My mom who’s 70 and on a fixed income is currently living with me in Boise waiting for her house to sell in Northern California. She wants to have her own place but is kind of in limbo right now because of the market. Some family members think she should just rent it out and wait for the market to turn around (which I know may take a while) instead of selling it for what she would get for it right now. Her home is paid for so she could afford to lower her price and still pay cash for one here. There are a ton of homes flooding the market here in Boise too, so she could still get a great deal on a home here eventually as well. If she rents it out, she would have to rent something for herself here. When the market does turn around and she was to sell then, wouldn’t she lose a big chunk of it to taxes anyways if it was rented out longer than 2 years? Thanks for any advice!!!!
She would not earn a profit from it. The rent she gets would have to pay her rent here. By the way, my mom is way into her health is isn’t going anywhere for a long time.
rent it out and make some money off it
No offense, but she’s 70…she doesnt have as much time as you would, so she should maybe rent it.
Definitely rent it. If she’s not desperate for a huge chunk of change, then why not? It’s pure profit. She could even hire a property manager to take care of maintenance, get a business license and write off any expense dealing with the house.
Yeah it’s a buyers market almost every where.
Her price won’t be met.
Unless she offers it Lease with an Option to Buy. She can set a hire price for the future, when the market turns.
If she’s owned it for more than 5yrs, (depending on the HUD program) she could do a reverse mortgage and not pay any mortgage.
It’s good for some people, but most elders want to leave an inheritance to their family?
Part of money received from a sale arent taxed when you reach a certain age.
When you rent a property, you have to claim the income from the rent, in any case, at anytime.
Sometimes it’s off set by taxes, insurance, depreciation and other expenses that the owner has to pay.
There are a great many things she could do with a property like that but unfortunatley I do not have enough info to give an opinion. I will tell you that the market in CA is (in my informed professional opinion) going to get worse before it gets better. Most analyst have us in this market or worse until 2009. With the currrent state of the mortgage lending industry, consumers have the fewest amount of programs available in years. Financing is difficult even for the highest credit scores. Also with over an estimated one trillion dollars worth of loans adjusting between now and the next couple of years coupled with the drastic decline of home prices mostly because of the the alarming forclosure rate, we may be in the position to see a serious crisis of historic proportions. These loans will adjust to rates way above affordability for many homeowners and because many of these homes aren’t worth what they owe on the mortgages, refinance options are unavailable. This means a lot more foreclosures and more decline in home values.
If you want to sell, I would do it now. You could rent but only if the rental premium paid for a substancial portion of her living expenses and still have money for upkeep and taxes. This would allow her keep the property and ride this out for the next few years in hopes the market swings back up. You know, a lot of my real state investor friends have several free and clear properties they used for what are called first position HELOC’s. It essentially gives you a credit line equal to up to 100% of the value of the home. Usually used for investment purposes. The rates are usually way better than a regular credit card and you may be able to take advantage of some tax write-offs. You can’t do that with a regular credit card. Be sure to speak with trusted real estate broker or attorney. Preferably one that owns investment property and has a good track record.
Hope this helps.
My parents are in the same situation in Southern CA, and they want to move out of state to be near me…so I’ve been doing lots of research.
As far as taxes are concerned, she could have a capital gains tax exclusion even if she rented. BUT she’d have to sell it within 3 years to qualify… In the 5 years prior to the sale of the house, you need to have lived in the house for at least 24 months in that 5-year period. It sounds like your mom is single or widowed so she’d get up to $250k profit untaxed (it’s $500k for married folks).
If she refinanced her house in CA and took some money out to put down on a house in Boise, she could rent out the CA home. The rent would cover the refinaced amount of money, and I’m assuming her mortgage payment in Boise. Be sure to save some money for unexpected troubles (plumbing, a/c, roof, etc). If you go this route, I’d recommend getting a property management company to take care of the CA home. Trying to be a landlord out of state is not going to be easy. Of course, mgmt is going to take a portion of the rent too. So do your math to see if this works out for your mom.
The easiest thing is to sell now, but if you’re willing to do a little work, it could mean a huge difference in profits. Good luck to you and your mom!