Reader Question: Sell Now, or Rent It & Wait?

I received the following email from a reader:

I am relocating out of the country and trying to understand if it is better for me to sell the house now or rent it for a few years and then sell.

I bought the house 7 years ago and I think I can sell it for about the price that I bought it for. I have about 10% equity in the house.

If I were to rent, the rent I get will be about $350 per month short of mortgage, insurance, property taxes. Plus there may be property management fees and other expenses.

I had made up my mind to sell, but today someone pointed me at Case-Shiller forecast that the seattle area housing market will be at 2007 levels by 2014. That will be about 40% increase from today’s value and is certainly tempting.

What would the experts recommend? Do you have any rent vs sell spreadsheet calculators? Would appreciate any pointers!

I don’t have any rent vs. sell calculators yet. That’s a great idea though, and I’ll see what I can come up with.

As for your specific situation, I would recommend that you sell now. Here’s why:

  • Prices may be close to the bottom, but they’ll probably bump along the bottom for years.
  • Inventory is terrible right now and sales are increasing, so if you clean your home up and price it right, it will most likely sell quickly.
  • If you’re losing $350 every month (more in between tenants), that’s money down the drain.
  • Long-distance landlording is a pain.

If you’d like to maximize your take-home on the sale, look into an alternative brokerage like Redfin, WaLaw, Findwell, or 500 Realty (disclosure: Tim works for Redfin, WaLaw is a current Seattle Bubble advertiser, and Findwell and 500 Realty are both former advertisers).

I don’t know where you saw a forecast that local prices “will be at 2007 levels by 2014.” That’s laughable. Almost as good as Forbes’ 2006 prediction that the median home price in the Seattle area would hit $600,000 by 2016.

Seattle-Area Home Prices: Forbes vs. Reality

Seriously, if you’re moving out of the country, it’s time to cut your losses. Holding out hope that prices will improve in a few years is a fool’s errand and will just cost you even more money in the long run.

  

About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

52 comments:

  1. 1

    I would view trying to time a sale for a higher price to be as bad as trying to time a buy to hit bottom. I would also agree that the prediction for 2014 prices is not worth anything.

    I would agree that being a distant landlord is not a good thing.

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  2. 2
    Pegasus says:

    Guessing here but the reader email sounds like the house is a major part of his financial picture since he mentions still paying a mortgage. Why would anyone want to carry that millstone around their neck especially on a cash flow losing basis and not being around to manage it? Good God man…get rid of it especially if those mortgage, taxes and insurance payments are a large portion of your income. Betting on the housing market to turn up significantly in 2014 is akin to going to the casino to make your fortune. It might happen but most likely won’t. Why even take the chance?

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  3. 3
    Mel Torme says:

    I’d like to expand on “- Long-distance landlording is a pain.” for 1000, The Alex (oops, I mean, The Tim).:

    That was my first thought before the other three points you made. Out of the state is bad enough, but when you’re out of the country, those tenants can do anything they want, property manager or no property manager. You’ll come back for a nice visit and meet-and-greet with the tenants, and to collect the back rent, not to mention the front rent*.

    First thing you’ll notice is the remodel of the bathroom into a beef-jerky-making factory complete with four Chinamen who make the jerky and are accomodated in the attic with restroom facilities below the back deck. All of the evergreens have been cut down over the last coupla’ years for bonfires. The washing machine, no, wait, the whole laundry room, has been converted into a beer making facility which happened to require 480 3-phase which was rigged up by one of the tenants directly from the pole (no extra money for conduit – all of it was spent on the barley, yeast, and malt extract).

    The bad part is the stuff that happened while you were gone that they won’t tell you about, such as the whole Risky Business brothel thing that went on for a few years until multiple neighbors informed the cops after their marriages broke up, the whole internet provider thing, the off-the-grid “crazy years”, etc.. They’ll never explain the 3-year old cow-patties in the back yard, the reason for the Barrett 50-cal mount below the skylight in the attic, and the 3 ft diameter hole that goes all the way through the hardwood floors and floor joists in the middle of the back bedroom. You’ll get the same old line every time “Oh, that was like that when we moved in”.

    All that notwithstanding, I agree completely with Tim that finance-wise, the decision is very easy. Sell it.

    *what is the back rent and the front rent? I dunno, ask George Thorougood or any one of the Delaware Destroyers..

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  4. 4

    RE: Mel Torme @ 3 – You’re ignoring the possibility of a meth lab or grow house. The latter can leave the owner with some very odd remodeling.

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  5. 5
    ray pepper says:

    SELL…if you are able….please also look into http://www.mls4owners.com

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  6. 6
    No Name Guy says:

    Sell. Sell it quick.

    In fact…..run…RUN AWAY!

    http://www.youtube.com/watch?v=_W_u4UTvk9w
    (Monte Python clip follows.)

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  7. 7
    ray pepper says:

    RE: No Name Guy @ 6

    LOVE IT!

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  8. 8

    I’ll agree with the above posters who suggest selling now. It’s really hard to imagine that we’re going to be at 2007 pricing in 2014. I don’t think that came from Mr. Price or Mr. Schiller.
    Sure, prices might be higher two years from now, but it’s probably not worth the risk, especially considering that if you rented it out you wouldn’t be making back the mortgage payment and would be subsidizing it to the tune of 350 dollars per month. If you have that kind of extra money lying around, 350 per month, you could invest it in other things more likely to bring a positive return, or squander it on something fun. Also, I’ve been a long distance landlord. Not fun. Even if you have it professionally managed, that will cost even more, often 10% of the rent, so…just get rid of the thing. You can’t imagine how free you’ll feel once it’s sold.

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  9. 9
    Drone says:

    Back to 2007 prices in the next two years??? Holy double-bubble Batman! I’d better buy now or be PRICED OUT FOREVER!!!!!!!111!!1!oneone

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  10. 10
    David Losh says:

    Get rid of it. This is the time to sell, when inventory is low.

    Prices will continue to decline as more economic details come out after the Presidential election. There is hope in the air that will surely dissipate.

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  11. 11
    Scotsman says:

    Sell it- to me! If I can get a leveraged 40% over 2 years I’m all in. Heck, I could pay cash and do well . . .

    OK- seriously- sell it. It only makes sense to hang onto it if you really love the home or will be needing a place to live. Otherwise I see little to no upside potential and a lot of risk.

    There, that was easy. Now you’ll sleep like a baby and can enjoy your coming adventure. Cheers!

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  12. 12
    tomtom says:

    Sell.

    I was an absentee landlord for 8 months and hated it.

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  13. 13
    phil says:

    Clean it up, hire a professional photographer (you want it to stand out) and sell it. Inventory is low and folks are looking.

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  14. 14
    whatsmyname says:

    Golly, I’m right there with Scotsman. You can’t know what the value will be in two years. But you can know that trying to manage a rental from another country has a high probability for dis-satisfaction. You can also expect that the condition will deteriorate without your presence. Even if the market matches the Case-Schiller forecast, your property might easily not, particularly since you won’t be near enough to protect it. Only you can choose your risk tolerance, but this is a proposition with very high downside risk, both hassle-wise in the short run and financially in the long run.

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  15. 15
    Alex says:

    I agree that if it’s losing money every month, then sell it. Yet I disagree that it’s risky owning out of state/country property if you can find a good property manager.

    I have property in another state, and my property manager is great. She helped me pick the house and rented it 1 week after closing. I pay her well for her work, but it still cashflows even after minor expenses. It’s a nice home in an upscale community and I’m picky about the tenants.

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  16. 16
    willynilly says:

    …someone pointed me at Case-Shiller forecast that the seattle area housing market will be at 2007 levels by 2014.

    Seriously, If you believe this FREAKING NONSENSE, sketch us out a scenario as to how and why this would be able to occur. If you are naive and ignorant enough to believe such stupidity you either:

    A. have been stuck on a desert island talking to a soccer ball for the last 4 years

    B. deserve to lose everything, and be punished by unspeakable horrors

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  17. 17
    Mel Torme says:

    RE: willynilly @ 16 – Ha ha, Willy-Nilly, I saw the movie that your scenario (A) refers to. I can see it now:

    Tom Hanks: “Wilson, what do I do? I just got a FedEx package with the new Case-Shiller forecast. It says that Seattle housing prices will go back up 40% by 2014.

    Wilson: “OK, that’s it I ain’t riding on any golly makeshift wooden raft across the ocean with you or any other financial wizard, you freak! Plus, I’m just a dang volleyball, you idiot, what are you talkin’ to me about financial data for?

    Tom Hanks: “Hey, you’re a soccer ball, not a volleyball, moron!”

    Wilson: “OK, I stand corrected.”

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  18. 18
    ricklind says:

    I suggest looking at the numbers as they are now, not how they might be, Does it make sense financially to sell given the challenges and definite expenses of sitting on it from a distance?

    Based on the limited information I have I would think “sell” is likely the right answer. You can always buy again later and not have the costs and uncertainty associated with sitting on it now. I like to let the numbers now drive the decision, rather than maybes. Hope this helps.

    Best,
    Rick

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  19. 19
    For Real says:

    A different tack here, with the same conclusion.

    In the late ’90s, I left Seattle on a job transfer. I rented out my house while I was gone. I knew I wanted to return to Seattle, and I knew I loved the house. So I kept it, even though the rental income at some points was less than the mortgage payments.

    But, unless there’s something you’re not telling us, you aren’t attached to your house, to Seattle, or both. (Don’t worry, it’s okay. I’ve moved around a lot, and have felt attached to only a few spots.) So if you keep it, you’ll be doing so as a speculation. Not as an investment, but as a speculation on future real estate prices.

    No one knows what will happen to house prices. The fact that so many people here think they won’t go up makes me think they might go up, but that guess plus $2.70 will buy you an iced grande Americano at Starbucks. The point is this: Do you want to pay $4,200 a year, plus maintenance costs and property management fees, to speculate on real estate prices? If you keep the place, that’s what you’ll be doing.

    A word or two about maintenance and property management. First off, maintenance is always a bigger number than you expect, because even the very best tenants aren’t owners. No matter how good they are, and how reasonable you are, if you rent out your house there will be more wear and tear than if you lived there.

    Property managers? They don’t do squat. In fact, they probably increase your risk, because they are forever in fear of some government agency testing them for discrimination against this or that protected class. Example: Cat loving lesbians. No problem with the lesbians, but her cat pissed all over the house. I’d never rent to a cat loving lesbian again, but your property manager will.

    Bottom line: Sell. And if prices should happen to go up, please don’t shed any tears. Those who sell at the top and buy at the bottom do so by happy mistake, like my neighbor who sold his house for $780,000 on Memorial Day weekend, 2007, within one week of the market top. Trust me, he wasn’t Kreskin the Magician. He just got lucky, like the dirtbag in Kentucky who won the Powerball last month, or will win it next year.

    So sell the joint, and don’t look back.

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  20. 20
    ross jordan says:

    I’m going to go against the grain and suggest keeping the home until the economy is healthier. I don’t think the housing market will recover to peak valuations (in real dollars). However, I do think the housing market could recover 5%-10% if the economy starts booming (and unemployment drops). Given that, I’d be inclined to hold a couple years.

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  21. 21
    robotslave says:

    That “2007 levels by 2014″ prediction is so insane that it makes me doubt this scenario is being presented in good faith.

    Seattle’s CSI is currently 132.7. To reach the ’07 peak of 192.3 in two years, prices would have to rise 20% YoY. The highest YoY increases during the inflation of the bubble, in ’06, topped out at 18.5%.

    To reach ’07 levels by 2020, you’d need a constant YoY increase of 5%. 6% would get you there by 2018.

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  22. 22
    Jonness says:

    40% increase by 2014. That’s a troll. :)

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  23. 23

    By Jonness @ 22:

    40% increase by 2014. That’s a troll. :)

    Plus, Case-Schiller is predicting a 40% increase in house prices? I could see Lennox Scott making this prediction, but Case-Schiller? Nah, unless they’re talking about Lou Case and Murray Schiller, unrelated real estate agents.

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  24. 24
    StillRenting says:

    I predict a 40% increase in gingerbread house prices by 2014 as food costs continue to rise.

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  25. 25
    Scotsman says:

    RE: StillRenting @ 24

    Amen. We had to pass on the ginger bread house last Christmas.. Pricey stuff! ;-)

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  26. 26
    ChrisM says:

    Holy cow, Tim is throwing raw meat at the wolves.

    Sell.

    Now!

    I had the pleasure of signing the paperwork at a consulate. Trust me, you don’t want to experience that. Sell your property while you’re still in the country.

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  27. 27

    By For Real @ 19:

    Property managers? They don’t do squat. In fact, they probably increase your risk, because they are forever in fear of some government agency testing them for discrimination against this or that protected class. Example: Cat loving lesbians. No problem with the lesbians, but her cat pissed all over the house. I’d never rent to a cat loving lesbian again, but your property manager will.

    That doesn’t increase your risk. In fact it decreases it.

    Professional property managers keep up with the rules that government periodically imposes on landlords. Without them it would be very difficult to comply with all of the rules.

    A few years ago I ran into a landlord who ended up with a seven figure judgment against him (an amount in excess of his insurance). If he’d have had a professional management the primary responsibility for that loss would have been on them (whether they would have enough insurance to cover that is another matter).

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  28. 28

    By robotslave @ 21:

    That “2007 levels by 2014″ prediction is so insane that it makes me doubt this scenario is being presented in good faith.

    Seattle’s CSI is currently 132.7. To reach the ’07 peak of 192.3 in two years, prices would have to rise 20% YoY. The highest YoY increases during the inflation of the bubble, in ’06, topped out at 18.5%.

    Not that I think such an increase is likely, but a decline in the number of short sales and REOs could make something like that possible. Mix is driving the number down and mix could drive it back up (or a number of REOs reselling).

    And of course it should be pointed out that C-S going up 40% doesn’t mean that the property at issue would go up 40%.

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  29. 29
    Blurtman says:

    Quit paying your mortgage. Rent out the house. Save the rent money. Obtain a principal loan modification. Keep the house.

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  30. 30
    dw says:

    Look at the math this way:

    Say the house is worth $300K. Assume you lose $300/month on rent, then add in $200/month for any costs of renting the house out (wear and tear, cleaning, repairs, hiring a management company, etc.) So, $500/month * 12 = $6000/year. And let’s assume you list it in 2014.

    That means you’ll need an overall 4% increase in home’s value just to recover the $12K you paid out. Given a 2% “normal” increase in the market before the bubble (but what is normal anymore?), holding would mean you’re treading water. But wait, that doesn’t include any fees, or any work needed to get the house into saleable condition, so at a 2% YOY you’d be losing money.

    Compare this to selling the house right now — you’d get cash now, and the 10% equity would protect you somewhat from losing money. There would be no further expenses after closing.

    Holding a house for a long time makes sense. Holding it for two years trying to time the market isn’t. I’d get out now.

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  31. 31
    Eastsider says:

    I am a rental property investor. I will never buy a property with a negative cash flow.

    SELL!

    P.s. I won’t be going after it :)

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  32. 32
    Jon-Lars Sorenson says:

    Funny thing: Case-Shiller index is a tracker of existing home values. It does not make any prediction of future prices.

    http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff–p-us—-

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  33. 33
    Toad37 says:

    Couldn’t agree more The Tim, hope he listens.

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  34. 34
    For Real says:

    “Professional property managers keep up with the rules that government periodically imposes on landlords. Without them it would be very difficult to comply with all of the rules.”

    ———-

    It varies, depending on the situation. Here, we’re talking about the smallest of small-time (potential) landlords, a guy renting out one house. I have been both the tenant and the landlord in such situations.

    As a tenant in such a house, I felt sorry for the landlord. The property manager collected his fee (generally one month’s rent per year) for doing nothing. Nice work if you can get it. I rented the place and literally never saw the property manager ever again for three years.

    As the landlord, I did it myself from 3,000 miles away. I had help from the first tenant, who turned out to be the guy who sold me the house. It was a “fizzbo,” or “For Sale By Owner.” You know, the kind that the real estate agents just hate. He was a real good guy, and the whackjob wife first forced him to move (which is how I got the house he and the kids never wanted to leave to begin with), and then divorced him.

    It so happened that when I had to move, he needed a place. So I gave him a big break on the rent (the divorce was killing him), and out of gratitude he helped me select the next tenant. After that, each tenant helped me find the next one. It all worked well in that sense; I think I had the best tenants you can realistically get, the lesbian’s urinarily active cat notwithstanding.

    But even great tenants are still tenants. One of them was doing either black magic or growing pot in the basement. Needed the walls painted white upstairs (pale yellow and pale blue just didn’t cut it), and literally couldn’t change a lightbulb without how-to instructions.

    Another tenant told me that everything was fine after the Nisqually earthquake. A few months later, on a trip to Seattle and a visit to the house, I saw the front steps separated from the foundation and the retaining wall cracked in a bunch of places. And the gardens went to hell.

    Two tenants became unemployed while living there, so I gave them extra time to pay the rent. They did come through, but this shows another risk. Forget about security deposits, because tenants typically don’t pay the last month’s rent. What are you going to do, evict them? And then there was the cat that left the gift that I smelled for the next year and a half.

    Property managers aren’t going to screen out any of this. As far as I’m concerned, the only reason to put up with any of it would be if you really loved the house and are strongly committed to returning at some point. If that were the case, I’d have some specific advice for “The Tim,” but in this case, given that he doesn’t seem to be committed to the house or to Seattle (again — this is perfectly fine by me, honest), I’m going to skip the how-to-be-an-absentee-landlord advice and go along with most of the rest of the people here who are telling him to sell.

    But when it comes to property managers, unless you’re talking about renting out your condo or vacation house, I don’t see their utility. Seattle’s rules with respect to landlords are not onerous. There’s a standard lease form, and that’s pretty much that. Being a landlord here, or just about anywhere else for that matter, is first and foremost a matter of being ultra careful in tenant selection, the farther away you are, the more so.

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  35. 35
    For Real says:

    p.s.: Years later, as I was rooting around in the basement pondering the two burn marks (obviously from candles) in the ceiling of what had become either the grow room or magic parlor, I found some very kinky leather lingerie. Definitely too skimpy for the cat-lovin’ lesbian. The indian (from India) couple? I heavily doubted it.

    I ultimately decided it was probably the second tenant, who had been a legislative assistant to a Republican senator before moving to Seattle to take one of those dot-com jobs. I mean, he moved to Florida after living here. Dot-com, Republican, Florida, leather, cross-dressing. They go together like, um … um … mayonnaise and a rope? A bottle of vodka and a December day?

    “The Tim,” if you do become a landlord, keep your sense of humor. You’ll need it.

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  36. 36
    Purple says:

    I would recommend selling if the rent won’t cover expenses. But, before doing that, check if refinancing down to a 1 or 3 year ARM will lower expenses enough to make renting it out a profitable proposition.

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  37. 37
    Mr. Ed says:

    I actually submitted about the same question back in 2011. Check out the Bubble thread “Reader Question: Sell Now, or Rent it for a Few Years?” from May 25, 2011. The Bubble consensus then was to sell, which we did. The buyer got a good deal on a nice house, but I have zero regrets. The freedom of not having the mortgage and not being a landlord outweighs any speculation about maybe home prices increasing. I guarantee that if you sell you won’t ever look back.

    Further, keep in mind that, if prices actually do nudge upwards someday, you won’t then be the only guy trying to sell who was “waiting it out” — everybody and their brother will be trying to sell, which will stifle or at least blunt the “recovery” anyway.

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  38. 38
    For Real says:

    My own opinion about house prices in general, and specifically in Seattle, is that the inflationary period that lasted roughly from the early ’70s to the mid-’00s will be seen as a fluke. Historically, the returns to houses have been inflation plus 1%, the lowest of the common individual asset classes (stocks, bonds, cash, houses).

    I think the overhang will be here for a long time, meaning at least another decade or more. I once saw a chart of New York City-area mansion prices dating back to the stock market-driven price mania of the late 1920s. No kidding, it took 60 years for those prices to return to their 1920s levels, adjusted for inflation. With the proviso that all real estate markets are quintessentially local, I wouldn’t be surprised if it took that long again, at least in some places.

    I bought my first house in 1993. I owned two more, and in 2003 was able to pay off the mortgage on the third and final place. There are few non-physical sensations more satisfying than owing $0.00 on your house. I did this the old fashioned way, not by real estate speculation but by living below my means and treating my house as a place to live, period.

    All that said, my own avoidance of real estate speculation, which is truly an article of faith for me and always has been, is a double-edged sword. It means that, notwithstanding my opinion just expressed, it’s not any kind of prediction. I literally don’t care what happens to the value of my own place. I live here because I love it. They’ll get me out of here feet first. One nice byproduct is that, when I remodeled it, I laughed at the advice to keep the bathtubs because they make a house more marketable. My heirs can worry about that.

    For me, the only reason to own a house is because you want to live there. If you want to speculate financially, buy stocks. And for God’s sake, don’t borrow on your house to buy stocks. And that old “advice” (typically from some grasping real estate agent) to get the biggest mortgage you can because “there’s a tax break,” is the dumbest thing I’ve ever heard. I didn’t believe it then, and I sure as hell don’t believe it now.

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  39. 39
    RE Investor says:

    I agree with the other people posting responses – sell. If you’re not covering your expenses, it’s just not worth it. You didn’t mention how long you’d be out of the country for, if it’s a short term posting it may be worth renting out, if you are moving back within a year or less. Your costs to sell and buy would make up the loss in monthly cash flow.

    One suggestion, if you wanted to keep some money in the Seattle real estate market, would be to sell your house and pick up one of the cheap houses being sold off by banks, FNM etc. If you buy right, you’ll have positive cash flow even after paying for professional management.

    The issue you have is the ‘middle class’ housing market price to rent ratio isn’t in your favor. It’s virtually impossible to buy a house in a nice area and rent it out at a profit, however smaller houses in lower middle class area, can be bought and rented for a profit.

    Going back to the original question, forget about what people predict prices will be, look at the cash flow today.

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  40. 40
    jesus christ says:

    Take the Tims Advice! Sell Quick,
    Seattle has Algea on the Brain!!!!

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  41. 41
    gardener1 says:

    I am going to completely agree with every else here–SELL IT–

    And I’ll go one better than that
    ~~get rid of all the stuff too~~
    The couch, washing machine, television (your US TV will not work overseas) all the junk and furnishings, dishes and appliances and cars. Get rid of it ALL.

    I was in the same circumstance. We took an overseas job posting. I sold the house but kept the stuff and put it in storage. Big mistake. Ten years later all that stuff is still there, I’ve been paying for it all this time and I’ve never seen those things again since I stored them away. And I have no place for any of it. All that stuff is a huge burden, it is hundreds of miles away costing me money every month, and I could care less about it anymore. For what I’ve paid in storage I could replace everything in there.

    Get rid of the property. Get rid of the stuff. Go free, be an expat, take nothing but your suitcase. Life abroad will change your perspective more than you can possibly imagine and all the stuff/property/and flotsam you accumulated in the US will be worthless to you and a transcontinental burden. Be done, be gone.

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  42. 42
    George Kanxer says:

    Sell it, what are you going to do if the WT that you rent the house to ends up turning it into a meth lab and leaves the typcial junkyard woth of cars in the front yard? I’e seen it happen too many times.

    Sell the house and be done with it.

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  43. 43
    Oversees says:

    I can see how they came up with the 2014 return to 2007 CSI. If you draw a trendline through 1996 to 2006 (pre-bubble) CSI data and extrapolate that out to 2014 you get a value near the 2007 CSI. If you assume that the previous Seattle home value was based on inflation, growth, jobs, etc. then the trend would have continued at that long term trend. Eventually it will return to this trend. It may not happen overnight because we overshot on the way down. Replacement cost won’t go down as inflation continually adds to the building costs. Anyone saying we won’t see significantly higher prices in the future are way off. It’s just a difficult to say when. Also I had a similar situation. Bought a home on the Eastside in 1996. Went overseas to work from 1999-2003. Loved the area,the schools, the home (Have a wife and 2 kids) so chose not to sell as replacement would have been impossible. I didn’t want to rent becuase of the hassle and I didn’t want people in my house. Of course if money is tight you might be better off selling.

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  44. 44
    bdeyes says:

    RE: Mel Torme @ 3 – @Mel Torme * ask John Lee Hooker, Thorogood just copied the song.

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  45. 45
    CMDCMF says:

    I wonder how many commentators here are landlords and truly are experienced owners of investment property. I thought so.

    I’ve been a landlord for 7 years, 3 of those absentee. To do so successfully, I have:
    1. A good house, well maintained in a desirable but not too pricey NJ neighborhood on the train line to NYC.
    2. An excellent agent who finds excellent tenants. She is well worth the one month rent fee. In seven years the house has been vacant a total of three months. I vet the tenants closely in conjunction with her recommendations.
    3. A excellent handyman who is available on a moment’s notice. He also visits the property every six months and provides a recommended list of needed maintenance work. I trust the guy.
    4. Rental started as break even, now is cash flow positive.

    That being said, being an absentee landlord is doable, though there can be issues. Such as the call I received one Sunday morning at 9:30 am while driving on I-90 East of Billings, MT. because sewage backed up into the basement. Two calls and $400 later, the problem was fixed.

    This being said, I made a conscious decision to keep this property, with the idea that others, in return the using the house, will pay off the mortgage. Seems like a good deal to me. I provide my tenants with use of my property in return for monthly monetary compensation. Both parties have responsibility here, and I take mine seriously.

    That being said, if the reader is trying to time the market – don’t do it! if the reader will be cash flow negative, think long and hard about affording the ongoing loss, which by the way can offset taxable gains elsewhere. If the reader will lose sleep at night, don’t do it. Sell now, take what equity you have and get on with life. I had to do just that with my previous home before moving to Seattle in 2010. it sucks but is not as painful as you think.

    I’m starting to look for another investment property somewhere in the Seattle metro area. Any ideas?

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  46. 46
    J says:

    Hey Tim,

    As a prop owner & landlord, I like your recommendations for this guy & totally agree.

    Here’s what I have seen (from 2010, though..) regarding predictions on where things will be in 2014:
    http://realestate.yahoo.com/promo/housing-markets-that-will-be-strongest-by-2014.html

    Case-Shiller is mentioned in this article; this might be what the original email from your reader was referring to.

    Cheers,
    J

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  47. 47

    RE: CMDCMF @ 45 – I don’t think anyone here is saying it’s not possible to being a successful landlord. What’s being addressed is being the involuntary landlord, or the accidental landlord. Becoming a landlord only because real estate prices are not high enough.

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  48. 48
    John Bailo says:

    Get out now.

    Run, and never look back.

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  49. 49
    For Real says:

    #45’s suggestion to have a handyman on call is a great one. I’d tell my tenants to find someone to fix X, Y, or Z, and that I’d pay. It worked out, but in hindsight it was a hell of a risk. We’ll have to agree to disagree about property managers, but I can see why some people would hire one. I’m not sure that my own experience is generalizable. Under different circumstances, I might have hired a property manager too.

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  50. 50
    CMDCMF says:

    #49 – point of clarification, I pay an agent to list, find tenants and rent the property; otherwise I manage it.

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  51. 51

    […] reached out to a few  experts – our financial advisor, 2-3 different realtors, seattle bubble blog community as well as friends who were in similar situation ( had a house, moved to different city and rented) […]

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  52. 52
    Similar Situation says:

    Hi,
    I am in a similar situation as the original mail but with couple of key differences. My house is selling for 50k less than the price I bought it for. I have about $100k equity in the house. if I rent it out I will get a net +ve cash flow of around $300. Would you suggest selling or renting in this case ?

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