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MrsS1976
LIF Adolescent
Member since 5/11 534 total posts
Name:
M
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deleted
Message edited 4/5/2012 9:33:08 AM.
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Posted 4/2/12 4:24 PM  |
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Re: Tenants asking for Rent reduction - lease expiring??
Would your current tenant, who asked for the rent reduction, be willing to stay on as a month to month tenant, knowing that she may have to vacate with 30 days notice or so (and that you may try to sell, she'd have to allow showings, etc.)?
If she is willing to do that, it seems like your best option. I mean, the logical thing for her to do would be to look for a cheaper place while she stays on month to month with you, but at least you'll get a bit more rental income without having to go through the hassle of finding a new tenant.
If you can afford to bring $ to the table, I would really consider selling and just being done with the condo. If I were you, I would have a few realtors come in and give you a price opinion re: what they think the condo would sell for today. I know you said you have a recent appraisal, but appraisals are somewhat subjective. Since there have been some recent sales in the complex, the appraisal is a bit outdated (usually appraisers like to use comps less than 3-4 months old, although they will go back as far as 6 months).
Were the units that recently sold similar to your unit in size, condition, etc.?
But selling it and being done with it is probably your best option, esp. if you are currently paying $500 a month just to break even and have the hassle of being a landlord.
Closing costs for a seller are minimal, usually less than 1% of the purchase price (mainly attorney's fee and transfer tax [$4 for every $1K of the purchase price]).
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| Posted 4/2/12 5:22 PM |
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MrsS1976
LIF Adolescent
Member since 5/11 534 total posts
Name:
M
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deleted
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Message edited 4/5/2012 9:33:28 AM.
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| Posted 4/2/12 5:32 PM |
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tara73
carseat nerd
Member since 11/09 3669 total posts
Name:
Buttercup
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Re: Tenants asking for Rent reduction - lease expiring??
If you are already kicking in 500/mo and will still have to write out a check for over 10k in 2 years, that is still at least 22k. Renewing with this tenant with the reduction turns that into 26k+, not to mention what happens if you get a bad tenant or have a major repair etc.
If you dump the condo now that is 24k at least.
So basically it's lose 20k+ now or over the next 2 years.
If you're still taking a loss in 2 years and you have no intention of keeping it long term, you're really just extending your misery it seems. If it were me, I'd just cut my losses now rather than wait it out and still lose the same amount of money.
I think if you were planning to keep this longer than that, maybe 5+ years it'd be worth hanging on to, but what is the point of continually sinking money into it if you're not going to hang onto it?
That's just my opinion on it, but I'd put it on the market for 20K less than you owe and see where the chips fall.
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| Posted 4/2/12 6:17 PM |
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MrsS1976
LIF Adolescent
Member since 5/11 534 total posts
Name:
M
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deleted
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Message edited 4/5/2012 9:33:45 AM.
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| Posted 4/3/12 11:17 AM |
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MST9106
My life:)
Member since 6/06 9589 total posts
Name:
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Re: Tenants asking for Rent reduction - lease expiring??
With the way the market looks and fluctuates I would dump it and RUN. There will be no significant growth in the market for a LONG time. You'll wipe out your savings, yes, BUT your headache will be gone and you can probably build up your savings quickly. I would get rid of it.
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| Posted 4/3/12 11:25 AM |
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Re: Tenants asking for Rent reduction - lease expiring??
I don't think you are going to gain much by waiting. The market is stable, but the prices remain relatively flat. And everyone predicts that when they start to rise, they are going to rise gradually. So waiting a year or two won't make much of a difference.
Also, I have SO many buyers, especially first time buyers (who tend to consider condos as an option) who are looking to buy now to take advantage of the low interest rates. As the interest rates rise, your buyer pool will shrink, because buyers who could have bought your condo when rates were low won't be able to afford it as rates rise.
Feel free to contact me if you'd like a free market analysis or would like to know more about how I work, market listings, etc. I'd be happy to talk with you offline or set up a meeting -- no obligation on your part -- just to give you some more information.
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| Posted 4/3/12 11:34 AM |
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MrsS1976
LIF Adolescent
Member since 5/11 534 total posts
Name:
M
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Re: Tenants asking for Rent reduction - lease expiring??
Thanks Christine, I sent you FM with more details of the situation.
I have a few months to figure this out since my tenant's lease expires in July.
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| Posted 4/3/12 11:43 AM |
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ave1024
I Took The Wrong Road
Member since 12/07 6153 total posts
Name:
That Led To The Wrong Tendencies
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Re: Tenants asking for Rent reduction - lease expiring??
Posted by tarabelle99
If you are already kicking in 500/mo and will still have to write out a check for over 10k in 2 years, that is still at least 22k. Renewing with this tenant with the reduction turns that into 26k+, not to mention what happens if you get a bad tenant or have a major repair etc.
If you dump the condo now that is 24k at least.
So basically it's lose 20k+ now or over the next 2 years.
This is not true because you are not factoring in how much of her PRINCIPAL+interest payment is actually principal. Most likely she isn't taking a $500 a month hit (is probably way less or even with principal factored in she could be in the black).
I think the OP needs to give us more information regarding what her monthly mortgage payment is, and how much of that is principal to make a better decision.
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| Posted 4/3/12 11:54 AM |
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ave1024
I Took The Wrong Road
Member since 12/07 6153 total posts
Name:
That Led To The Wrong Tendencies
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Re: Tenants asking for Rent reduction - lease expiring??
Posted by MrsS1976
My tenant just told me this morning she wasn't going to renew the lease in July so I am not sure if she would be month to month, unless I was able to renew the lease as a month to month for the REDUCED price.
My hesitation about a month to month is the legal implications should she decide to turn into a "problem" tenant (she hasn't been one for the past 2 years, always pays on time and is very good with keeping the apartment clean/tidy, etc)..But having been in landlord-tenant court, I know NY law favors Tenants over landlords so I am leery that she may not vacate w/in 30 days and if I sell, the buyer may back out of the transaction.
I think you have the legal implications mixed up. Month to month tenants are always better for the LANDLORD because it allows you to evict a problem tenant way faster (you don't have to wait for the lease to end).
If the tenant decides to be a real pain and stops paying, it doesn't matter if you are month to month or if that tenant has 18 months left in their lease. If they want to stop paying, they will stop paying and it will take you time to evict either way.
Month to month allows a landlord to get rid of a PAYING problem tenant way faster.
You need to decide how difficult it is to find a tenant. I'd probably allow the $200 a month reduction for now but for that reduction I would require a year lease in this case. Mainly because this tenant may be in limbo with her living situation and if you know she isn't a problem tenant, you want to get her locked in to have to pay for this lease over the year term.
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| Posted 4/3/12 11:58 AM |
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MrsS1976
LIF Adolescent
Member since 5/11 534 total posts
Name:
M
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deleted
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Message edited 4/5/2012 9:34:09 AM.
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| Posted 4/3/12 12:04 PM |
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Blu-ize
Plan B is Now Plan A
Member since 7/05 32475 total posts
Name:
Susan
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Re: Tenants asking for Rent reduction - lease expiring??
are you taking this apt as a rental with a loss at tax time or are you keeping it as a second home?
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| Posted 4/3/12 1:14 PM |
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ave1024
I Took The Wrong Road
Member since 12/07 6153 total posts
Name:
That Led To The Wrong Tendencies
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Re: Tenants asking for Rent reduction - lease expiring??
There is no way to "strategically default". It will destroy your credit. The bank can come after you for your current house. Stupid suggestion IMO.
You should talk to a good tax guy. The $1300 a month you posted probably has a good $200-300 in principal. So you cut that from your $975 losses.
Then your tax guy should be adding up every little thing related to this rental and deducting it from your taxes. Everything can add up to quite a bit of savings on taxes. He should be deducting everything from repairs to maintenance to losses to taxes/interest paid. All of this can seriously bridge the gap.
I am not a tax expert but you should definitely talk to one. How much is this property worth? You do realize you will pay a 1% seller's tax when you sell plus other closing costs. I'd hold onto it if you have a paying tenant.
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| Posted 4/3/12 2:31 PM |
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ave1024
I Took The Wrong Road
Member since 12/07 6153 total posts
Name:
That Led To The Wrong Tendencies
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Re: Tenants asking for Rent reduction - lease expiring??
Posted by Blu-ize
are you taking this apt as a rental with a loss at tax time or are you keeping it as a second home?
I don't think this would be classified as a second home if they aren't living there. She should be treating this strictly as an investment/business expense.
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| Posted 4/3/12 2:39 PM |
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Blu-ize
Plan B is Now Plan A
Member since 7/05 32475 total posts
Name:
Susan
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Re: Tenants asking for Rent reduction - lease expiring??
Posted by ave1024
There is no way to "strategically default". It will destroy your credit. The bank can come after you for your current house. Stupid suggestion IMO.
You should talk to a good tax guy. The $1300 a month you posted probably has a good $200-300 in principal. So you cut that from your $975 losses.
Then your tax guy should be adding up every little thing related to this rental and deducting it from your taxes. Everything can add up to quite a bit of savings on taxes. He should be deducting everything from repairs to maintenance to losses to taxes/interest paid. All of this can seriously bridge the gap.
I am not a tax expert but you should definitely talk to one. How much is this property worth? You do realize you will pay a 1% seller's tax when you sell plus other closing costs. I'd hold onto it if you have a paying tenant.
Agree! I also have a rental that I deduct losses on. I am 200% under water. I feel ya..
Can't do squat about it but at tax time I'm almost at a break even. My rent does not cover my mortgage or maintenance but when I deduct interest, maintenance and depreciation I am pretty close to whole. Hence why I asked you the question before.
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| Posted 4/3/12 2:41 PM |
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shiv
Twinsanity!!
Member since 5/07 4747 total posts
Name:
Shiv
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Re: Tenants asking for Rent reduction - lease expiring??
I would try to get a tenant in for a higher amount than your getting now. See what the rent market is for the condos in your area.
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| Posted 4/3/12 3:06 PM |
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jams92
Member since 1/12 6105 total posts
Name:
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Re: Tenants asking for Rent reduction - lease expiring??
i have to say, we asked our landlord for a rent reduction 2 years ago and he dropped it $100 for us. i think asking for a $200 decrease is a lot even though i understand her asking you.
i would say your best bet is to put it on the market now and see what you get....but both for sale and also for rent. you shouldnt need to cover monthly bills on it; your renter should cover the expenses.
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| Posted 4/3/12 4:21 PM |
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MrsS1976
LIF Adolescent
Member since 5/11 534 total posts
Name:
M
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deleted
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Message edited 4/5/2012 9:34:26 AM.
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| Posted 4/3/12 5:11 PM |
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Blu-ize
Plan B is Now Plan A
Member since 7/05 32475 total posts
Name:
Susan
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Re: Tenants asking for Rent reduction - lease expiring??
Posted by MrsS1976
Posted by Blu-ize
are you taking this apt as a rental with a loss at tax time or are you keeping it as a second home?
Yes as a rental. We already dudected a ton of expenses for it on our taxes..I even deducted kitchen sink repair and a grouting job DH did on the bathroom tiles a few months ago.
Do you know what your net is then? You can't go by the monthly cost..only the aggregate with deductions. You might be surprised.
First, get a new appraisal..
Second, if the appraisal is better than expected, try to sell..
Third, try to get a tenant for more money. If you can offer a short term lease say 6 months, then do that while trying to sell.
That all is if you are still in a significant hole.
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| Posted 4/3/12 5:57 PM |
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