Author Topic: Need Help!  (Read 7973 times)

WilderMD

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Need Help!
« on: April 07, 2014, 10:55:55 AM »
Income:
2,600.00  per mo at current job
1,100.00  rental income (but has not been rented since November 2013 - I'm dying here)
   380.00  second job for tax season
4,080.00  in a better world, when condo is actually being rented

Expenses:
30.00 Haircut/Pedi
50.00 Entertainment
875.00 Rent
130.00 Ins/Phone
275.00 Truck Payment
100.00 Barclay's MC
122.00 Barclay's VISA
847.82 Mortgage
240.00 HOA
120.00 Electric Bill
200.00 Water Bill

200.00 nRewards VISA
200.00 Food
150.00  Gas
292.00  Sallie Mae (Total Due 54,637)
368.00  GE Capital to not payinterest
4,199.82

Please note:  no cable, starting to implement biking to work 2 days a week and due to spine surgery last year, numerous medical bills and some dental bills on 0% interest for a certain period of time.  Having crappy renters really throws a wrench in the wheel to success.  They have cost me over $5,000! (unpaid rent, utilities, cleaning, etc.) Any suggestions would be appreciated.

The condo is listed for rent through the Navy, personal friends and is also up for sale since Jan 1, 2014.  Listed in red is condo expenses.

Threshkin

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Re: Need Help!
« Reply #1 on: April 07, 2014, 11:12:58 AM »
Here is what stands out to me:

Income:
1,100.00  rental income (but has not been rented since November 2013 - I'm dying here)
No rent for 5 months = $5,500 lost income.  If you don't expect this to change soon, either sell the condo at a lower price or drop the rent to get it occupied now.

Expenses:
30.00 Haircut/Pedi
50.00 Entertainment
130.00 Ins/Phone
WTF?  Negative cash flow and you are still spending on these?  Stop now!

275.00 Truck Payment
Do you need the truck for work?  If not, sell it, take the loss if any, and buy a cheap, economical used car.

100.00 Barclay's MC
122.00 Barclay's VISA
200.00 nRewards VISA
292.00  Sallie Mae (Total Due 54,637)
368.00  GE Capital to not pay interest
Are these all debt payments?  If so, sort by highest interest and PAY THEM OFF with all spare cash possible!

847.82 Mortgage
240.00 HOA
120.00 Electric Bill
200.00 Water Bill

So if you do get it rented @$1,100 you are clearing only $20/month? (Mortgage + HOA.  I assume the tenant would pay the Electric and Water.)  I change my previous advice and say SELL IT ASAP.  You do not say what you owe but you should consider dropping the price aggressively until you get this anvil off your back.  This kind of debt burden plus negative cast flow makes it very hard to swim.

Good luck!

Rebecca Stapler

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Re: Need Help!
« Reply #2 on: April 07, 2014, 11:31:25 AM »

847.82 Mortgage
240.00 HOA
120.00 Electric Bill
200.00 Water Bill

So if you do get it rented @$1,100 you are clearing only $20/month? (Mortgage + HOA.  I assume the tenant would pay the Electric and Water.)  I change my previous advice and say SELL IT ASAP.  You do not say what you owe but you should consider dropping the price aggressively until you get this anvil off your back.  This kind of debt burden plus negative cast flow makes it very hard to swim.

Good luck!

I agree. If, in the best of circumstances, the rental doesn't net you more than $20, I don't see why you are renting it. It's costing you $1,000/mo to keep it, so drop the price to get it sold soon. Is it underwater?

Are you on an income-sensitive plan for your student loans? Apply to do that, and use the monthly savings to pay off your highest interest credit card debt.

jordanread

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Re: Need Help!
« Reply #3 on: April 07, 2014, 12:00:00 PM »
Hey folks. This case study is my mom. She'll be coming back in to update, but the Condo has been on the market for a while (4 months?). I'm not sure if she's underwater on the Condo or not, but she'll update the numbers.

I told her this community was awesome. :-)

WilderMD

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Re: Need Help!
« Reply #4 on: April 07, 2014, 12:16:48 PM »
Here's the update to most responses (I hope I can remember them all).

I'm currently behind Feb/Mar payment on condo.  Entered into a repayment schedule as of April 18th.  i owe $120k on condo, avg price on market is $136k.  I've had it for 3 years.

I had my hair cut short on Feb 22nd, so I won't need another one for a while.  No, I'm not getting pedicures (it is on my fantasy list though).  And, no on $ for entertainment.  I'm working 7 days a week and between 9-12 hours daily.  My entertainment consists of listening to music and maybe a bubble bath.  I also shop at farmer's markets and Costco and cook at home 100% of the time.  Allows me to save when I pack my lunch and long days.

Sallie Mae loans are in forbearance, due to economic hardship at the moment.

One credit card is high interest, the rest are at 0%.

I owe $7500 on my 06 Dodge Ram.  I don't use it for work, but it has been reliable.  I've moved twice in 8 months and I don't plan on doing that any time soon.  Low interest 4%.  I'm hesitant about getting an economical car because I don't even have $500 to spend on one that wouldn't require money spent on getting it working properly.  I think I'll stick to my bike or get a moped or something?

Good ideas on the lowering rent and selling price - consider it implemented.  Thanks!

Threshkin

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Re: Need Help!
« Reply #5 on: April 07, 2014, 01:18:11 PM »
Here's the update to most responses (I hope I can remember them all).

I'm currently behind Feb/Mar payment on condo.  Entered into a repayment schedule as of April 18th.  i owe $120k on condo, avg price on market is $136k.  I've had it for 3 years.

Good ideas on the lowering rent and selling price - consider it implemented.  Thanks!

Don't rent it - sell it!  Even at your current rent you would still be bleeding cash.  Any property will sell quickly if it is priced right.  I am guessing you are working with a RE agent.  Ask them what it will take to sell it quickly.  It might be price but it might also need repair or cosmetic work.  If price is the only thing holding up a quick sale ask about reducing the commission rate to help keep your closing costs down.  It sounds like you have little or no money to bring to closing and you don't have much equity.  If your broker will not work with you consider firing him and engaging a fixed price discount broker or even FSBO. 

Even if you make nothing at all on the sale, you will eliminate about $1,400 per month in expenses.  That should put you onto positive cash flow.  Just as important, it will eliminate a huge mental/emotional burden.

After that, you should pay everything you can on your high interest CC.  Get that one paid off and then move on to the next highest interest debt.  Rinse and repeat.

I don't agree with you on the truck but it seems to me that the most important thing to tackle first is the condo.

arebelspy

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Re: Need Help!
« Reply #6 on: April 07, 2014, 01:22:13 PM »
Agree on dumping the condo ASAP.  The HOA fee on top of the mortgage.. yikes.

Your mortgage is also very high for only owing 120k.  You must have put almost nothing down and/or be at a pretty high interest rate, no?
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WilderMD

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Re: Need Help!
« Reply #7 on: April 07, 2014, 01:57:55 PM »
Talked with Real Estate Agent.  Offering $1000 toward condo fees and dropped price another $1,000.  Should get some movement going and relieve the migraine along with it.

Called Sallie Mae, I'm on income sensitive repayment plan.

WilderMD

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Re: Need Help!
« Reply #8 on: April 07, 2014, 07:03:21 PM »
The HOA fee on top of mtg is what is killing offers coming in for condo.  A real deal breaker because it doesn't have pool, gym, playground, etc. for the fee.  Jordan was right, I was just thinking of getting out of a bad situation instead of an investment opportunity.  It was close to work, a store, a bank and a hospital, also in a safe neighborhood and good school district, so I figured someone upstairs was watching out for me.  It was good for the time, but now ... ugg!

I should have some movement on this soon taking the suggestions as noted.  Next project, the truck issue.  Thank you all so much! 

I had the credit card paid off before I moved to Florida, so I'm mad at myself for allowing it out of control.  This was a big learning lesson. I had to escape, but will be all the wiser in the future. 

Another Reader

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Re: Need Help!
« Reply #9 on: April 07, 2014, 07:27:02 PM »
Why is the condo costing you so much in utilities if it is vacant?  And why would you pay utilities at all when it is occupied?

In your shoes, I would do whatever is necessary to get it sold.  You say the average sales price is $136k.  How does your unit compare to the average?  How long were the "average" units on the market? How long have the current listings been on the market?  Ask the agent what price and concessions it would take to get a solid offer in 30 days.  You may find you not only have no equity, but you would have to bring money to the table to get the deal done.  If that's the case, you might need to do a short sale to get out from under this alligator.

WilderMD

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Re: Need Help!
« Reply #10 on: April 08, 2014, 11:45:19 AM »
Even though nobody is in the unit, some heat needs to be on to keep the pipes from freezing.  It's set at 64 and when the agent shows the unit, turns it up to a more comfortable level.  Agent has had numerous individual showings and held 5 open house weekends.  It shows quite well, but again, the HOA fees are way to high for what you get.  By implementing the things outlined, I should get movement quickly.

Roland of Gilead

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Re: Need Help!
« Reply #11 on: April 08, 2014, 11:50:59 AM »
I am very sorry for your current problems, but thank you for showing the other side of the rental income retirement plan.   This type of situation is exactly what I fear would happen with us, since we are clueless about houses, condos and the rental market.  Some make it work well though.

jordanread

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Re: Need Help!
« Reply #12 on: April 08, 2014, 12:07:49 PM »
I am very sorry for your current problems, but thank you for showing the other side of the rental income retirement plan.   This type of situation is exactly what I fear would happen with us, since we are clueless about houses, condos and the rental market.  Some make it work well though.
Ah, don't be scared. This wasn't a retirement plan by a long shot. She bought the place to live in, but another opportunity presented itself that had her relocate. The renting/selling happened by accident, and was not why the property was purchased. With the correct research, and running the numbers, this property would most likely not have met the general guidelines for buying an investment property. This is more of a story of trying to put the hair fire out.

The Real Estate category has a bunch of stuff on how to do this correctly, so don't let something like this freak you out.

P.S. Mustachian Gunslinger...I like it!!

WilderMD

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Re: Need Help!
« Reply #13 on: April 09, 2014, 03:31:40 PM »
So, new question:  Has anyone done a deed in lieu of foreclosure?  They claim it can be done and not have it negatively affect your credit and wipe out the prior 30/60 day late payments.  Maybe this would be a quicker way to triage the bleeding cash, since there might only be $1000 I would get after selling it and paying realtor.  Any thought?

arebelspy

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Re: Need Help!
« Reply #14 on: April 09, 2014, 04:57:22 PM »
So, new question:  Has anyone done a deed in lieu of foreclosure?  They claim it can be done and not have it negatively affect your credit and wipe out the prior 30/60 day late payments.  Maybe this would be a quicker way to triage the bleeding cash, since there might only be $1000 I would get after selling it and paying realtor.  Any thought?

I've done it, but not in the way you're thinking (I was the one holding the note that the borrower was signing the DIL for).

The typical banks won't do a DIL unless you're way far behind on payments, so it probably won't help your credit since you'll have all those lates. Plus you still defaulted on the note and that can be recorded.

Still, it doesn't hurt to check with your bank - you might find them amiable!

(Don't misunderstand my post - I think it's a good idea and worth a shot - just offering honest feedback on why it may not work.)
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WilderMD

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Re: Need Help!
« Reply #15 on: April 09, 2014, 07:41:52 PM »
Thanks for the post Las Vegas, I'll keep you posted!

Rebecca Stapler

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Re: Need Help!
« Reply #16 on: April 10, 2014, 07:52:15 AM »
So, new question:  Has anyone done a deed in lieu of foreclosure?  They claim it can be done and not have it negatively affect your credit and wipe out the prior 30/60 day late payments.  Maybe this would be a quicker way to triage the bleeding cash, since there might only be $1000 I would get after selling it and paying realtor.  Any thought?

Here are my thoughts on DIL: You said that you only owe $120k, but you're listing it at $138k. If you sold it for $138k, you would net $129k after realtor fees. Instead of a DIL, why not drop the price down to something that would net you your mortgage balance after realtor fess, and not take a hit on your credit? I'm not sure the exact hit, but I found this article that explains it a bit: http://www.washingtonpost.com/business/economy/whats-worse-for-credit-score--foreclosure-short-sale-or-deed-in-lieu/2011/08/30/gIQAbnTaqJ_story.html If you don't have a deficiency (ie, the bank can sell it for what you owe) then the credit score impact will be less.

You currently own a home, right? If you're not interested in refinancing it or needing your credit score to be stellar in the next 7 years, then maybe getting dinged on your credit rating isn't that terrible for you.

jordanread

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Re: Need Help!
« Reply #17 on: April 10, 2014, 04:18:54 PM »
All right, she just asked a few questions regarding lowering the price, and the quote below outlines the Realtor's response. I don't really have a frame of reference for this, so I'm not certain if there is anything to be concerned about:

Quote
One of the main expenses you missed was on the commission. It is 6% not 3%.  It is 3% goes to the listing company, and 3 % goes to the selling company. (<<Name of Company Removed>> is listing of course and who ever represents the buyer is the selling)
 
I will give you the breakdown.  Some of these expenses , such as closing costs, repairs, or the 1% repairs by contract ( I'll explain that further later) are added in just in case. They are not written in stone, but rather to estimate high, rather than have you get hit with something unexpected.  I would rather you got more than you were expecting, than have a nasty surprise at the end.
 
With a sales price of  $135,000.00
 
you have deed preparation settlement fee of approximately $250.00
Your Gantor's tax is : $135.00 $1.00 for each $1,000. sales price
Real estate commission total is 6% =$8,100.00 Listing and selling side.
Termite inspection if required by federal regs. only on FHA and VA loans seller must pay. $95.00
Closing cost assistance to buyer. 3% estimated. Not advertised, but if they need it, to close the deal, I have added it in. If they don't then all to the good for you.
A one year home warranty $325.00  not a have to. But if they ask for it... again don't want to loose the deal over that. And also can be used to negotiate on repairs if needed.  So this may not apply, if they don't request it.
Tax service fee: $90.00   Required on government loans FHA, VA
If there is a home inspection, which most likely there will be, the cost of any agreed upon repairs,   I haven't put a number on that, because it's impossible to know for sure what that could be.  I don't foresee any issues , but.... I don't know that for sure.
The 1% repairs referred to in Paragraph 13 of purchase agreement refers to If the appraiser or the termite inspection sees something that he requires be repaired, ( again I really doubt that will come into play, so I didn't add that in, but I put it on the sheet so you would know what the maximum would be. )  This is where being in a condo does pay off. They take care of the termite and moisture issues, and generally any outside or structural issues.
 
So total costs not including the $1,350.00 1%= $12,045.00
Approximate payoff:                                                 $120,000.00
Approximate Net to seller:                                       $2,955.00
Minus the $1,000 condo fee enticement:             $1,955.00
 
*** This could change depending on what the buyer asks for, but I wanted you to have the worst case *****
 

arebelspy

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Re: Need Help!
« Reply #18 on: April 10, 2014, 05:09:30 PM »
Typically I put selling costs at about 8%, that's not too far out of line.  So you have a little wiggle room for negotiating before you have to come out of pocket.

Do you have any offers?

You may want to - as a last resort - just drop the price by that though and then when buyers try to negotiate tell them you can't because of the mortgage.
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Roland of Gilead

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Re: Need Help!
« Reply #19 on: April 10, 2014, 05:15:47 PM »
Would it sell on Craigslist for $125,000?

jordanread

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Re: Need Help!
« Reply #20 on: April 10, 2014, 05:31:05 PM »
Typically I put selling costs at about 8%, that's not too far out of line.  So you have a little wiggle room for negotiating before you have to come out of pocket.

Do you have any offers?

You may want to - as a last resort - just drop the price by that though and then when buyers try to negotiate tell them you can't because of the mortgage.
No offers as of yet, but it's showing this evening. This was her clarifying some things before dropping the price down to $135K.

Would it sell on Craigslist for $125,000?

That's a thought, but I'm pretty sure that there is more to it than that, although Arebelspy would know better than I would.

Thegoblinchief

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Re: Need Help!
« Reply #21 on: April 10, 2014, 07:11:48 PM »
At the amount you're bleeding, list it for a net wash. $1,000 price drop isn't aggressive enough.

Sallie Mae is student loans, yes? Have you negotiated with them at all?
« Last Edit: April 10, 2014, 07:14:00 PM by Thegoblinchief »

jordanread

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Re: Need Help!
« Reply #22 on: April 10, 2014, 08:09:33 PM »
At the amount you're bleeding, list it for a net wash. $1,000 price drop isn't aggressive enough.

Sallie Mae is student loans, yes? Have you negotiated with them at all?

Yeah, I told her to a couple of months ago. You should have seen it before she called.