Making Your House A Rental Versus A Short Sale? 8 Reasons Why You Shouldn’t
Many homeowners opt to make their underwater house a rental property. The typical thought process is holding the property until the housing market turns around thus enabling the house to be a normal sale. Is this a viable alternative to foreclosure or a short sale?
We know of many homeowners who chose this route and eventually turned to short sell their house. Why? Let’s explore 9 reasons why not to make your house a rental property to come out from underwater.
Example: $300,000 Fair Market Value, $400,000 Balance Owed To Bank(s)
- Maintenance/Repairs – Typically, maintenance and repairs cost about 1% of the house value per year. This doesn’t only include cosmetics. Roof can need replacing (thousands), gutter replacement, siding, paint, flashing, and etc. This puts us at -$3000/yr
- Negative Cashflow – Often times, the rent does not cover the mortgage. -$3600/yr (-$300/mo)
- Property Taxes – The city needs to be paid. -$3000/yr
- Occupancy Rates – If you are lucky, you can get 90% and above occupancy rate. What if you lose 10% of your total yearly rents?
- Non Payment Issues – This one is very common. Many renters will give a sob story in order to get out of paying the months rent. I know homeowners who bit the bullet for almost a year resulting in thousands lost because they couldn’t evict a homeowner.
- Burden Of A Landlord – Management of a rental property can be a nightmare. Driving back and forth and dealing with tenants while fixing all the problems involved with a house can be a part time job.
- Time To Break Even – How long will it take YOU to break even? Find out here. After closing costs, many houses will take years to break even.
- Fleeting Tax Exemption – If you do make your house a secondary home, you are surrendering your ability to qualify for the mortgage forgiveness debt relief act.
House prices increasing are the main reason why homeowners will choose this route. However, the sustainability of the current appreciation rates will not last. Many experts have expressed concerns of another bubble with the artificially low inventory and the foreclosure inventory that will eventually flood the market.
Why Short Sale?
A short sale relieves you of all of the burdens listed above and it sets you up to become a boomerang buyer. You walk away from your home with little to no liability and with dings on your credit report which can be remedied via great credit rebuilding programs such as Lexington Law.
If you are in Washington State, we at seattle short sale blog have chosen the absolute best experts to work with in the industry. Our negotiators have a steller track record and have closed hundreds of short sales. Best of all, they are free.
Submit your information here and we will connect you within 24-48 hours.
Hope this helps