If you are related to me or have been a long-time reader of my blog, then you know that Carl and I have owned two rental properties back in Minnesota for 11 years now in an attempt to diversify our portfolio. We were going to buy some houses, rent them out for a number of years and then sell them later at a nice profit. We bought our first rental property, a 4 bedroom, 2 bath single-family home in a highly desirable rental market in August, 2006 for $256,000 (I showed a tour here and here and then revealed the new bathroom we put in the basement). In December of that year, we then bought a little 2 bedroom, 1 bath two-story townhouse in a great location the next town over from us for $145,000 (I showed a tour here).
And then the housing market crashed.
At the bottom of the housing market fiasco, the house was worth around $203,000 in 2011 and the townhouse plummeted to about half of what we paid to around $75,000.
We have waited patiently since then for the two properties to recoup their value so we could get out of the rental business. We have been incredibly blessed and are extremely grateful that we have had steady, decent renters that have covered all of our expenses and even put a little money in our pockets each year making this experience tolerable. But with living in another state now, it is difficult in maintaining the properties (and relying on paying service people) and managing the whole rental process from afar. The final kicker was two major expenses at the rental house this spring, including a $2,800 bill for a new furnace and a $2,000 bill to replace the sewer main line.
So about a month ago, we had a realtor visit the rental house to give us an estimate of the value. And we were thrilled to find out that we could finally get our money back out of it if we were to sell it now. The only problem was we have tenants in there with a lease through the end of the summer. When I contacted them to inform them that we would be selling the property, they stated that they wanted to buy it! So after hiring an attorney and doing some negotiations, we now have a Contract for Deed with the current tenants. What this means is that Carl and I are financing the purchase for up to three years while they work on building credit and securing their own mortgage. They have “purchased” the home from us, are making monthly “mortgage payments” to us and our responsible for all maintenance, taxes and insurance. However, we hold the title to house until their final (balloon) payment is made. If for any reason they can’t make the final payment, we get to keep all money they have paid, including the down payment we required of them, and the house reverts back to us. So it’s a win-win and actually is a good financial arrangement for Carl and I.
Now, the townhouse is another story. I do not believe that we will ever recoup the money that we paid for that property. It has slowly climbed up to around $100,000 to maybe $110,000 (if you believe Zillow) but it will be many, many, many more years before it makes it back up to what we paid. Since that property does not have a mortgage, we just plan on keeping it and living there for the summer whenever Kelly decides to get married and give us some grandbabies. Ha!
Side story: The previous renter of the townhouse was actually on a month-to-month lease since his lease expired last summer. He contacted me a few weeks ago to give his required 60-day notice but stated that he was actually interested in leaving ASAP if I could find a new renter. Within one-hour of listing the property on Craigslist and posting the ad on Facebook, it was rented, sight-unseen by a friend-of-a-friend who was interested in moving ASAP. So we actually ended up with a new tenant in the townhouse less than 48 hours after the old tenant moved out with just one-week’s notice! I just love those little gifts from God.
So we have sort-of sold one of our rental properties and are saving the other one for our summer home in Minnesota during our golden years. YAY! God is so good.