Should I sell cabin (2nd home) in '12 or '13?

[kat]

I've never sold real estate before. I still own the first home I bought in 1992. I will be putting my 2nd home on the market in 2012 or 2013 because the property isn't right for my situation any longer. I bought it in 2007.

I could make all the repairs and improvements I think it needs in time to put it on the market in 2012. I am going to replace the roof and paint it in 2012. I assumed 2013 would be better and give me more time to make improvements. I hear terrible things about the market now and assume it won't be better in 2012. I might be able to rent it in 2012 and cover my costs.

But now I've begun to question how I can assume 2013 will be better than 2012 re the market, and aren't I just risking having to make more repairs if I hold onto it longer? And it might take two years to sell.

If it helps to know, it's a three season cabin on 3 acres in SW Vermont in an area loved by hunters, a couple miles from two lakes, and half an hour from skiing. It's in very good condition, solidly built, and though it's 3 season it has a heater and is well insulated.

Any thoughts or advice? I've never done this before and could use some feedback.

Thanks!

 

[tryan]

Without rental income you'll pay more to carry the property than it will appreciate in 1 year.

So if you can not rent ... sell. If you can/do rent keep it as long as you can tolerate the renters.

I would also expect we're A LONG time away from the 2007 price (a decade).

 

[kat]

Thanks. I'm looking into a possible rental arrangement right now, so it looks promising for next year. Fortunately, when I bought it in October 07 I got a good price for that time, though I expect a loss of 12% when I sell, plus realtor fee, etc. One advantage of renting is claiming a tax loss, which I actually know very little about but will look into.

 

[lightspeed]

We have gone through a similar situation, and we rationalized selling at a loss this way: If you can't rent, I would view it as any poor performing stock-- sell, get what you can out of it, don't look back, and put it in another investment that will appreciate sooner than the cabin will (just don't spend all your equity to booze and gambling, then it's a real loss you'll never regain). It's actually worse than a poor performing stock because of the fixed costs associated with owning it. Good luck!

 

[kat]

Lightspeed, I appreciate hearing about your experience. Fortunately or unfortunately, I paid cash when I bought it, so my ongoing costs are not great, and it is very easy to see my loss. I sense a lot of value in your words "sell, get what you can out of it, don't look back". I'll probably put the money right back into my investments at Vanguard where the money once had been. I guess I should remind myself I took the cash out of an appreciating stock market at just about the right time.

Thanks again.

 

[chinaco]

Sorry it turned out that way.

I would probably rent it to defray the ongoing costs... For that matter, unless I were living in it regularly... I would probably already be renting it.

You could consider listing it next year (2012) to see if you get an acceptable price. If you operate it as a rental... It will be ready to show to prospective buyers. You can always reject offers and take it back off the market and list it again in 2013.

You need to be thinking about the lowest price you would be willing to accept... IOW - what is the price you would accept (lower limit where you know you would be better off keeping it and running it as a rental for say.... 5 years). You will probably be facing low ball offers for the next few years.

 

[travelover]

Did someone say in another thread that if you rent a property for a certain time period, that a loss on the eventual sale might be tax deductible?

 

[kat]

Travelover, I remember reading that too -- and I had heard it before. I'm going to look into it.

Chinaco, I like that idea and it's something I was playing out in my imagination when I looked at options. Rent it, but also put it on the market in 2012 and see what happens.

Then, as travelover mentioned, I could see about getting some tax loss benefits for a rental property.

Right now that looks like the best plan. And I have been trying to think about the lowest offer I'd take. I have to learn more about closing costs as a seller, since it's new to me. I have a lowest "walk away with..." figure in my mind, but I have to break it down and work backwards considering all the fees and other expenses and see how I get there.

I appreciate all the help thinking this through. It's feeling more do-able.

 

[jimnjana]

have you considered turning it into a vacation rental?

 

[Brat]

My concern about renting a cabin is that the renter may use its remote location for the manufacture of drugs. If that happens to you the place is a total loss.

 

[kat]

Thanks again for all the help to think it through. Brat, the remote place attracts hunters from all over. I see it more as a sanctuary for animals, since I don't shoot them but see so many, but I am not concerned about what the hunters do. There are good reasons to cull the populations. It's possible that the hunters do drugs, but my experience is hunters are some of the most level-headed, cautious people in life.

(But I agree with you about drug problems. I see signs of alcohol problems. People throw the cans out the car windows while they drive by. My dirt road is a short cut to the next town...)

Next year, I am renting it to people from a non-profit I work with. I know everyone.

Jimnjana, yes, I considered turning it into a rental long term, but if it's right for me it's just not clear yet. My gut tells me long term rental (and ownership) is long term hassles with fixing things. But all that depreciation, and other tax related things got me thinking.

I want to explain one reason I am selling. In the wider region where I go hiking, ticks are a huge problem, and it's increasing. My dog was just diagnosed with lyme disease. I hate how it affects my beautiful 6 year old German shepherd -- his back is very sore and arthritic. I decided that owning two houses in this region is too much for me, with constant vigilance, and all the care it takes to inspect. Those ticks are so tiny. They come in the house on my dog and me. So, I am going back to owning and caring for one house, and renting my get away places. My get away will be in a lower tick place.

When I bought this place in Dec. 07, I liked one of the realtors. (She was not the listing agency, but had a very helpful website where I learned about all the property in the region, so she became involved.) I asked her if she was interested in the listing, saying I am planning for '13 but might try '12 while I rent it. She got back to me right away, with useful, practical information, and heard what I said. She's the kind of person you would feel okay about paying -- in the right job.

I've never sold property before, so it's been a learning experience and I really appreciate the feedback. Thank you.

 

[chinaco]

My concern about renting a cabin is that the renter may use its remote location for the manufacture of drugs. If that happens to you the place is a total loss.

Can you elaborate a little more?

Do you think the state or feds would not hold the business owner (landlord) liable or culpable for the crime?

If the house were burned or damaged/destroyed during the commission of a crime (by a renter), do you think the insurance company would not pay?

Or were you thinking of some other situation?

 

[kat]

P.S. In case it wasn't clear but it probably doesn't matter, I signed the contract to purchase it in October 07 and the closing was in December 07. In this thread here, I used both months as the time I bought it. Fortunately, I had moved my purchase money out of stocks to cash before it sank.

And the outlook for my dog is excellent. Two tests confirmed lyme disease as the vet thought. Today is his first day on the pills (antibiotics). I also learned from her what I already thought. In this region, most ticks do not carry lyme, but some do. And even if your pet had the vaccine and always has the preventatives, your pet can still get lyme. (It's not 100% on the vaccine or the preventatives.) I just got tired of being vigilant and still not enough, and want a get away somewhere else. Renting sounds great until I know where.

 

[Brat]

Evidently the OP has folks she trusts lined up to rent the cabin so drug manufacturers won't be an issue.

As I have not personally had to consider the issue I do not know if insurance covers damage from drug manufacture. I do know that it is something that must be disclosed when selling.

 

[MichaelB]

Back to the original question, roof repair and painting need to be done. Most home buyers do not want to deal with major repairs or will demand more in discount than the cost of repair. A fresh coat of paint and other minor touch-ups make the house much easier to sell.

It is more difficult to sell a house that is currently being rented. You have less control over appearance and an uncooperative tenant can turn off prospective buyers.

Now or later is difficult to answer because the housing market is not the same everywhere. One year is not likely to make much difference unless the specific area has an unusually large % of forecloses which keeps prices depressed. If you have a plan to invest the proceeds elsewhere it probably makes sense to sell and move on.

Here's a recent thread discussing taxes and housing with some tax references http://www.early-retirement.org/forums/f28/tax-question-57549.html

 

[SkisALot]

Something you might want to check out that I've heard (and I don't know if it's true): There's allegedly a provision in the health care bill that beginning in 2013 anyone with an income over $250,000 will pay an additional tax of 3.8% (to help cover the cost of the bill) no matter the source of that income. So if a house sale bumps up your income. . .DH and I are thinking of selling our house and a real estate person gave us this info. Something to check out with a tax person of which I am not.