I recently met with a couple on Saturday and this is exactly the question they are considering.  They currently owe about $96,000 on their current home, but they live in a declining neighborhood and on a good day, their home might sell for $85,000.  Typically, in the Indianapolis area, it is safe to budget about 10% of the sale price to cover all of the seller’s closing costs…such as the cost to have their realtor pay to market their home, to represent them in the transaction, to handle all of their negotiations; it also pays the other agent who brings us the buyer; it also helps cover the cost of the seller’s title insurance, deed and affidavit, pro-rated taxes, etc.

Well, 10% of an $85,000 sale price would be about $8,500.  Subtract $8,500 from the sale price of $85,000 and this means the seller would be taking $76,500 away from the closing table.  However….they still have to pay their mortgage company $96,000 to get out from under their mortgage.  So, instead of walking away with $76,500 it really means that the seller would be bringing $19,500 to the closing table just to get out from underneath their current home.

The thought of this sounded awful to the seller so we talked about the possibility of keeping their current home as a rental property.  Here are some important things to think about if this is an option you might be considering:

• Talk to a reputable lender to know for sure that you can qualify for your new home purchase without having to sell your current home.  Why go through all of this if you really can’t move into the home you really want right now?
• Think of the tax considerations.  Having a rental property can be a great tax write-off.  Any improvements you make to the “rental property”…any maintenance repairs, insurance, interest on a mortgage, property taxes….all of this stuff could be a tax write-off (but talk to your accountant for more specifics).
• If you keep your current home as a rental property, you have someone else helping to fund your retirement account!  Just think about it, 30 years from now that home will be paid for, it will probably worth at least twice what it is right now and if you choose to sell it at that time, you get to walk off with the cash.  But for 30 years you had someone else in there making all of the payments for you…pretty cool, huh?
• Keeping your home as a rental can help you move on and take advantage of today’s AWESOME Home Prices and KILLER Interest Rates…without feeling like you’re taking a kick in the stomach for the sale of your home.

OK, those are some highlights of having a rental property, but how about some of the negatives?

• Maintenance Issues?  If you’re like me, I barely know how to change a light bulb, so the thought of being the 24 hour maintenance person on a rental property made me nervous.  But here’s how you handle that…get a Home Warranty for the property.  For $38 a month, I have a Home Warranty on my rental property and the renters know that whenever they have a problem, they are to call the Home Warranty company first, not me.  The Home Warranty company sends out a contractor, the renter pays the $50 deductible at the time the repair is made and then they send along the invoice for the deductible with their next month’s rent and simply deduct $50 off of their next month’s rent…works like a charm!  You can use any Home Warranty company you want, but the one I use is HSA Home Warranty.  Check them out at:  www.OnlineHSA.com
• What if the renter trashes the house?  Great consideration.  I’ve found that the best way to avoid this problem is to collect a hefty deposit up front…and I’m talking an amount that is at least the value of the first month’s rent.  If you have someone paying $850 a month in rent and they know that if they take good care of your property, they’re going to get $850 back at the end of their lease, they are going to be much more motivated to take good care of the property while they’re in it.  *As an important PS to this…don’t make the same mistake I made…don’t do the final walk through with the tenant, determine that the property looks good and then give them their deposit back on the spot.  Have it written into your lease agreement that you will return the deposit 60 days after the walk through.  That way…if they fail to pay their last utility bill(s) and you get stuck with them, you can take it out of the deposit.

Got more questions on whether this is a good consideration for you or not?  Call, Text or Email…we’ll talk about it!  317.294.1861 or Shawna@iShopGreenwood.com

Simply go to http://ishopgreenwood.com/home-search/ scroll over the map and it’s all right there.

But, if you simply can’t wait that long and must absolutely know right now what they are…here you go…

Greenwood

• Total Listings:  892
• Average Price:  $216,388
• Median Price:  $169,900

New Whiteland

• Total Listings:  54
• Average Price:  $99,604
• Median Price:  $95,000

Whiteland

• Total Listings:  77
• Average Price:  $192,698
• Median Price:  $159,900

Bargersville

• Total Listings:  136
• Average Price:  $484,812
• Median Price:  $334,900

Franklin

• Total Listings:  392
• Average Price:  $158,580
• Median Price:  $124,777

If you like this kind of stuff, you might also like:

http://ishopgreenwood.com/2008/12/09/less-talk-more-pics/ or

http://ishopgreenwood.com/2008/10/17/this-weeks-best-buys/

Want more specifics on what your home would most likely sell for in today’s market?  Send me a note…let’s talk!

Posted below is a closer look at homes specifically priced at or above $500,000 in Center Grove and Greenwood School Systems.

What we see is that there are currently 52 homes Active on the market in Center Grove, priced at or above $500,000 with the highest Active list price at $2,850,000 (the average Active list price is $835,815).  There are also 2 homes Pending in Center Grove Schools listed at or above $500,000 with an average list price of $697,400.

However, in Greenwood Schools, there are no homes currently Active that are listed at or above $500,000 and none that are Pending either.  Neither school system had a closed sale in this price range during the month of November either.

Hope this helps better explain the numbers.  If you have any questions or comments you’d like to share, by all means, please let us know!

Click on graph to enlarge

In fact, I double checked all of the numbers more than once just to make sure I hadn’t messed something up! Unfortunately, the numbers are correct. Check out what we discovered…

Click on graph to enlarge

What I find really interesting is that Center Grove has twice as many homes currently Active on the market as Greenwood, more than twice as many Pending and yet, during the month of November, only had 25% more closings than Greenwood.

Another big difference we see is with regard to the actual home prices.  Right now, the average home in Center Grove is listed for $330,629 while the average home in Greenwood is currently listed for $141,892.  These same trends follow down through the Pending price differences, as well as the actual Sold prices.

With over 600 homes currently available in Center Grove and Greenwood combined, it’s time to go shopping!  Give me a call and let’s go look at some houses this weekend!  317.893.1636  Hope to hear from you soon!