe $40,000 before all the middlemen took their piece.

Today, I thought of selling to my tenants and carrying the financing myself. That would give me a few hundred dollars every month, I imagine.

Anyway, feel free to tear up my assumptions above and give me your straight opinion. My goal is to get cash flowing in the right direction. If I sold it, I could pay off student loans and probably pocket $10–20k.

One other consideration is that I’d likely not qualify for another mortgage anytime soon. But, there’s a part of me that almost would rather own a “micro” house free and clear at this point than deal with all of that. Maybe not forever, but for now the thought is appealing.

Thoughts? What do you recommend based on your experience?

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8 Answers

How old are you and what are your goals?

You situation is complicated and other information is needed.

The only thing interesting I could say is that with inflation right around corner, selling a house now would be a bad idea.

Rock2 (1077

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late 30s

serenade (3784

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If you can afford to refinance over 15 years and take the hit, do it. You will be so happy you did. I’m assming you’re in your mid 20’s to early 30’s if you have student loans. You will be shocked at how fast the next 15–20 years fly by!The biggest problem I see with refinancing is that when you bought it it was probably “owner occupied.” You might have trouble refinancing as a rental.
edit: you snuck your age in there on me. Still, from age 30 to 50 flew by.

Judi (40025

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@Judi, that’s correct that i bought it owner-occupied, etc. What makes it difficult if it’s now rented? Just curious and thanks for your advice.

serenade (3784

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@serenade , lenders have a higher qualifying standard for income properties than they do for owner occupied properties. You may have enough equity that you can get the loan no problem, but you might find yourself jumping through a lot more hoops than you did when you originally purchased the property.

Judi (40025

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I would hold the property right now, it is considered a buyers market still and not a sellers market. I would then choose the 3.5% rate for 15 yrs rather than the 4% at 30 yrs because its only a little extra a month. If you feel you can raise the rent an extra $20 to make up some of the differenct then do it. In a short 15 yrs if you pay as scheduled then you will own the property free and clear so you can sell and get the whole amount rather and paying off the loan with a portion and hopefully by then it would be a sellers market and you will make a tidy profit.

creative1 (12081

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Sell it to the tenants and carry the financing.

The only reason we are refinancing our rental is because we owe nearly $50,000 more than it currently appraises for, and we cannot sell it. We will be able to lower our interest rate about 1% with the new loan.

YARNLADY (46570

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