When your rent cant cover your mortgage
My house was not built with investment in mind but now I am considering using it as such. Mortgage on it is 3000 and average rent in the area is 2300. Does it make sense to stay for a while and pay it down so the mortgage is 2300 and now reasonable for rent, pay a heavy principal to bring it down significantly so that it on par with the rent or just sell and buy new one. TC = 200
Sell and buy another one.
-$700 a month is large loss plus $ to prep for rent, upkeep, repairs, tax on rental income, etc. Not worth it even with the tax benefits...
If you like where you live hold on to your house. Nobody takes prop 13 into account when they “upgrade” their homes. Property taxes can be crushing and you can’t pay it down like you can a mortgage. Taxes go in only one direction, up.
This, in general - for the OP, that's ssuming he's in California and assuming he's already got appreciation (and thus prop 13 savings) built in
Why did you expect mortgage to cover your rent... Seems insane given that you build equity in the property overtime while the renters do not
At the least, you paid too much for the house
Not necessarily. We don’t know what tax bracket the OP is in. And how much mortgage interest and property tax they’re able to deduct from their income. I’m willing to bet that if you take those goodies into account they’re paying less than 2300. Not accounting for the down payment of course.
This is always funny to me. You realize you get to sent the rent right? Set it to at least the cost or ideally higher to cover maintenance. The "market" rent is meaningless.
If it’s an investment you can afford then yes
If I stayed in it for a couple of years and paid like 30-40k towards the principal then the mortgage will be reduced to what the average rent is. I have that amount to put down but I’m wondering if homes people use for rent are always cheap homes such the cost of the full mortgage covers the rent. In my case I would have covered 22.2 % before the montage is on par with rent.
Refinance
Are you in CA or elsewhere? If in CA, how much has the house appreciated? (Prop 13 makes holding a lot more useful given potential property tax savings) Whether or not in CA, has the house appreciated enough to make a real profit after transaction costs? In general, being a landlord is a pain in the neck and I'd rather be in the stock market
Pain in the neck? I send a text a couple times of a year to manage multiple properties. If you are doing more you are doing it wrong lol.
How much does your property manager charge you? What's the biggest loss you've been out due to damage or a maintenance need?
D) not enough Information