We are upside down in our house. Should we sell or rent?
We bought a house for my Dad at the end of 2003 for $55,000 then put about $10,000 in for remodel. Our loan ended up being $68,000 for the house.
We have $58,000 left on our loan today. My Dad has not paid us much over the years for rent, and we have had to do other repairs on the house. We are in the hole about $23,000 after rent and repairs have been paid.
The area took a deep decline in property values since 2009 and they have not recovered. My Dad is elderly and is ready to move out and live with his son. Realtors have told us that we may be able to get $45,000 to $50,000 for the house.
I have been thinking about renting the house as a vacation rental. I have placed an experimental ad on a vacation rental website and I have gotten pretty good interest from rental clients for this summer, about 49 possible rental nights at $150.00 per night.
The area is not great for a vacation rental, but it’s not bad either. No crime, a nice quite street, but the houses are small and cheap, and close to some attractions.
We would need to do some additional repairs on the house and update it. I’m thinking the cost would be about $15,000. Then we would need to furnish the house for another $10,000.
My question is should we just go ahead and try to sell the house at a loss, or put more money into the house and try the vacation rental. We would need to rent the house 8 nights per month to break even. If we could rent the house 14 nights per month we would make $10,000 profit per year. It could take 5 to 7 years for us to recoup all our losses.
Thank your for your time.