Renters Maybe

We are very hopeful. A local family has put down a non refundable deposit of $200 to hold the house for March 1 move in. They are working hard to gather the required deposit, which I was adamant about after our last experience with the eviction. It is the equivilant of first and last month's rent. In case of an eviction which takes 21 days, we have funds available to pay the mortgage on time.

The two months it took to get a renter meant we had to pay two months mortgage for an empty house. Tom was so torn. He was talking about trying to do the short sale or Deed in lieu again. The housing prices are still falling. Our house price has continued to decline since last year. To me the rental is the only way to go if we can just get a good tenant in the place.

I could kick myself over last summer when I had choices. I made a very bad choice in tenants. This time I am hopeful that the credit history will be good and all will go smoothly. The family would like to eventually buy our house. At least that is what they tell me. No one seems to be able to do it right now though.

Foreclosures are still coming on to the market. I know from a friend's case that there are more still out there waiting. Four years have passed without paying mortgage and her house still has not officially been foreclosed and sold. With this kind of trickling back up of foreclosures the market could continue for a long time wallowing further down.

Hopefully the rental prices will continue at these levels. Which helps us out tremendously. We are about to do our taxes. From everything I read, we can write off everything having to do with the old house, up to $25,000. If we can keep to that $25,000 ceiling, we may come out OK.

The only glitch is if we want to depreciate the rental. If we depreciate the house, then when we do sell it, if we sell it within five years and treat it as our primary residence, we have to pay back all the depreciation. I am thinking though that with this economy there is no way we could sell in five years at a price that would even work for us. Going beyond five years we have to consider capital gains, but again, at these prices even in five years I don't think we have to worry about capital gains.

Tom has been doing research for a book he wants to write about America and how did we get to this position. During his research he read an article published regarding the Great Depression. If you bought a house at the peak of the market, just prior to the 1929 crash, it took 40 years to recover the purchase value of that house. We have a thirty year loan. We bought in December 2006, the very peak of the market. We potentially wont see a recovery to our original purchase price for decades. Meanwhile the house depreciates in value with age. More things can go wrong. The roof will need repairing in 15 years. I dread the big expenses.

We are in the process of doing a refinance for a lower interest rate. Special programs are out there now to help people even if it is a second home. 100% financing to stop the flow of foreclosures. Government backed FNMA programs are in place. We don't know for sure though if they will work with us as Tom is self employed. The lower interest rates are tantalizing. It is one of the few reasons Tom is still willing to stay in the game with the house. We started the process back in early December and are still waiting on processing as we move into the middle of February. Government bureaucracy is still at work faithfully slow and cumbersome.

It is a huge boost to us to have the house rented as that is one of the criteria. Proof that the house is rentable. With the lower interest rate, virtually all the known costs can be covered under the cost of the monthly rent. Taxes and insurance, which are now out of our pockets, would roll into rent. It is an exciting thought. It still wont cover repairs that may come up. But I am looking at the positive side.

The new mortgage would be 30 years fixed. We would lose the five years we paid into the old mortgage. The cost of the new loan, which will run about $5000, will be recovered in less than a year. I look at that $5000 as the amount I was paying out of pocket anyway to cover the taxes, $4400, and the insurance, $1200. Insurance on a rental property is higher than on a primary residence since the care for the house is less than it would be if you lived in it yourself. The care of ownership has value at every level, even insurance.

So we explore every avenue of options. That is what I tell Tom. Patience, as we weed our way through the muck of the housing market. Rent, short sale, Deed in lieu, foreclosure, there are options. They just aren't pleasing. I am grateful we are one of the lucky families. We have a roof over our heads and we own our house that we live in now. Having a rental property has always been one of my ambitions. I just didn't quite expect it to be this way.