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Leaving Michigan, should I rent out or sell my home?

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  • Leaving Michigan, should I rent out or sell my home?

    I am 25-years old. My income is approximately $100,000 per year now (only $50,000 last year). I am self-employed (Internet business).

    On April 30, 2009, I purchased an unfinished home for $155,000. I put $31,000 down, and another $30,000 into finishing the home (carpet, granite counters, plumbing, etc). The home is brand new and in VERY good condition.

    I borrowed the $61,000 that went into the down payment and finishing of the home on my Visa credit cards. I still owe $16,953 at 11.99% and $34,360 at 7.74% on my two Visa cards. However, based on my new income, it's possible to pay off these two Visa cards within 2-years. I have no financial issues or problems making the payments.

    The mortgage is only $120,000 (4.25% APR at 30-years fixed), even though the home is worth about $200,000. Remember, I still owe $51,313 on my two Visa cards that went into the home. So I don't really have much equity.

    I am about to file my 2009 tax return and was planning on claiming the $8,000 first time home buyers credit.

    However, I just accepted a job on the east coast and will be moving to Maryland. My new job will only pay me about $45,000, but I will get up to $70,000 within two-years. I will also still make $100,000+ this year from my Internet business.

    Should I sell my home or rent it out? The home is in perfect shape, with wood floors and all white carpet. If I sell it, I can expect to gross about $200,000 to $220,000, but I'll pay huge real estate fees for the sale. I will also have to return the $8,000 first time buyers credit which I am about to claim.

    If I rent it, I'll still owe the $51,313 on my Visa credit cards, but I can easily pay these off within 2-years with my new income.

    What is the best move based on my young age? I am never coming back to this state again, so if I rent it, I'll have to hire a property manager and pay them about 10%.

    Your thoughts?

  • #2
    1) Never say never. As you've found, life throws you curve balls.
    2) Do not buy a house in Maryland yet. You need a few years of stability before you take the plunge again.
    3) You borrowed on your credit cards to fix up a house in Michigan?? Do you watch the news at all???
    4) If you can sell, regardless of the fees, do it. You'll be very lucky if you can. Being a landlord, especially long distance is very difficult. Tenants will put a lot of wear and tear on your house. Even with a management company, you can still get tenants that will not pay and destroy your house. The eviction process is not fun, cheap or quick.
    5) Good luck!

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    • #3
      You may not be able to claim the First time home buyers tax credit. The income limit is 75k for a single person. And I believe you have to claim it as primary residence for 2 years.

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      • #4
        Do you really want to be a landlord? I realize you could hire a company, but ultimately, it is still your asset and your responsibility to pay any maintenence and insurance.

        I'd probably sell it. Good luck making the decision.
        My other blog is Your Organized Friend.

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        • #5
          Thanks. I think you are right. I will probably just sell this home, and pay off the $51,000 on my cards.

          I know, it was probably a risky move to borrow so much money to buy and finish a home in Michigan, but based on my new income, the large amount of credit card debt is really not a huge issue for me.

          In any case, I'll just sell it and use the money for other investments. Perhaps, I'll buy an ounce of gold every month, and invest another $1,000 a month in the market.

          I think my long term investing goal is to average about 10% per year or more for the next 40-years, I just need to figure out how and where to do that. I guess I can max out $16,500 a year in the 401k.

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          • #6
            You may have other investment options. With your business on the side, you are strattling the self-employed and employed worlds. Self employed people can put over $42k in their retirement per year. But you can't participate in an employer's 401k.

            Don't get your investment advice from radio ads and internet advertising. Gold is not a good investment over time. You also are buying at a high point. Start paying those cards down starting now -NO investment will pay more than the rates on those cards.

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            • #7
              I agree, sell the home. I had rentals once and that was the worse decision I ever made. The tenants trashed the houses. Sell, even at a loss.

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              • #8
                Originally posted by wincrasher View Post
                You may have other investment options. With your business on the side, you are strattling the self-employed and employed worlds. Self employed people can put over $42k in their retirement per year. But you can't participate in an employer's 401k.

                Don't get your investment advice from radio ads and internet advertising. Gold is not a good investment over time. You also are buying at a high point. Start paying those cards down starting now -NO investment will pay more than the rates on those cards.
                Self-employed people CAN participate in an employer's 401k.
                One can contribute to a 401k, and a SEP-IRA (self-employed IRA) at the same time.
                But the total contributions of both together must not exceed 25% of income.
                Last edited by Renegade313; 01-27-2010, 05:51 PM.

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