1 month prior to Hurricane Katrina, we purchased a townhouse in Gulfport, MS. The plan was to offer it as a vacation rental for most of the year, which should have covered almost all of the expenses and allow us to use it when it wasnt rented. Then Katrina hit, we werent in a flood zone so no flood insurance, although that wouldnt have mattered, we only owned the property for 29 days.
Anyway, the property was repaired (6 inches of water causes a lot of damage), and we converted it to a long term rental.
Unfortunately, we paid $170K for it and would be lucky to get $90K for it and owe $125K.
It has been vacant since April. We can cover the expense, but doing so takes away our ability to fund IRAs.
Since we are upside down, we are considering the following short term options:
1. Continue to rent it as a long term rental (assumes the management co can find a tenant)
2. Use it ourselves (would require that we furnish it $10K expense) we are already covering the carrying cost...
1. Sell it the minute we can break even on the mortgage, undertsanding we will lose $$.
2. When we FIRE (approx 13 years) convert it to our primary residence, live there for 2 years minimum (we like the area), then sell if we choose to.
It seems obvious that we should keep it and live there when we FIRE, BUT we have had tenants that have caused damage, and there is always the chance of another hurricane (now fully insured $4.5k a year, a $3K increase after Katrina). Isaac didnt cause any damage
. The neighborhood isnt as nice as it used to be, most of the units are rental properties, and some of the tenants leave a bit to be desired..(not sure if I will want to live there in 13 yrs)
Thoughts, other suggestions?