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TrophyHusband

is it better to sell a house for a loss, or rent it for less than the mortgage?

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we're fortunate that we have the means to pay the mortgage indefinately even without renters.
.



In that case i would run it negatively geared and offset your costs with the rent.
Unless the market dies again and the poroperty depreciates, you will end up better in the long run if you hold on to it.
You are not now, nor will you ever be, good enough to not die in this sport (Sparky)
My Life ROCKS!
How's yours doing?

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Blacklab offered to run the numbers for ya, he's got experience there and I'd take him up on it.

My experience is with rental properties and for whatever it's worth my advise would be to dump & run.

You're correct in saying this market isn't going to reverse anytime soon, and trust me you do NOT want to be an absentee landlord.

I saw this coming and sold several properties a couple years ago and can't tell you how happy I am that I did.

Rent on the places we have left is nearly 1/2 of what it was 3 or 4 years ago and the quality of renters is much lower because of it, that's extra wear & tear on the place that you have to maintain...if the rent doesn't even cover the note, where does the extra repair overhead come from?

Yeah it stings to go upside down selling, but it sounds like in your case it won't be a critical move financially. If you can recover the closing costs etc in less than a year I'd take the money and lose the stress! ;)

Like you mentioned, there are other more stable investments you can explore.











~ If you choke a Smurf, what color does it turn? ~

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i've been pming blacklab. he's helping me with this too.

i'm not necessarily opposed to having a rental property, but i really don't want to have this house as a rental. on the practical side, the lawn is huge. there is an acre of grass, two irrigation systems, 18 watering zones, over 100 sprinkler heads. there is almost always a sprinkler head out of whack. they are easy for me to fix, but to call in a sprinkler guy to fix a head costs $50 just to get him out there. that culd eat into things pretty quick. also, the house is in idaho and we are in florida. in three years we could be in japan, italy, alaska, or back in idaho (we would only go back there if we still owned the house, but we really don't want to go back).

on a more emotional side, this was our home for 4 years. it is where our family really blossomed. we love the house and property and have a lot of fond memories. i don't know how i feel about someone else living there and making it their home while we still own it.

you also touched on something important, stress. this thing doesn't feel like an asset, it feels to me like something hanging over my head that i want to get rid of. i think i could get rid of that feeling if someone could show me that this would be a decent investment. it turns out that there are just too many variables to make a determination.

i wish this was easier.


"Your scrotum is quite nice" - Skymama
www.kjandmegan.com

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on a more emotional side, this was our home for 4 years. it is where our family really blossomed. we love the house and property and have a lot of fond memories. i don't know how i feel about someone else living there and making it their home while we still own it.



When dealing with real estate, you have to take the emotions out of the equation. The place you live in now with your family is your home, the other place is just a house. Do the thing that is financially better for you, period.
She is Da Man, and you better not mess with Da Man,
because she will lay some keepdown on you faster than, well, really fast. ~Billvon

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Twardo and Remster are right on. For us when we were in the same scenario, we looked at "feeding" the house for at least three more years waiting for the market to turn around. At the time, we had renters in there making the mortgage payment but not covering the taxes so it wasn't a big deal. Then the renters moved out, not able to re-rent at the same rate, lots of repairs/painting/floors/maint. etc and that was enough. We were not willing to keep putting that kind of money into it and dumped it at a loss. Forget about the emotional stress on my wife (and thus also on me) of having to deal with the hassels of being an absentee owner.

Never look down on someone, unless they are going down on you.

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on a more emotional side, this was our home for 4 years. it is where our family really blossomed. we love the house and property and have a lot of fond memories. i don't know how i feel about someone else living there and making it their home while we still own it.



When dealing with real estate, you have to take the emotions out of the equation. The place you live in now with your family is your home, the other place is just a house. Do the thing that is financially better for you, period.



COMPLETELY agree with Skymama.

And here's another thing.. In Accounting, they teach you about the concept of "sunk costs".. Essentially, it's the idea that past investments should not be factored into your decisions for future investments.. In other words, when deciding what to do with your money / investment / asset, you should only think about whether it's a good idea to keep / sell it based on what makes more financial *sense* moving forward, not how much money you have already lost/gained..

You can't change the past, but you can *try* to pick the best option for the future.
"There is no problem so bad you can't make it worse."
- Chris Hadfield
« Sors le martinet et flagelle toi indigne contrôleuse de gestion. »
- my boss

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Essentially, it's the idea that past investments should not be factored into your decisions for future investments.



Unless its your pet-project at work. Then sunk costs are extremely important.



No.. Sunk costs are in the past, and if the best option is to disinvest, that is the best option irrespective of past losses/investments..

I'm not saying that past investments are irrelevant.. They affect how much profit/loss you make.. I'm saying you should not base your future decisions on what you have already put in. You should just always take the best option. Otherwise, you may avoid a small loss only to incur a bigger one.. Or you may sell for a short-term profit when you could have made a big profit by waiting..
"There is no problem so bad you can't make it worse."
- Chris Hadfield
« Sors le martinet et flagelle toi indigne contrôleuse de gestion. »
- my boss

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And if you're having a lot of trouble separating the emotions from the house, that's a point in favor of selling. Because those emotions cost you both money and heartache if you really loved the place.

Wendy P.
There is nothing more dangerous than breaking a basic safety rule and getting away with it. It removes fear of the consequences and builds false confidence. (tbrown)

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In other words, when deciding what to do with your money / investment / asset, you should only think about whether it's a good idea to keep / sell it based on what makes more financial *sense* moving forward, not how much money you have already lost/gained..



very good point and its something we're trying to keep in mind.

there doesn't sound like there's a right or wrong answer here. maybe we'll get a decent offer soon.

there is a couple looking at it tonight who have already looked at it twice before. they've been interested in it for a while, but still own a house. my agent told me yesterday that they qualified for finacing so they don't have to sell their house before buying. i'm hoping they make a move in the next couple days.


"Your scrotum is quite nice" - Skymama
www.kjandmegan.com

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unless you are finacially constrained (you said you are not) or unless this place will cost loads to keep right, i would not be selling. Property has proven itself to be a great investment over time.
We have 2 properties that we rent, they are both negatively geared so they both cost us money, but in the long run the capital gains will far out way the expenses.
You are not now, nor will you ever be, good enough to not die in this sport (Sparky)
My Life ROCKS!
How's yours doing?

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Sell it. There are always other opportunities closer to where you are presently living. For me, being as far away as you are would be a deal killer. I have a number of neighbours that have rental properties and they are a lot of work and require constant attention.

If the house will carry itself with no more injections of cash from you....renting it allows someone else to buy it for you over time. I've heard renting described as how to get rich slow in real estate. But I'd never follow that path unless I was able to monitor my property very closely.
--
Murray

"No tyranny is so irksome as petty tyranny: the officious demands of policemen, government clerks, and electromechanical gadgets." - Edward Abbey

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We are kind of in the same boat. We have two properties providing profit while a third is being rented at a loss. In the U. S., passive losses can only be written off against passive gains (now), and the loss property is enough for us not to be taxed on the profit. Since this is San Diego, and two are very close to the beach, we(hope) recovery will allow us to profit within the next 7+ years. But to say this was easy so far would be a lie. Some strange reason, this challenge is my cup of tea. I would advise that if you are not willing to respond to new and sometimes unique issues at a drop of a dime, that it might be a good choice to sell. Prices mayl get better in the future, but if you can't take the stress, is the money worth it?
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"The trouble with quotes on the internet is that you can never know if they are genuine" - Abraham Lincoln

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Prices mayl get better in the future, but if you can't take the stress, is the money worth it?



if i were convinced that this would be a good long term investment, i wouldn't be too stressed about it. right now i'm itching to knock out our cars loans and start dumping money into retirement investments. we've been in kind of a holding pattern while wiating to sell the house but its been almost a year now.


"Your scrotum is quite nice" - Skymama
www.kjandmegan.com

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Find a *fee-based* financial planner in your area and make an appointment to get your question answered. A lot depends on the rest of your financial situation.



i'm not sure a financial planner from here would have the right perspective reguarding real estate in idaho (where the house is). we're currently in the florida panhandle and in my opinion and many other peoples' opinions, you would be crazy to sell a house here right now if you could swing the payments. the market here is artificially low and it will recover quite well in the next several years. that is likely not the case in idaho.


"Your scrotum is quite nice" - Skymama
www.kjandmegan.com

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Prices mayl get better in the future, but if you can't take the stress, is the money worth it?



if i were convinced that this would be a good long term investment, i wouldn't be too stressed about it. right now i'm itching to knock out our cars loans and start dumping money into retirement investments. we've been in kind of a holding pattern while wiating to sell the house but its been almost a year now.



Sell. You can always buy later when retirement and other bills are at a comfy level. Some places in the U. S. ,especially California, real estate experts are claiming a complete recovery in about 10 to 15 years. They, however, haven't said what "recovery" meant; return to peak prices or return to normalcy.
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Prices mayl get better in the future, but if you can't take the stress, is the money worth it?



if i were convinced that this would be a good long term investment, i wouldn't be too stressed about it. right now i'm itching to knock out our cars loans and start dumping money into retirement investments. we've been in kind of a holding pattern while wiating to sell the house but its been almost a year now.



Sell. You can always buy later when retirement and other bills are at a comfy level. Some places in the U. S. ,especially California, real estate experts are claiming a complete recovery in about 10 to 15 years. They, however, haven't said what "recovery" meant; return to peak prices or return to normalcy.


Here in Australia PROPERTY is the retirement investment. Over the long term property has out perfomed stocks in recent years.
It's rare for property to DEvalue, and capital growth is often quite good.
Our investment properties are FOR our retirment.
You are not now, nor will you ever be, good enough to not die in this sport (Sparky)
My Life ROCKS!
How's yours doing?

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Sell. You can always buy later when retirement and other bills are at a comfy level. Some places in the U. S. ,especially California, real estate experts are claiming a complete recovery in about 10 to 15 years. They, however, haven't said what "recovery" meant; return to peak prices or return to normalcy.


Here in Australia PROPERTY is the retirement investment. Over the long term property has out perfomed stocks in recent years.
It's rare for property to DEvalue, and capital growth is often quite good.
Our investment properties are FOR our retirment.



thats what everyone here was banking on also! look where it lead us
LifeshouldNOTbeajourneytothegravewithawellpreservedbody,buttskidinsideways,cigarinone hand,martiniintheother,bodythoroughlyused upandscreaming:"WOO HOO!! What a ride!!!"

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...if we were to rent, we would fall short of our mortgage by $225/month which would have to come out of pocket.
...
only about 20% of our mortgage payment goes to principal, the rest goes to interest, property taxes, and insurance.



The amount of the mortgage payment would help here. If we assume it's $1,500, then you'd be paying $225/month for $300 worth of equity...a nice gain if you can get it. However it's not clear that this accounts for whatever expenses you'd incur by renting it out.

Blues,
Dave
"I AM A PROFESSIONAL EXTREME ATHLETE!"
(drink Mountain Dew)

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Here in Australia PROPERTY is the retirement investment. Over the long term property has out perfomed stocks in recent years.



Recent years is close to pointless when you look at long term strategies. Have you actually seen the data to back that up?

In the US, if you look at the CS index from 87 (the time the index was started) to the top of the market (December 2005), the average return on a property is only 3% annually, when taking into account inflation. Looking at a well diversified portfolio (say the Wilshire 5000) over a 20 years period, you should see at least 6% return when accounting for inflation.
Remster

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