Lakewood - selling vs. renting

amother

Pearl

Thu, Nov 17 2016, 11:08 am

I live in Lakewood in a starter home condominium that DH and I bought 16 years ago. For various reasons, the neighborhood no longer works for us, and we'd like to move to a house (not a townhouse). We found a house that could work for us, in a neighborhood that makes sense for us.

Initially we thought the best thing would be to sell our house and use the money to buy a new house, taking out a mortgage for the difference. (We're almost done with our mortgage on this house, and would probably need to take a mortgage for about 100K, maybe a little more, including some renovations the new house would need).

For about 6 months I've tried to sell our house by owner. Haven't sold, and am considering signing up with a realtor. This would probably mean a slight increase to the amount we'd end up taking as our new mortgage. We may also need to sell for less than we hoped.

One thing that keeps coming up is, why don't we rent instead of selling. We live in an area where we'd have no problem getting renters. In fact, I had to put "no renters" into my advertising because we got so many calls from people who want to rent my home.

I wonder sometimes if renting could work for us. The thing is, I don't have money to put as a downpayment for a new home. A new home would cost us about 500K. That's a big mortgage. Our house would not rent out for so much - we could get maybe $1600 or so monthly, and almost $600 of that would go to property taxes.

What am I missing here? Is there any way to make something like this work?

TIA.

amother

Cobalt

Thu, Nov 17 2016, 11:12 am

if you cant do such a big mortgage then why are you thinking of renting? sell it first and with a contingency so be able to buy something else. thats what I did. alot of people do this.

speak to a broker. they can help you find something that is suitable for you. dont do this alone. first inquire whats available. in a developement its cheaper. and there are neighborhoods that are cheaper like in jackson. some parts of lakewood are cheaper too. dont give up

a good broker can get you what you want. doing this alone is not a good idea. most people go with a broker as that is the best way. oh I hate them I dont really trust them. but we dont have a choice. they know what you can get and they will do alot to get you the price you want.

amother

Slategray

Thu, Nov 17 2016, 11:19 am

If you have no money for a down payment then I dont know why there is an option to rent out your house. I just sold my house in Lakewood- we were thinking of renting it out and we regret not renting it out now HOWEVER, I had the money for a new down payment on my house. The market is not good now and we didnt get so much money for my old house which is why renting for us wouldve made more sense. But we put more money down on my new house and have a pretty low mortgage so its not the end of the world.

amother

Pearl

Thu, Nov 17 2016, 11:24 am

OK thanks. I think going with a realtor is the way to go. I was just wondering if I'm missing anything, because so many people ask me why don't I just hold on to the house and rent it (mostly I get this from people who know someone who wants to rent my house. I live in Yeshiva area so rentals are very in demand here....)

amother

Slategray

Thu, Nov 17 2016, 11:25 am

amother wrote:

They are assuming you have money for a down payment. I got asked this question a lot too but in the end my husband wanted to put more money down then 20%.

amother

Pearl

Thu, Nov 17 2016, 11:43 am

amother wrote:

How much is rental where you want to move?
Perhaps it would be better to rent your home, and rent in the new area.
Since the area you own now is in such high demand perhaps it can be rented for more?

Interesting idea. I don't know how many rentals are available in the area I want to move to, though I believe there are some....and also it would likely be more to rent than I would get for my house, so it would cost me a couple hundred a month for money that would not be going toward eventually owning that house....However we would at least still own this house.....

Never thought of it....hmm....

amother

Pearl

Thu, Nov 17 2016, 1:52 pm

amother wrote:

by the way, another option is to refinance your house. Mortgage rates are so low now that you can take out some money from your house and still have a low mortgage. This way you can have down payment money and rent out your house.

But wouldn't that just up the price of my mortgage in the 2nd location? Like say I take a 100K equity loan for a downpayment for the house, and then a 400K mortgage loan....that's a pretty high monthly payment, even with low rates....my rental would contribute about $1000 to it monthly but it's still pretty high.....

amother

Aqua

Thu, Nov 17 2016, 2:53 pm

We are doing something similar. Our current starter home (multifamily) still has a mortgage of 400 000$ on it but is worth more than 900 000$ on the market. We are taking out a home equity loan of 300 000$ to buy a new place. The income from the mutifamily will cover the existing mortgage, taxes, insurance and the HELOC. We will be paying the new mortgage and taxes. We end up with 2 properties for the same monthly cost.

In your case, let's say your current home is worth 400 000$. You can tap into 80% of your equity via a HELOC and get about 300 000$ to put down on the new house. 1600$ rent will cover the cost of the loan + taxes on the condo. The difference is that you will carry a larger mortgage on the new house and probably some expenses from your condo. If you can afford the 600$/month or so, most definitely hold onto your condo as an investment.

sky

Thu, Nov 17 2016, 3:04 pm

Refinancing is a good option if your rent will cover your morgage, and you have a cushion in case it is empty.
Lets say its worth 200,000 (more realistic than 900,000 especially if its in a Coventry type area) . You refinance. Put 20% down + closing costs and what is left on the loan. You can walk away with about 140,000.
Use that as your down payment and let the rent cover the new morgage. This way you have the down payment and keep your old home as an investment to sell one day when you need the money.
Rates are so low now it probably makes sens if you can lock in like 3.75 - plus properties are so high you can get a very high home value.
On a 140,000 loan your monthy rate could be under 700, so you might even make money when you are done paying your morgage and taxes.

amother

Beige

Fri, Nov 18 2016, 11:34 am

amother wrote:

"The market is not good now"? I thought prices rose in the last year or two, and are continuing to go even higher very quickly in Lakewood.