Real estate investment question

[phebus]

I am moving to Havasu, and was selling my house in O.C.. I have had second thoughts of selling, and am considering keeping it, and renting it out.
My question is, would it be better to sell it, and take advantage of not having to pay capital gains tax, or to keep it and rent it (it will have a positive cash flow of a couple of hundred dollars), see some appreciation through the years (hopefully, as I don't plan on this being a short term deal), but then face paying capital gains tax in the future?
If anyone has a crystal ball, can I please either borrow it, or rent it?

[YeLLowBoaT]

If you can come close to "breaking even" on the deal keep it. If your throwing a couple hundred away every month sale it. Don't forget that you have to pay for alot more then the just the house when you rent. Water, trash, waste. not to forget the up keep. Little things like if some 1 stays inthe house for more then 1 year you must paint the inside. Carpet cleaning between renter... it all adds up fast.
In the "long hual" relestate will always go up, the only time you really won't make money ( in the long term) is if inflation spikes very high.

[Supultlbich]

I would keep it Rick, like you said it cant hurt. RSM isn't likely to loose any of its value, and your house isnt exactly in the low rent neighborhood either. Sounds like a win win if you ask me.

[Ivan Dan]

I am moving to Havasu, and was selling my house in O.C.. I have had second thoughts of selling, and am considering keeping it, and renting it out.
My question is, would it be better to sell it, and take advantage of not having to pay capital gains tax, or to keep it and rent it (it will have a positive cash flow of a couple of hundred dollars), see some appreciation through the years (hopefully, as I don't plan on this being a short term deal), but then face paying capital gains tax in the future?
If anyone has a crystal ball, can I please either borrow it, or rent it?
Rick~ I think you will get a lot mixed opinions with this ranging from one extreme to the other. The question you need to answer yourself is....
Can you live comfortable in your house in LHC without having the cash from the sale?
If you can make it without being strapped than it wouldn't be a bad thing to keep and rent out. If you think its gonna be too tough financially then maybe you are making the right decision by selling and cashing it out.

[phebus]

We have tried to figure in all the costs, including the property tax (which is very high with Melo Roos), and we would still be positive., if I take advantage of the income tax savings.
My dilema is that it would have to appreciate 20 percent before it would even be a break even, if I couldn't take advantage of the capital gains write off.
I am neither investment saavy nor real estate smart to know the pros and cons, so I thought I would throw it out here, as I have someone interested in buying the house and need to make up my mind.

[YeLLowBoaT]

Just a little fyi most porp mangment companys Suck! Golf ball thru garden hose bad. When it comes to "maintance" ( we are talking things breaking and yadda yadda not lawn care) a good rule of thumb is take what the rent is a month and add 25%. that will be about what your costs are for "maintance" if you have a lease for 1 year. ( assuming that the renters change) A good chunck of that will just cover your legal requirments for having some 1 stay there 1 year. I use to do alot of properity mangment repaints, I saw every thing from better then it was when they rented to 10k in damage in less then 1 month.

[phebus]

One of the main resons for wanting to keep it would be that if were not happy living in Havasu, we wouldn't have cut all our ties here, and a move back wouldn't be too hard.
But, I don't want to open up a can of worms, and have to worry about things either.
I think I am still leaning towards selling it.

[Essex502]

I am moving to Havasu, and was selling my house in O.C.. I have had second thoughts of selling, and am considering keeping it, and renting it out.
My question is, would it be better to sell it, and take advantage of not having to pay capital gains tax, or to keep it and rent it (it will have a positive cash flow of a couple of hundred dollars), see some appreciation through the years (hopefully, as I don't plan on this being a short term deal), but then face paying capital gains tax in the future?
If anyone has a crystal ball, can I please either borrow it, or rent it?
From your post I am not sure where your capital gains tax would be. If you have lived in the OC house as you primary residence an aggregate of 2 years in the last 5 years then you and your wife can write of $500K tax free from the sale. Any profit OVER the $500K would be taxed though. Take that $500K and invest it and you should be able to realize 10% or more annually.
On the other hand, rental property is a long term benefit but you have to hold cash in reserve for maintenance and for the months that it isn't rented - usually between tenants. Then you have to have a management company or you have to manage it yourself. Since you will be quite a distance away, who's gonna' get the call from the tenants when something needs to be fixed? A management company for the rental - if you decide to go that route - will cost from 10% of the rent and up. They usually will need a reserve of cash to start the process for the upkeep.
If you don't need the money to live on in Havasu, keep the house as a rental. You can always make a like-kind exchanve later for other income property with no taxation if your new property is valued the same as the old one or greater.
Just some things to think about.

[soupersonic]

You could always sell it on a lease option.Take enough of a down payment to cover any repairs if they dont qualify in a year. Charge enough rent to have a positive cash flow.Then in a year when they dont qualify, you get it back fix it again,most likely just carpet,paint and a few small items.Then you can do it again or sell it outright and you have reaped the benefits of the appreciation.If they do qualify,it would be sold at the current appraised value and you have still gotten the appreciation. Most people in a situation that need to rent to own this way arent going to complain about sales price ,interest rates, and they are responsible for any repairs.Plus you can do periodic inspections to make sure they arent destroying your investment :) :)

[phebus]

The capital gains would be from a future sale/cash out. I don't want to die with a house, I want to die spending a house full of money :)

[Essex502]

The capital gains would be from a future sale/cash out. I don't want to die with a house, I want to die spending a house full of money :)
With rental or other investment property you can always use a 1031 Starker echange to avoid the taxation. You can rent that house now and later take the exchange for a house or houses or other investment property - even in Havasu. Talk to your accountant on the details.

[Red Horse]

I have a rental in Vegas and I am in Japan. The distance sucks, but I have friends that help out and it only gets hectic around lease time. With that distance, you could do some of the maintenance yourself and possibly rent it out yourself and save. Property managment really does suck. They dont seem to care too much and are in it for themselves first, then the client. I would hold onto the house. Real Estate may not be growing buy leaps and bounds, but even 3-5% on X00K is a lot of money for a year. Take the postiive cash flow for a year and make a rental house fund to cover unrented periods and the like. You'll do fine.

[Ziggy]

The capital gains would be from a future sale/cash out. I don't want to die with a house, I want to die spending a house full of money :) Your kids will want you to die with a house or two though :idea: Make their lives 'just' that more secure in the future. Use what you need, leave what can. :)

[Family Jewell]

I am new to the Hot Boat one line but after reading your question I had to put my 2 pennys in. One question you must ask your self is What am I going to do with the money I make on the property I sell. The reason, you want to make sure you go to anther investment where you can realize the same or greater return. The other part of this is that you will be able to write off all of your expences. Even a trip back to check on the property. Another thing to think about is tax shelter you will now be creating for your self. Above all you have to consider this ( Can I sleep at night knowing I have a renter?) Some people can"t . One last thing DO NOT USE PROPERTY MANAGEMENT! :cool: :cool:

[Ziggy]

Welcome to ***boat Family Jewel :)

[brianthomas]

Would you not have to sell in the next three years to get your 500K exclusion as you have to live there for two of five years?

[Family Jewell]

Thanks Ziggy ! I have been reading some of the postings and it seems like there is a nice group of peeps here ! :smile:

[Ziggy]

Thanks Ziggy ! I have been reading some of the postings and it seems like there is a nice group of peeps here ! :smile:Yes they are, haven't met a one that hasn't been nice in person as well......but as with every court there must be a jester or two :p
Enjoy.

[phebus]

If I sold my house here, I would roll the profits into the new house in Havasu. That would keep my monthly payments low, and allow me to put money into savings
I was retired out on a medical disability from my job, so the majority of my monthly income will be tax free, so I don't need a tax write off.

[SDLifesaver]

Rick, my .02 is keep your OC house and use it as a rental. It is not going to depreciate, it is equity in your pocket when needed, it is an automatic get out of jail free card if you and Linda don't like the full time Havasu thing. It is a possesion that is to valuable to get rid of. What is the rental market in your neighborhood like? Like Ivan Dan said you are going to get 100's of opinions but if you are on the fence make the safest move and keep your place here. Besides, what an opportunity to help Nicole when the time comes to get a house if you still have to OC residence. I wish I could get houses for my kids now because I have a bad feeling they are going to be able to get them as easy as we did when they are grown up and of house age.