We’re Thinking About Becoming Landlords

Our listing agreement with our second Realtor expires at the beginning of June, and while we’ve had a few more visits in the last month we have yet to be presented with an offer on our condo in Chicago.

The ’spring market’ is in full step according to our Realtor and the first time home buyers credit is helping entice some people into the market. However the damage has been done and at this point our agent is suggesting another price drop to solicit an offer. We are currently listed at our original purchase price and he is suggesting another drop of $10,000. If things are so bad why isn’t he moving on his commission? Well I know why, because his company will not allow that to happen but you would think everyone involved in real estate this days would be making some concessions, not just the sellers.

We’ve held out for selling our place because the last thing we want to do is become landlords from 2,000+ miles away. Thankfully H’s parents have said they would help in any way possible and I’m sure we could find a handy-person (is it still politically correct to say handy-man?) to attend to a few things here and there.

Our fixed costs work out to around $1,700 a month and I think the most we can get for our place rent wise is $1,100. Taking on a loss of $600 a month is not ideal but we think the upside will come two fold around this time next year.

1. While renting the condo we can still write off the mortgage and property tax interest if I am not mistaken. It’s one of the great benefits of home ownership here in the United States and who can’t use a tax break here and there.
2. The market should be better at this time in 2010. Everything I’ve read says the market will be better in late 2009 and into 2010 so if we can sell at our purchase price or better a year from now than it’s something the two of us could deal with.

Financially it breaks down like this – If we take a loss of $600 a month we’re looking at $7,200 for the year. If we were to drop our list price to the suggested $10,000 our Realtor is hinting at, it will mean an additional $10,00 loss out of our pocket ($20,000 loss total).

You don’t have to be great at math thinking the $3,000 is worth waiting the market out for another year. Yes I’m sure a few things might come up here and require us to lay out some money but also take into account the tax break in addition to the $3,000 and I guess it’s not a terrible idea.

What’s the worst that could happen? We would be listing at the same price or the suggested lower price in a year’s time.

Hopefully by then buyers will not be as picky and the inventory will not be as abundant as it currently is.

Did I tell you we had a woman come into our place and loved it, but took a pass because she wanted to use the second bedroom as a changing area/closet and it’s too far away from the master bedroom. I’d guess the two rooms are a total of 10 feet away from one another.