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We (spouse and I) bought our house on 2007 for $ 168,500. We still owe $ 162,000, and our monthly payment is $ 1370 because we had to add the property taxes and insurance for a 100% loan. We have to relocate to another state and we don’t know what to do!! If we try to sell, we will have to pay out of pocket around 20-25K,including 6% real estate commission, home depreciation, closing costs for the buyer, and miscellaneous expenses. The home market right now in our area is bad…But I have another option…that is renting out our home at around $ 950-$ 1000 per month…The problem is that our mortgage payment is $ 1370 and we also would have to pay 10% for the property management, home insurance, and other miscellaneous, which puts us at a monthly out of pocket expense of around $ 600-$ 650!! We do not have the $ 20-$ 25K to pay out of pocket if we decided to sell it. We will need to settle down first before we can afford to pay the $ 600-$ 650 monthly to keep the house rented out…I know that we could pay for our own rent in Texas for that amount!! It will be like paying double rent…and still we will need to sell the house later when we save enough money to pay for the loss and agent fees….But I’m afraid that the tenants destroy the house and on top of the house depreciation and the agent fees we will also end up paying for repairs or full mortgage if they move out before time. If we don’t sell it or rent it out it will have to go in foreclosure and our credit will be ruined…Please help if you have knowledge about the subject…Thanks

2 Thoughts on Should I rent out my house at a loss?
  1. Reply
    Big Tom
    April 30, 2011 at 1:28 am

    I applaud you for wanting to do the right thing. If you can get lucky to get some good tenants into the place then you will be fine but it will still cost you. If you could get around dealing with the property manager i would. This can be done easily if you get decent tenants who pay the rent ontime and won’t trash the place. I would rent the place out and every last extra dime that you have needs to goto the mortgage. If possible pick up a second parttime job so that you can put all some more money toward the principle. If you play your cards right, you will be able to get out of the house in a couple of years without ruining yourselves.

  2. Reply
    Glenn S
    April 30, 2011 at 2:04 am

    Tom’s advise is worst you could ever get. Don’t try and rent your home without a good property manager if you are not living in the area of the property. More than a couple of hours away. Drive that distance just once a month and it will cost you that amount in time and money vs. a property manager. That is about as good as an example as being penny wise and dollar foolish as I can think of.

    You shouldn’t have that large amount of a negative cash flow. Rent it for $ 1000 a month and hire a property manager for 8% of the monthly rent, $ 80, plus water, and the difference between the payment with PITI $ 370….a $ 475 monthly negative cash flow.

    You will be able to deduct all the costs, including the $ 475 from your income tax plus you can write-off depreciate of about $ 350 a month. When the market comes back sell the property at a profit. You are no in a bad position. Just ride out the down market and five years from now you will have saved a lot of money on your income taxes and could have a nice nest egg. If you have an FHA loan do a FHA streamline loan immediately while you still live in the property. You should get a lower interest rate and you don’t need an appraisal. That should save at least $ 100 a month in principal and interest. Also file for a lower property tax bill since the value of the property has gone down since you purchased it.

    Go talk to a CPA or good tax adviser before you do anything, but in the long run you could come out very well.

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