what are the consequences, help

[toefu]

A while back, I bought a property with full intent of knocking it down in a 1-2 years and rebuilding. The idea was to do minor remodeling and rough it out in the home. Unfortunately, the home had lead paint and my wife got pregnant. We ran the numbers and it simply didn't make sense to do the repairs, as the total renovation budget would exceed the cost of renting for 2 years.

So, the new plan is to knock down the home and leave it an empty field.

pros:

insurance is less for the home (need insurance for a mortgage)

property tax should be same or less

cons:

will I still be able to file the property tax and mortgage interest if I theoretically don't live there?

what else should I be thinking about?

Thanks for any help

Edited June 5, 2009 by toefu

[TheNiche]

A while back, I bought a property with full intent of knocking it down in a 1-2 years and rebuilding. The idea was to do minor remodeling and rough it out in the home. Unfortunately, the home had lead paint and my wife got pregnant. We ran the numbers and it simply didn't make sense to do the repairs, as the total renovation budget would exceed the cost of renting for 2 years.

So, the new plan is to knock down the home and leave it an empty field.

pros:

insurance is less for the home (need insurance for a mortgage)

property tax should be same or less

cons:

will I still be able to file the property tax and mortgage interest if I theoretically don't live there?

what else should I be thinking about?

Thanks for any help

You currently have a mortgage that requires that the property be your primary place of residence. In order to avoid being in default on your mortgage, you will have to refinance as vacant land, meaning that your interest rates will be reset to reflect the risk of a non-revenue-producing investment property.

Insurance will no longer be necessary because there is nothing on the property to insure.

Check your HCAD appraisal. They value a property based on land and improvements. Zero out the improvements and that will be the new basis for your property taxes. They should go down, possibly by quite a bit. However, you will no longer be able to claim a homestead exemption.

[musicman]

However, you will no longer be able to claim a homestead exemption.

Yep and land values are significantly rising in some parts of Houston. i have several unimproved properties that went up more than 20%.

[Ross]

A while back, I bought a property with full intent of knocking it down in a 1-2 years and rebuilding. The idea was to do minor remodeling and rough it out in the home. Unfortunately, the home had lead paint and my wife got pregnant. We ran the numbers and it simply didn't make sense to do the repairs, as the total renovation budget would exceed the cost of renting for 2 years.

Why is lead paint a problem? As long as the paint isn't flaking or chipping, it's a non-issue. If you need to paint the house, wear a respirator while you prepare the surfaces, and then use a HEPA filtered vacuum to clean up afterwards. This isn't an East Coast state where you have to actually remove the paint completely and dispose of it in a hazardous waste dump. If you want to, there's nothing to prevent you from sanding off the lead paint on the outside of the house, leaving the dust all over the yard. any house more than about 35 years old probably has lead paint.

[Mr. Chenevert]

You can't rent it out as-is?

[toefu]

Thanks for all the replies, This has been very educational for me.

My wife is a bit on the extreme worryside with the lead paint, and I'm not likely going to push that agenda on her.

The home is in pretty bad shape as well, and renovating it just to rent out would be costly, assuming i can get it rented out quickly, since I plan to eventually bull doze it and rebuild within a few years anyhow.

And wouldn't renting it out also violate my mortgage, since this is a primary residence mortgage?

[Yankee_in_TX]

And wouldn't renting it out also violate my mortgage, since this is a primary residence mortgage?

That entirely depends on the terms of your mortgage.

Also, you do need to insure vacant land (if you demolish) - but this type of insurance is much cheaper. IE someone decides to got play on your lot and trips and falls, you're covered.

[TheNiche]

Also, you do need to insure vacant land (if you demolish) - but this type of insurance is much cheaper. IE someone decides to got play on your lot and trips and falls, you're covered.

That's a liability policy, and while it is cheaper, you should evaluate that as an option very carefully. If the deductible is too high, the insurance won't do you much good in the most likely sorts of cases. It would behoove you to fence off the lot, post 'No Trespassing' signs in English and Spanish along the perimeter, and to be a responsible land owner by keeping the grass cut on a regular basis. Just making it look like somebody values the land will reduce the frequency with which illegal dumping or criminal trespass is a problem.

[plumber2]

Thanks for all the replies, This has been very educational for me.

And now you know where babies come from too!