patrick.net

You might be able to try a for-sale-by-owner. I know that takes time so if you're able to find tenants willing to rent it while you're trying to sell it, that would be awesome.

I would sell it.

Vain is very close here -- a lease option both gets a renter into the unit and allows them to purchase later. Desperate times call for desperate measures; lease with option to buy was a favorite tool of RE advice columnist Robert Bruss when sellers outnumber buyers.

You might also want to rethink what makes a good tenant. It sounds to me like you have wildly unrealistic expectations. I mean, someone not wanting to give you their SSN is going to make the difference between continuing to run the place as a rental property and turning around and selling it?

A year lease? I don't know about Florida law, but in CA a tenant can basically walk away at any time and it's very difficult for the landlord to come after them. You have to actively try to rerent the place, and can only go after them for lost income while the place sits vacant. If they give you 30 days notice and you find another tenant who wants to move in before that window ends, they don't owe you a dime. Plus they can claim the place wasn't "habitable" because it had a leaky faucet or improperly vented bathroom or whatever. You don't sacrifice as much by going month-to-month as you might think.

Dogs? If your place has nice hardwood floors then I totally understand as dogs will do a number on those things whether the owners are responsible or not. But if someone is able to feed and care for 4 well behaved dogs, at least you know they aren't a total screwup. Dog-friendly rentals are harder to come by, so you also know they'll be less likely to walk.

SSN? Given the rate of identity theft these days, I'm not going to hand mind over to some bloke I found off craigslist who claims to have a place for rent. Once we're both serious about signing a lease, and all the terms have already been negotiated, then sure, I can give it to them if they need it to run a credit check. But I see a lot of rental open houses where the LL asks me to fill out an application asking for all sorts of personal details (SSN, income, birthdate, etc) before I've even had time to digest for a couple hours and figure out if I want the place.

I am in a similar situation, but this house is my primary residence. Job changes force me to move so it was never an investment property. My house PITI is just over $2100 but the rental market pays only $1600 for this house. I could pay the loss, but I decided that there is no way it would appreciate at $500 a month to make up the loss. The house is in the San Joaquin valley in California so I believe the market may still go down. I listed it with a Realtor for $290k and got a few offers for around $250k. As I owe $255k (interest is 6.5%!)on the note I declined the offers. The listing agreement expired so I put in on Craigslist for sale by owner and I got an offer that will just cover the loan. I am now trying to figure out how to start the escrow without a Realtor, it should be fine, we will see. In my case I decided to cut my losses and get out before things get worse. I also get to save my 800 credit score. Try putting it on Craigslist, it might be your way out.

Woggs and ordertaker:

Walk Away.

Affect your credit?

Who cares?
Lending practices will change as Walking Away becomes more common, more mainstream.

So many things that used to be stigmatized aren't any more as they have become more common, like,
the job applicant who may have been a casual marijuana used for a short while in college; or, being a divorcee, single parent, being gay, or if you're an entrepeneur, leading a startup into financial failure.

Collectively, the concept of having Walk Away on the credit history is more a problem for the shrinking number of rich who want a high return on their money than for borrowers, particularly in deflation.

Walk Away.

I agree with alpine about the tenants...perhaps don't worry about a social security number until credit checks are needed.

I think asking for a years lease is standard for $1200+ a month type places...I'm not sure how much rent you are asking. If it's like $500-$600 a month, then you're going to attract the month-to-month types and that's all there really is to it.

Also, not sure what you mean by monthly expenses. It seems you have a mortgage. Does the rent you get take care of the interest, property taxes, and other expenses? Expecting the tenants rent to cover all of these operating costs and to pay down all of the principle portion of the rent is overly optimistic if the market is declining/neutral.

Nevertheless, sounds like you may just want to sell it. In which case, just bite the bullet and sell it and don't let it ruin your life.

One thing I think many landlords fail to remember is that a house is only a safe investment in the traditional sense if you pay all cash for it or mostly cash. Otherwise, you are speculating. Buying a house with a mortgage is the same as buying stocks on margin, the only difference is stocks are historically much more volatile.

Factor in how much it will cost to buy another place in the future as well. If you're going to sell today and lose 3% or so, and then buy at a later day and pay another 3% factor that in as well. Not to mention you'll need a new down payment.

I think the comment about tenants is correct. I'm not sure why those people might not want to release their SSN, but perhaps you can work around that. The less than 1 year lease is probably fine as well. People don't generally stay 6 months. As long as their intentions are to stay longer, that is all you care about. 6 months or 1 year, it's better to have someone stay 3-4 years regardless of what the lease locks them in for. Same with the dogs, unless the house is really new, if the dogs are not puppies they're not likely to tear it apart.

The big point might be the loss of jobs and/or lack of good jobs. Although a large population will create jobs itself in terms of service needs. I guess it depends on how depressed the area you are in currently. Taking a small loss for a few years might be worth it in the end. The investment might not appreciate much, but after the mortgage is paid off you've got a nice retirement income. It's not a bad idea to diversify.

"To get it rented, we will have to take a small monthly loss."

Does this account for principle repayment?

Can you take advantage of passive income tax loss deduction? What you find as a monthly loss may in fact be current cash flow gain after considering principle repayment and income tax benefit. Your facts are a little too vague to make a good decision.

It's a small monthly loss purchased a year ago and not 2003-2008. In a few years that liability may become and asset if is not so already. I would hold on to it.

You have interest in the home, not the type you want, which is really the case for these kind of property. Some homes you choose the tenant and some homes the tenant choose you. I lean on option #2. Florida just built too many homes and now there is a long hangover.

SF ace says

“To get it rented, we will have to take a small monthly loss.”
Does this account for principle repayment?
Can you take advantage of passive income tax loss deduction? What you find as a monthly loss may in fact be current cash flow gain after considering principle repayment and income tax benefit. Your facts are a little too vague to make a good decision.

I never thought of this angle. In my case I would lose $500 a month payment over rental income, I bought in 2008 so hardly any of the payment goes to principle. Also my rate is 6.5% with no PMI, I can't refinance to a lower rate without putting another $40k in to avoid PMI. I am not familiar with the passive income tax loss deduction, I will have to google that. My instinct tells me to sell and move on.

Woggs and ordertaker

Based on that profile, you have a little less than 300 out 2100 going into principle currently. Your ITI is about 1800.

You can probably depreciate about 250K over 27.5 years or about 750 a month. So 1800+750=2550 or 950 in tax loss (not cash loss). In reality, your tax loss will probably be more after converting post tax expesne to pre-tax expense If your AGI is less than 120K, you can deduct this as an above the line deduction fully. Presuming you are in the 25% and 8% tax rate, that is about $300 a month in tax deduction benefit.

You should also file with the county to have your property tax reduced perhaps get another 100 bucks or so. Now, does the situation look a little bit better knowing 300 bucks goes to principle repayment, 300 bucks subsizied by fed and state tax and 100 bucks reduction in property tax. To the extent that you can re-fi to 4.5% subsequently, it can only help your case too.

@ordertaker

morgage interest deduction is worthless in FL since there is no state income tax thus no chance of itemization. However, passive income loss is an entirely different story for your situation.

I would sell it, but then you don't want to have tenants in there or it won't sell. You have to decide one way or the other. Your husband will listen to you next time! Buying a rental property where there are no jobs and falling rents....Yikes. From your post I am assuming that you are doing all the leg work yourself and not using a management company. If you use a management company they are pros and folks know they have to provide SS, license, etc. if they want to get a place. When pros are doing the work for you it takes all of the emotion out of it and you can write it off. I use a management company for my rental properties and it has been well worth the 6% that they charge. The tenants don't know me other than the one time I meet them when they move in and I let them know I live nearby while making sure they have a copy of the manuals that go with certain gizmos and how to use them. I can say that it takes most of the stress off of you because the manager will do all the good work IF YOU HAVE A GOOD COMPANY to work with. They find the tenants and have all the MLS access, flyers, etc. not to mention the foot traffic of serious folks looking for a place. They screen them, run the checks, take the call at 3:00 a.m. for the proverbial clogged toilet, collect the rent, send you a statement that makes sense for your tax person and everything else.
I would definitely take the tenants willing to pay lower rent before I took someone with four dogs. I have a no dog/cat policy and it has served me well. I just tell the ladies at the management company that I don't care if someone has a hamster, parakeet, lizard or some other small animal.
Good luck with whatever you decide to do.

Some of these scenarios are all a house of cards propped up by Cool and Hip (Bay Area) assumptions that you'll always and forever be in a high tax bracket. I think if that were true, "taking a hit" would be no different than selling some stocks at a loss to realize some profit on other shares, more of an opportunity than a hit.

Since it sounds from your post that this is not the case, well, deflation is the situation in the nation.

Walk away.

sybrib says

Some of these scenarios are all a house of cards propped up by Cool and Hip (Bay Area) assumptions that you’ll always and forever be in a high tax bracket. I think if that were true, “taking a hit” would be no different than selling some stocks at a loss to realize some profit on other shares, more of an opportunity than a hit.
Since it sounds from your post that this is not the case, well, deflation is the situation in the nation.
Walk away.

Most of IRC code like mortage/property tax interest deduction and passive loss are meant to get you through the first 5-10 years of home ownership, traditionally the toughest part of owning. The idea is by the time you hold the home for 10 years, it will be an asset and will stand on its own without any boost.

Most of IRC code like mortage/property tax interest deduction and passive loss are meant to get you through the first 5-10 years of home ownership, traditionally the toughest part of owning. The idea is by the time you hold the home for 10 years, it will be an asset and will stand on its own without any boost.

Tradition?

Well try telling that to someone who bought in Florida 5 years ago !