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Deciding Between Selling or Renting My Condo
Hi ladies,
I bought my condo 6 years ago, a 600 sq. foot 1 bedroom unit in downtown Newport, RI. I loved it then. It's still cute, but, now that I'm married and he moved in with me, we're ready to move on to a home. We put it on the market in July but no bites yet. I know, big surprise. My hubby is all for renting it out, and I'm nervous about it. The building was built in 1836 and my beautiful hardwood floors are original to the house. I'm concerned a renter won't take care of them. Also, in order to not lose money renting it (b/c my mortgage rate is so high), I have to refinance it. Even if we stayed there we would refinance it. Our monthly payment will plummet about $400!! Which also means that, IF we can rent it, we'll be able to afford a pretty nice house. But, renting has lots of risks. Can you find someone reliable to rent it? Will they take care of it?
I guess I'm wondering if anyone has any thoughts or experience with this, or made such a decision lately? Thanks!
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Re: Deciding Between Selling or Renting My Condo
It sounds like a pretty desirable rental - well taken care of, historic, but also updated. That being said. I'd try the refi first and talk with your mortgage broker about how your credit will get hit if you refi right now and then get another mortgage soon after. I think you could refi sooner, stay a little longer and then your credit will rebound and you can buy a new place and rent your place out.
I've only been a landlord for 3 months, but so far, it's pretty easy.
Are you united with the CCOKCs?
Can you get approved for and afford 2 mortgages comfortably? Do you have an adequate down payment saved up for a new house as well as an emergency fund to cover anything at 2 places? These are things you really need to think about.
We are renting our old house because we couldn't find a buyer. We have fantastic tenants, but things break. In the past year alone we have spent well over $5K on repairs and that is in addition to the house we live in.
We also put our condo on the market in July. Much positive feedback but no offers. Ultimately we decided to take it off (2 weeks ago) and rent it out for a few reasons: 1. We have an adjustable mortgage and our rate will drop in January. So we might actually end up making money on it while we wait. 2. My H's employer will pay for a property management company, so we are hands off with the exception of writing checks when things break etc.
Our location is great and we have an updated kitchen, bath and hardwood floors. I also am nervous that they won't be treating our place like we would. However, our options are limited in that we need the rent money. We couldn't swing 2 mortgages right now (I just changed to a SAHM.)
I would speak to a mortgage broker first. When we refinanced I believe they checked the MLS listing to make sure we hadn't been on the market within so many days or months. That could impact your refinance decision. One other concern about refinancing is how much you owe vs how much it appraises for. Since you haven't been able to sell at whatever price you are currently listed, I would assume market value is less than your list price. That could affect your equity and what kind of loan you could get.
Related to renting - if you can afford both mortgage payments without a renter and have a downpayment to do so, I think it sounds like that's the only way to get out of your condo soon.
In addition to what others have said, I would also add that you'll be limited on the types of mortgages you'll qualify for on the refinance if you plan to rent the condo. For example, with an FHA mortgage, there's an owner occupancy clause and the home has to be owner-occupied for something like 3 years.
You might be able to get away with telling the bank that you plan to live in the house so you could get a conventional refi with less equity, but if you tell the lender that you're going to turn it into a rental, they will likely require you to have at least 20% equity in the property. Financing a rental is not as easy as financing a primary residence.
Mr. Sammy Dog