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What to do with my parents' house
Similar to HELEN a couple months ago, I have a question about my particular situation. My parents are retired and getting ready to downsize out of their house in a near-city suburb of Boston. I'm not sure about other parts of the country, but the Boston area is full of old, poorly maintained houses inhabited by the same owners for decades. My parents are in this category, and they own the house free and clear.
I am the only heir to my parents, and we're having conversations about the coming transition: helping them move into a condo or senior housing development someplace, and what to do with the house.
Basically I'm wondering whether we should get it ready to sell or to rent.
I believe that attempting to sell would be much higher stakes in this market. If we had put in some basic updates into it in 2005, this house could have sold quickly for $550K. But this year, I have seen comparably dilapidated properties on the market for $250K. And with $50K spent wisely on modernizations, my parents' house might fetch $350K. Who knows what the market will be like next year, which is the absolute soonest I can envision my parents taking any action at all.
But consider using it an an income property. I'm not exactly sure what the carrying costs would be. But a smaller investment in modernizations ($20K) could convert it into a reasonable rental unit for a family.
I think the rental demand is strong in their town (good schools, close to jobs that people move across the country for). Plus, local RE prices are still too high for new investors to finance rental properties and turn a profit.
I'm not too concerned with what we would to with the proceeds of a sale or the rental income. The money can be put to very good use.
Our choice should be based on the risk/reward profile: Consider the money we need to invest for improvements in the house in each scenario, sell and rent, versus the value of the lump sum of the sale scenario and the income perpetuity of the rent scenario.
And I do mean perpetuity. If we convert it to an income property, I will likely inherit it and continue to rent it out for decades more.
I'm leaning toward the rent scenario. Need to persuade my parents of the wisest choice.
Any comments? What details am I overlooking?
I am the only heir to my parents, and we're having conversations about the coming transition: helping them move into a condo or senior housing development someplace, and what to do with the house.
Basically I'm wondering whether we should get it ready to sell or to rent.
I believe that attempting to sell would be much higher stakes in this market. If we had put in some basic updates into it in 2005, this house could have sold quickly for $550K. But this year, I have seen comparably dilapidated properties on the market for $250K. And with $50K spent wisely on modernizations, my parents' house might fetch $350K. Who knows what the market will be like next year, which is the absolute soonest I can envision my parents taking any action at all.
But consider using it an an income property. I'm not exactly sure what the carrying costs would be. But a smaller investment in modernizations ($20K) could convert it into a reasonable rental unit for a family.
I think the rental demand is strong in their town (good schools, close to jobs that people move across the country for). Plus, local RE prices are still too high for new investors to finance rental properties and turn a profit.
I'm not too concerned with what we would to with the proceeds of a sale or the rental income. The money can be put to very good use.
Our choice should be based on the risk/reward profile: Consider the money we need to invest for improvements in the house in each scenario, sell and rent, versus the value of the lump sum of the sale scenario and the income perpetuity of the rent scenario.
And I do mean perpetuity. If we convert it to an income property, I will likely inherit it and continue to rent it out for decades more.
I'm leaning toward the rent scenario. Need to persuade my parents of the wisest choice.
Any comments? What details am I overlooking?
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