OfflineHi all. I am new to this forum, and I have a sad and happy story that I would be very interested to hear your comments and thoughts about.
I am a new immigrant. I brought with me some money and a dream to live and make money from Real Estate. I wanted to build the American Dream for my family. I found a realtor that spoke my language and I thought would be helpful to me, and explained to him what I was looking for. I made my research (not enough!) and got information mainly from that realtor, whom I trusted as a friend and a mentor.
I ended up purchasing two properties - one as a residence, and one as an investment. The investment property is old, but in good shape and in a very nice neighborhood.
Leaning mainly on the info I got from the realtor - who has more then 10 properties in the area and therefore should have known a thing or two about the market status - I made my calculation for the investment property as follows:
Purchase price - K$835 (20% down payment), $3400 mortgage (interest only), $4300 tax. Monthly rent: $4500. Positive cash flow should have been around $742 a month. My plan was to hold the house for a year, add a garage and a deck, and sell it for nice profit.
The reality was completely different: It was very hard to rent the house, and it stood empty for 9 (!) months. I rented it at last for $3600 only. The tax has been recalculated that year, and is now $7687 (!).
The positive cash flow of $740 is now negative $440. Add this to the 9 months with no rent ($33,825), and the value that dropped more than 15% (around $125,000), and you see in what kind of mess I am.
In retrospect I can say that I knew very little about the situation at the time (end of 2006, market already going down), and the "friend/mentor" gave me plenty of wrong advice, helping only himself. I made a Hugh mistake counting on that "mentor" (who was, off-course, "unavailable" after that) and didn't do my homework right.
So why is this story also a happy one? because few months ago I saw Dean Graziosi on TV, bought the book, and completely fell in love with it. I am fully charged again, and ready to start over with my dream, this time - hopefully - doing it right!
The only problem is that I still loose money on this house, and it makes it harder for me to get loans and to purchase other properties. My options are:
1. Stick to the house, go on losing, and wait for better times
2. Sell the house and lose even more
3. Move to that house for few years and sell my residence (also dropped in value)
I'm not going to surrender - I just need a way to get out of the mess and start over! Does anybody have a clever advice for me?
Many thanks in advance.
How do I get out from this mess and start over?
Posted on: Sat, 08/16/2008 - 23:09
How do I get out from this mess and start over?
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I saw something here called operation free home
where you get local companies to donate towards your mortgage and you give your house to a needy family for a year.
That may give you some wiggle room to come up with plan B.
I'm not sure if it would work in your case because where ever you live the rents seem really high. Plus it sounds as if you alrady have it rented and if you break your contract with your renter it may cost you more money in the long run.
Look in the forums for operation free home.
i am truely sorry to hear that, however you came to the right place, maybe we(i) can help get you back on track. Need to know a couple of things first, about your personal residence, approx FMV,(if you know) how much do you owe on the property?, because sounds to me like option #1 and #3 could be a possibility depending on the factors that i asked you for, but right NOW i do know this: i would NOT sell that type of property @ this very moment, i would either move-in and wait(market is going to get better sooner than you think) or just stick it out longer, i'll wait to hear from you
YOUR HERO, SULLY
Also I have been learning (but haven't done yet) finding people who can't qualify for a loan through a traditional bank and find them a loan with a broker and maybe you could find someone to take it off your hands but not make a profit and you could start fresh.
Or advertise to someone who has'nt been able to qualify for a loan and do a lease option on your property and even if after the period of time of the option is up and they still can't qualify maybe you could come up with plan b
or maybe even the market will turn.
If you don't know what lease options are I can explain it or they have plenty of post about it here.
Good Luck and keep me posted and don't give up on the American Dream this is just a brick wall that you need to find away over, under, or around
if she does do a LEASE-OPTION, the fact remains that she will still produce a negative cash flow, maybe NOT as much, since she could recieve higher rents through an OPTION, well you know maybe, it's an option to look at
YOUR HERO, SULLY
Welcome to the DG family, as we call it, we are happy to have you join us! I'm so terribly sorry to hear about your situation. It's hard to get back into the swing of things after hitting hardships, but I'm glad to see you are trying! The replies are all great, another option would be to sell the house with you financing the buyer. You live in the house that has the lowest mortgage payment and sell the other one owner financed. This way someone else is making that payment, taxes, insurance etc. You might not get what you wanted, but if you can't lease option it and you want to get out of the negative cash flow, it might be your only option til the market changes.
We will pray for you and continue to be here if you need any help!
God bless you,
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."
yup, good one, e, that would work too, but again we need to know the information on your primary residence to really HELP
YOUR HERO, SULLY
More details would help alot!
But that just goes to show you there ARE options for you...
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."
Hey guys - many many thanks for your replies. It gives a nice feeling to know that there are people out there listening and giving good advice.
I don't know much about the operation free home that Phil mentioned, but I am definitely going to get more info, and I'll share it with you.
The lease option is something I thought about, but the lease agreement I have now with my tenant expires only on June 2009, so I guess I would have to wait for that. Can I end the current lease agreement if I find a lease option? Can I sell the house with the tenant?
As to Sully's question: I bought my residence house for K$705 (K$150 down payment), and its value now is K$630-680. Selling this one and moving to the other would save me the monthly mortgage payments and half the tax on the investment property if I live there. On the other hand I am going to lose money on the value and paying to Realtor.
Elena, can you pleas give me more details on the owner financing option? It sounds interesting.
Thanks again for the good advice and support. It helps already.
Owner finance means that you finance the buyer. They make the down payment to you, the monthly payments go to you @ whatever % you negotiate, in short YOU are the lender/bank. I might have another solution for you, email me @ webuyhouses24_7.com for details (too long to post).
Good luck and God bless!
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."