THE SCENARIO
A friend of mine, Jim, bought a house in California for $450,000 in December 2004, which was not too long before the real estate implosion that happened at the end of 2007. The loan on that house is adjustable, meaning that as rates rise over time, the payments will get more and more expensive.
Because he bought the house near the top of the market, and because the crash was so deep, the house was worth less than he bought it for until very recently. Now, he's considering selling it, because he thinks the market is near its peak again in the area in which the house is located.
Jim lived in the house for four years, and has been renting it to tenants since he moved out in 2008. During the entire time he's owned it, the property has averaged breaking even* on a month-to-month basis.
The question: If Jim ...
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