Author Topic: 2 Properties - 2 Mortgages or ?  (Read 2484 times)

Trillium

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2 Properties - 2 Mortgages or ?
« on: January 08, 2015, 12:04:26 PM »
New Mustachian here.......
Own a property that I currently rent in my home state. Real estate market is still depressed and unable to sell at this time. It rents easily and at a decent price but not quite enough to cover total ownership on the current loan. I plan on staying another ten years possibly more in my current state where real estate is significantly more expensive.  After five years of renting, I'd like to purchase a home.

I have never owned two pieces of real estate at the same time, and I'm unclear on options to structure a mortgage(s).  I'd like to leverage the equity in the first house to buy the second as its substantial at 65%.  I've been offered a re-fi on this house to fund a second or to try to secure a second mortgage completely separate from the first.I've read about cross-collateralized loans but have not found a loan officer willing to discuss. Either way I plan on refinancing the current home due to the high interest rate.

Are they any other options available to me?  And what are the gotchas?  I realize I may have to rent longer or possibly for the rest of the my time in at my current location.

Current House
     Owe: $48k  at 5.5%
Paid Off: 2020

Prospective Home
Estimated Cost:  $300-400k @ 3.7%
 
Potential DownPayment for Second House
$80k

ShoulderThingThatGoesUp

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Re: 2 Properties - 2 Mortgages or ?
« Reply #1 on: January 08, 2015, 02:35:52 PM »
Okay, so you have a money-losing rental property that you're not underwater on, in fact, you have substantial equity. So how are you unable to sell?

Trillium

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Re: 2 Properties - 2 Mortgages or ?
« Reply #2 on: January 08, 2015, 04:43:31 PM »
I attempted to sell it for the last 5 months with nothing except one almost bid that never materialized. There was very little traffic even though it's a well-kept house...until I also put it up for rent.  Now I've had a continous stream of potential renters and two good candidates to rent. If I had to guess, the foreclosures in the city are still holding prices down.
« Last Edit: January 08, 2015, 04:45:54 PM by Trillium »

Hotstreak

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Re: 2 Properties - 2 Mortgages or ?
« Reply #3 on: January 09, 2015, 04:46:24 PM »
You need to determine the value of your current home, then sell it.  It is obviously not worth what you are asking, or else someone would have looked and offered. 
 
"It rents easily and at a decent price but not quite enough to cover total ownership on the current loan" -- What does this mean exactly?  Does the rent not cover all expenses, or does it not cover PITI, or not even PI?
 
You might want to look around & do some more reading.  You don't seem to know the relevant terminology for your rental, and the question you are asking is actually really basic.  It worries me that any answer you get here won't make sense or be actionable without a large enough base of knowledge to understand it through.  I suggest you spend more time reading this forum and other sites, such as biggerpockets.com, until you get a better understanding of the basics.  If you still have a question at that point, people will be more able to help you.

Trillium

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Re: 2 Properties - 2 Mortgages or ?
« Reply #4 on: January 10, 2015, 12:57:11 PM »
Thanks for the link RobbyJ. I was checking out a local landlord class this morning.

Yes, total cost meant all costs associated with the property: mortgage, insurance, taxes, annual maintenance and repairs. Often when I talk to people, they ask if the rent covers the mortgage as if that were enough.  If I refinanced the property at a lower rate, I would start to generate positive income.  That positive income would not make the 6% of what I have in the house as referenced in a previous post.  But the mortgage is getting paid down quickly as most of the payment is principal, that is generating some significant equity (assuming the house price does not go lower).  It really depends if/when the area will bounce back. There's reason to be optimistic but not until all the foreclosures clear out.

ShoulderThingThatGoesUp

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Re: 2 Properties - 2 Mortgages or ?
« Reply #5 on: January 12, 2015, 06:03:21 AM »
Foreclosures will be with us for a long time. Near my house there's one that's been vacant and winterized since November of 2012 according to the notice on the front - and the bank just took possession in October. The banks are holding some properties, just like you are, hoping for an increase in prices.

Hotstreak

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Re: 2 Properties - 2 Mortgages or ?
« Reply #6 on: January 13, 2015, 12:17:40 AM »
Bottom line - the property is worth what someone is willing to pay for it.  If you state a value, then state nobody is willing to pay that price, that is NOT the value, it is above the value.