Should I rent out my upside down Florida home until I can sell it?

April

29

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Should you rent out your home if you lack the equity to sell it?

Sometimes life takes an unexpected turn and leaves you stuck with a home without the equity to sell. This could happen for a variety of reasons, but the ones I see most are when the owners:

  • Bought at the top of the market with a minimal or no down payment and now need to relocate.
  • Bought at the top of the market and found the home to have unexpected unaffordable repairs.
  • Flip ran into overtime and the market has cooled since.
  • Secured a historically low interest rate that they want to hold onto, but they need to move.
  • Multiple loan workouts led to owing more than the home could sell for.
  • Discovered their HUD Partial Claim was much higher than expected. 

While a short sale is one option in these circumstances, many owners consider renting out until the market improves to a point where they do have the equity to sell. 

Jacksonville short sales

But should you rent out your upside down home?

Will you make a profit?

Investment property is generally purchased for the purpose of making money. If your anticipated rents fall short of paying the mortgage and expenses on the property –  think twice. Making monthly payments for the privilege of being a landlord generally never ends well

how much negative equity do you have?

How long will you have to hold on to the property to break even? If you have significant negative equity, it may be many years before you are in a position to sell without short selling.The Jacksonville, Florida market peaked in 2022 and has been heading down since. Are you prepared to hang onto the property for the long term? 

have you considered the advantages of SHORT selling NOW as an owner occupant vs investor?

They are significant. If you occupy the home now, rent it out, and then later decide to short sell, your lender will be much more demanding with you as an investor rather than an occupying home owner. Having tenants in a home you are attempting to sell can be incredibly challenging and almost always leads to a lower sale price.

5 tips selling tenant occupied

If a short sale seems the most likely resolution, there are significant benefits to doing so while you still occupy the home.

do you plan to buy another home?

 If so, do you qualify for the new mortgage while paying on the old? Rental income generally won't be considered income until it has been established for some time. 

ARE YOU REALLY READY TO become a landlord?
  • Have you considered what expenses besides the mortgage will be involved? 
  • Do you have enough reserves to cover months of vacancy or perhaps eviction if it becomes necessary? Eviction can take many months, during which there may be no rental income. 
  • Who will maintain the property?
  • Are you physically close to the property or will you need a property manager at an additional expense?
  • What will you do if the tenants cause property damage?

The decision to rent out an upside down home should never be taken lightly. Take all options into consideration, including a short sale. I have seen many clients rent out their homes only to seek out a short sale after realizing they made the wrong decision. If a short sale is your best option, sooner rather than later is always key to the quickest recovery.

Get a free consultation and find out if a short sale is right for you!

I recently found myself in the unfortunate situation of being underwater on the mortgage of my condo and unable to continue to afford the mortgage payments. My real estate agent at the time suggested renting the unit to cover the cost each month until I was no longer underwater. I thought this was my only option at the time so I agreed and listed the condo for rent and quickly ended up reducing the listing price to the point where I’d be losing money each month if I was to secure a renter. To add to the loss, I’d also be responsible for maintaining the property and have heard numerous horror stories from other renters who had experienced tenants refusing to pay, drawn out evictions, and ongoing legal fees. As time went on it was clear that renting was no longer a viable option and I started seeking out alternatives. A friend had asked if I considered a short sale, to be honest it was a topic I had no actual knowledge on but a ton of misconceptions. After doing some research online I decided anything was worth a shot but honestly wasn’t too hopeful. I found Minna’s contact information while doing my research; her team is the best in the state when it comes to short sales. After my first phone call with Minna, there was no question in my mind that I was finally on the right track. She listened to my situation and clearly explained the short sale process, timeline and what to expect at every point in the process. Within a month of having the unit listed Minna and her team had received an offer and quickly helped me move forward through the short sale process until the unit was closed on last week. What a burden they have helped me with, I can’t recommend them enough. I only wish I’d found them sooner.

J.M.

Last Updated on April 29, 2024 by Minna Reid

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