Author Topic: HELP..Lucy needs advice on a property investment to rent out  (Read 22868 times)

lucy

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HELP..Lucy needs advice on a property investment to rent out
« on: February 03, 2013, 09:00:54 AM »

We have a current mortgage here, and are planning to stay until the market changes. Right now, we are under water. We owe 81,781.00  It is in North Fl..a condo.
Our desire is to move to the beach, but right now we cannot sell. We have no equity, 2 years ago it was valued at 125,000. Today they are selling in here for 50-60k range. BITES!

We have a nice savings from my inheritance, and are in the position to pay cash for a townhouse that is 3/4 mile from the beach..it is in a greatly desired area, and sell very quickly in this small community. The hoa dues are only 60.00 a month, and that only takes care of the grounds, which are beautifully landscaped, and there is a pool also. The rest is left for us to care for, roof, siding etc.

Since August I have been unemployed from the company I worked for , for the past 15 years. I am currently on umemployment, and it is going to stop soon. Without that, we will be forced to draw from our savings to make our bills, as you know, the savings makes virtually NO interest.
We are thinking that if we purchase the beach townhome, we can rent it out, for about 1000-1200 a month..we have already asked the others in this community, and that is what the going rate is there.

The asking price is 139,900. We are going to offer 129000. Cash depending on the inspection..and btw it looks like it will need to be re-roofed, which is around 3-5k.  Everything else looks to be perfect .

If they accept our offer, then we will pay cash.

Is it going to be worth the investment, to rent that one out, it is a much desired area, and walking distance to the beach, and then use that money as our income until I am working again?
Im thinking, the cash is sitting in the bank anyways, and not earning anything. Then after 2 years, we may be able to get out from our current condo...and move to our beach dream home.

Will be be subject to paying high taxes on this income? Or can I make myself the Rental manager and use that as a write off?
We need to act quickly, because this property will go fast, they usually sell or get imediate offers, therefore I am going to put the contract on it Monday.

Any and all advice is much appreciated.

lucy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #1 on: February 03, 2013, 09:08:55 AM »
Another question...I have 28K in my 401  I would like to withdraw the whole thing to put toward the purchase, then that will leave more liquid cash in the bank. Will I have to pay taxes to do that if I am using it for an investment?
We Live in Florida. And yes, I am fully vested.

SunshineGirl

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #2 on: February 03, 2013, 09:24:45 AM »
Hi, Lucy,

Can you give us more information, such as other household income? Total savings? Without a fuller picture, you won't get the best advice.

As far as your 401K, your age matters in terms of will you have to pay a penalty, so let us know that, too.

In general, I think liquidity is important, especially when you lose an income stream, but so much depends on your individual situation. I agree your initial idea of the condo does make sense, IF other factors support it, such as a significant other's income, your other savings, your likelihood of finding a new job soon, your age, etc.

arebelspy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #3 on: February 03, 2013, 09:39:37 AM »
1000-1200 is a huge range for rent (20% difference). Find out what rent actually is.

That being said, you can find much better deals in Florida than 130k for 1000 (or even 1200) rent.  Especially with an HOA.

Under 1% of purchase price in gross monthly rent is pretty mediocre if not downright bad, and I know for a fact there is a lot more potential in your market.

This particular opportunity aside, I'm not sure this sounds like the best use of your money right now.  You're out of a job, so keeping funds liquid is important.  Locking up 130k into an illiquid investment right now is probably not the best way to go, IMO, especially in a desperate search for yield.

Real estate has higher returns, yes, but it comes with risk.  A vacancy right now, or repairs, or whatever, while you're out of work, would be really tough to deal with.

I'm a fan of real estate, but you need to get your life (income and expenses) stabilized first before taking on that extra risk.

Hope I didn't burst your bubble too hard, trying to be realistic in your situation.

Best of luck!
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
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lucy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #4 on: February 03, 2013, 09:51:04 AM »
I am 57.. we still have at least 100,000 liquid

My  husband has an income, about 60k a year...

The reason we want that particular place is because it will be our future retirement home, and it will go up in value..no doubt about that.  As soon as the market increases here in our present condo, we wil sell, no doubt. I'd sell today if we  could.

The beach house is prime location, and we have been searching for the past 2 years, money has sat in the bank, not earning. I am looking at this as , an investment, as well as a source of temporary income. I am not sure if I will work again
I have a ruptured disc, and last year had surgery for same already..So finding employment is difficult in my situation anyways.

I don't think at my age that I would be putting much more into that 4011 anyways.

lucy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #5 on: February 03, 2013, 09:53:40 AM »
Oh, and by the way..we have looked at beach property for the past 2 years, and this is the best priced neighborhood for the money.

Sure, there are cheaper places, but the dues are over 300 a month, and the homes are in need of a lot of repair. This Townhouse is in great condition, move in ready.

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #6 on: February 03, 2013, 10:07:27 AM »
Lots of rationalizations here.  Take money out of the 401k to do this?  I wouldn't in your shoes.  You will pay taxes and the 10 percent penalty.  Totally agree with Arebelspy on this.  Get your income and expense stabilized and then make plans to move and to invest.

lucy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #7 on: February 03, 2013, 10:31:23 AM »
Correction,  we will have at least 100K AFTER this purchase in liquid.

I think if you use 401 to invest , it is not penalized.

this will be temporary, we plan to sell existing condo, and move to the beach permenantly

SunshineGirl

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #8 on: February 03, 2013, 12:38:51 PM »
Typically, if you're over the age of 55, you can take money from your 401K without penalty. You would pay your normal income taxes on it.

Is this property in the town you now live in?

And what would it take to sell the condo you're in now? How much cash?

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #9 on: February 03, 2013, 12:47:01 PM »
You say this will be income until you are working again and then you say you are not sure if you will work again.  I would not invest a large sum of money in an illiquid asset that may or may not appreciate and could cost you a lot of money should the property need work or the tenant damages the place and you have to evict, not knowing what the household income will be.

If this property is so great and in such a desirable area, why hasn't it sold?

arebelspy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #10 on: February 03, 2013, 01:18:18 PM »
Out of work for 6 months, and saying "Without [unemployment], we will be forced to draw from our savings to make our bills."

Are you planning on going back to work?  Or are you looking for advice on how to turn a stache into cash flow for early retirement?

We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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lucy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #11 on: February 03, 2013, 01:31:33 PM »
The property just went on the Market 2 days ago..I was the first to see it.  I have tried to buy in that community for the past 2 years, and always too late, usually the first viewer puts a bid , and it is usually accepted. 

I am not looking at this as a future rental at all, as far as the tenants are concerned, I know I would be very picky. If I don't get it rented, thats ok too, because I can handle the dues, until we are able to sell our unit we are in right now. This area will not decline, this I know, and have been watching it for a while, its clean, and immaculate. The market has dropped for everyone, making this affordable . This unit sold 6 years ago for over 250,000.  As we ALL are aware, that has happened everywhere. I have the cash, it has been sitting in the bank for 2 years..I don't want to risk on stocks, I would much rather be living where my hearts desire is, which is at the beach. Beach property, always goes up in value, especially if it is purchased on the down market. I am a lot less worried about investing in real estate than in the stock market. The money is sitting anyway. I won't be using it anyway. It is an inheritance, there is plenty left if there will be needed improvments.
After we sell our present condo, we are planning on re-modeling the new place's kitchen anyway. So inreality , I am not concerned , and I have seen how well that area is kept.
I think if we wait, then we will miss out on a great opportunity to move and live less than a mile from the beautiful  beach. This area is in high demand. They sell fast, I have watched for 2 years.

My Condo we are in now is much older, the area has declined, not sure if its just the Market right now, or what. But I know that 3 years ago they were selling for double of what they are selling now..but I really am seeing signs of that turning around.
Property, NICE property at the Beach inventory has dropped..I can't find another like this in this great of shape.
The one we now live in has dues of 300 a month, my mortg payment is 613..plus 300= 913.00 a month.  I do not have a lot of bills.
the highest payment we have right now is child support, my Hubby pays 1000 a month, and that will also be done in 2 1/2 years.
Which will also add another 1000 monthly for our living expenses.
I do not think we could get 81000 right now for our condo, if we could then we would sell and walk away even, but hopefully in a couple of years it should go back to the 100,000 range. and we should have equity .
I have thought about just giving this back, but I really dont think that I can short sale with as much money as we have in the bank.
Anyone have any thoughts on that?

As far as me going back to work, I will prob go part time, both of our cars are paid off, and we have no credit card debt.

I hope this gives a clearer picture.
And , thank you all for your advice. 

lucy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #12 on: February 03, 2013, 01:35:54 PM »
And Yes, the property is 5 minutes from my Husbands job.  It is 35 minutes from our present home, we are in-town and it is at the beach 20-30 min drive depending on traffic.

Self-employed-swami

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #13 on: February 03, 2013, 01:48:48 PM »
With all that you are saying about your expenses, I wouldn't take every penny of your money, and sink it into real estate.

I think this would be a bad idea, and that you are just trying to rationalize it.  Don't buy real estate when you are unemployed.

arebelspy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #14 on: February 03, 2013, 02:07:01 PM »
If you are purchasing with the intent to move today, selling your condo ASAP (short sell if you're okay with that, or bring cash to the table), you may be able to make it work (still not enough hard numbers to know, stuff like expenses - I'm guessing you probably don't know those numbers?). A rental would be a bad idea in your current situation.

Either way it sounds like you have made up your mind regardless of what we're going to say, so I hope it works out for you.  Best of luck!
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

lucy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #15 on: February 03, 2013, 02:20:34 PM »
I do know all expenses..will lay it all out..cooking and getting ready for superbowl ..lol

check back and ill have all info

thanks

and , I am not putting all our money into realestate. I will still have about 130,000.00  Cash left in the bank
be back later thanks

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #16 on: February 03, 2013, 03:26:43 PM »
You describe the property as a townhouse.  Does that mean multi-story?  If so, is that really the best choice for your retirement home?  Unless there is a bedroom and full bath on the main floor, you may have to move again when stairs become a problem. 

My guess is that if the property is so desirable and is properly priced, it will sell quickly.  However, I would think twice about the assumption the less desirable condo where you live now will go up as quickly as you think.  That side of the equation may need more consideration.

If you buy it, it will be interesting to hear the update in a year....

lucy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #17 on: February 03, 2013, 03:53:37 PM »
OK...HERE IS A BREAKDOWN
 spouse -           - 60,000.  yr
 my  unempl ben biweekly 538  to end soon
 savings cking, etc liquid cash   255,000.00
 401 k                                         28000.00
payments
Home (condo)  613.00 includes ins, taxes
condo dues      300.00
elect -               140.00
cell phones (2)   180.00
cable                  180.
child support     1100.00  (2 years left)
auto ins             130 both cars  (350Z 2003)  &  (2007Hummer)
misc                   200.
Gas (auto)         300.

that is it..no debt other than normal life

would REALLY like to get out of our current Mortg . will wait until a year or 2
I know that it will rise again, this was selling for 125000. a few short years ago. We took a hit like everyone else

Our hearts desire is to move to our Beach Home, this seems like the way to go, if we wait, the market will rise, and there will be fewer and fewer deals.  If you can see a better way to do this without loosing the deal, by all means I am all ears.
We are not looking for a get rich thing..we want to be at the beach, we love to swim, fish, and just enjoy the atmosphere. Simple life and laid back

But I def do not want to make a stupid mistake either. As it is we have held onto the money for 2 years, instead of investing and taking a chance on loosing...



Self-employed-swami

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #18 on: February 03, 2013, 04:01:21 PM »

that is it..no debt other than normal life


What do you mean when you say this?  Are there car payments or something?

lucy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #19 on: February 03, 2013, 04:17:06 PM »
Both Cars are paid off!
Normal bills meaning phone cable etc

Blindsquirrel

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #20 on: February 03, 2013, 07:19:28 PM »
  My advice is just say no. You have a chance with the cash you have to be totally debt free. ARebelspy is correct in that you do not want to lock away cash in an non liquid investment. The fact that this decision is causing you angst speaks volumes to me. When you get another job and solidify your cash flow for the long term, the beach will still be there. Just my 2 cents.

lucy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #21 on: February 03, 2013, 07:47:49 PM »
I agree the beach will still be there, but the cash may not be..I have not used it to invest in anything, and I am really afraid to, I always believed that real estate was a great investment. Just ask the Donald!  The cash has been sitting in my bank account not doing anything..why is it not a great investment? Don't you think that at the very least we could keep it a year and re-sell it? Or one of them?
Or we could rent the place we are in right now and move to the beach now.
I am afraid of the stock market, I think that is a much higher risk isn't it?  I am looking at this as I will be making over 1000 a month on this money..while in the bank it has only made 200buc's for the whole year! 
Maybe I am missing something, I have spoken to my Brother in Law who own 3 huge beach houses on Cape Hatteras, and another on Bethany Beach, and he loved the idea. 
Well I am going to go for it, we probably will be out bid anyway. lol  Yes I am nervous, but I always get nervous spending money, even buying a washing machine makes me a little nervous. lol

Ok, well I will sleep on it, and think some more..it just seems so rational to me, and I have always been very good with my budget.
thank you

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #22 on: February 03, 2013, 08:57:54 PM »
The Donald files BK with astonishing regularity.  I would rather take financial advice from successful investors.

Are you really interested in learning to live so that you can be more financially secure?  Sell the Hummer, cut out unnecessary expenditures, and continue to save.  You want it all now, and that's not consistent with the philosophy of most people here.

arebelspy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #23 on: February 03, 2013, 09:37:14 PM »
why is it not a great investment?

Well my Mustachian side aside (I.e. you shouldn't buy it because of your current personal situation), I've also already addressed this as a real estate investor.

The numbers are mediocre, at best, and it's just not that good of an investment even if you had a job and 500k in the bank.

If you're buying it as a personal residence, do that.  Buy that place, sell your current place, bring the amount of cash to the table necessary due to being underwater, and move.

But don't trick yourself into thinking this is an amazing investment opportunity.  It's not.
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Jack

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #24 on: February 03, 2013, 10:19:12 PM »
I may not be as badass as some of the other folks here, but my opinion is that the beach townhouse is a reasonable primary residence for you, based in its price relative to your husband's salary, proximity to his job, and the fact that that's where you want to live.

However, I think that if you want the townhouse badly enough, you should be willing to drastically cut expenses elsewhere to compensate. First of all, both of those ridiculous cars have got to go. Your husband would have absolutely no excuse not to ride a bike to work, so all you need is maybe one used economy hatchback -- but zero cars would be better. Cellphones and cable TV have got to go, too (you don't need TV to relax; That's what the beach is for!). Quit using so much air conditioning; you electric bill is absurd. You forgot to mention your other expenses, such as groceries and eating out, but it's safe to assume that you need to cut back drastically there as well. Finally, [short] sell the condo ASAP.

I think either buying this townhouse and renting it out, or keeping the condo and renting it out, are terrible ideas -- if you want an investment property, you need to choose it because it makes sense mathematically as an investment, not because you'd like to live there yourself. Messing with the 401k is also stupid. But the most stupid idea is buying the property with the intent of selling it for a profit in a year: the transaction costs (realtor fees, etc.) blow that plan right out of the water, and that's before you even talk about carrying costs or opportunity costs.

Besides, if you're to risk-averse even to invest in the stock market, going into real estate like that is crazy!

Buy the beach house, sell the condo, cut your expenses to the bone and shovel your money into some combination of stocks and inflation-protected bonds as fast as you possibly can (since at 57, you're way behind on your retirement fund!).

lucy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #25 on: February 03, 2013, 11:13:41 PM »
How can we get out of this Condo if we are underwater? Doesn't that ruin my credit? 
As far as investment, every single townhouse that we looked at the beach has been bought by an investor with cash according to our Realtor..so if this is such a bad investment, then why are they all buying with cash?
We are not looking to become landlords, its just a way to buy this place and buy time until our present Condo is sell-able again.
Sure, I could take a lot of my cash and but in lower rent areas and become a low rent investor in a low rent district, but I have no desire to become a permenant landlord.
Why would we sell the Hummer? We use it to go fishing, and have had many enjoying vacations, I am not a get it NOW type of person, I have worked my ass off for the past 15 years with the same company, and my Husband was at a job making 150k a year, but they let him go, company downsized..we worked very hard for what we have!  The Cars, BOTH of them are paid for..we take it on the beach and happen to enjoy that, besides we also have a Harley which is also paid for. We will have bikes at the beach, cannot wait! The 350Z I bought 10 years ago, that is also paid for. I happen to think that I have managed my money very wisely ..just not in the investment side .
I have a different view I guess, I feel that I could be dead in 5 years, so why am I going to strap myself and not enjoy my life, and leave it behind, ya can't take it with you, :-) My Husband has the same philosophy..we want to be comfortable, not looking for a get rich or become a Millionaire scheme. Its as simple as that, as long as we have a nice roof over our heads, and money in the bank, food on the table, and no debt, we are fine. If we win the lottery that would be great, but we don't gamble, and we dont blow our money on drugs or booze.
I appreciate all your advice, and believe me, if I didn't I would not post here. I needed to hear what you all thought. I also have no intention of selling  the beach home in a year, I was saying that IF we needed to then we can always do that.
In the future my husband will recieve his inheritance also,  his Loving wonderful Father is 83, and has already shared his plans with my husband concerning his will.  That said, and NO I am not counting on that, just making a fact. I hope he lives forever, but he wont.
Im still thinking, I could not sleep because I am very excited..and I cannot wait to have my beach home that I have worked and waited for for the past 10 years.

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #26 on: February 04, 2013, 04:30:17 AM »
As I said, if you do this, it will be interesting to hear the update in a year....

Jack

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #27 on: February 04, 2013, 06:21:40 AM »
How can we get out of this Condo if we are underwater? Doesn't that ruin my credit? 

Probably, but you don't need credit anymore if you're buying the townhouse with cash, staying there forever, and not buying anything else on credit (and at 57, you shouldn't be buying anything else on credit anyway!).

As far as investment, every single townhouse that we looked at the beach has been bought by an investor with cash according to our Realtor..so if this is such a bad investment, then why are they all buying with cash?

Because they're speculators who can afford to lose. You can't.

(Either that, or they're idiots and you shouldn't be comparing yourself to them anyway!)

Why would we sell the Hummer? [Complainypants excuses deleted]

You should sell both gas-guzzlers (and the motorcycle) for two reasons:

First, because your husband currently uses one one of them for his 30-minutes-each-way commute. See this for an explanation of how stupid that is.

Second, because you're less than 10 years from retirement (and based on the health and unemployment issues you mentioned, you may already be retired) and your $154000 in savings (what would be left after buying the townhouse) is only enough to generate $6,160/year in income. Are you going to be able to live on Social Security + $6,160/year?

lucy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #28 on: February 04, 2013, 06:37:00 AM »

[/qu


Second, because you're less than 10 years from retirement (and based on the health and unemployment issues you mentioned, you may already be retired) and your $154000 in savings (what would be left after buying the townhouse) is only enough to generate $6,160/year in income. Are you going to be able to live on Social Security + $6,160/year?
[/quote]

actually why not? If everything is paid for, besides, my husband is still working, and will be working for a while, he is only 51.
You are forgetting about his inheritance .
Get rid of our pleasure, Bike, cars? I am not going to live like that! We have not worked all these years to not be able to enjoy our live while we still can. What good is a lot of money if you are to to enjoy it by the time that you finally have it? That is what my Father did, he saved his whoile life and died in his sleep at 83...and for what?  He was so tight and cheap, held onto that money  so tightly, he would not buy cable, or a computer, drove an old car,  he was old school. Where did it get him? He left it all behind...I begged him to use it for himself before he died..to enjoy life, in fact I had no idea what he had in the bank, but I knew that at the very least he could have afforded cable, and long distance on his phone.
I appreciate your advice, but I have to disagree..we may live to regret it, but times have changed, money does not grow the way it used to, and to tell you the truth, if Obama stays in office our money wont be worth squat anyways. At least I will have my home paid for, and he won't be able to take that from us too.

Some of your points are good, but I don't agree with all of them...You have no idea , you do not live in Fl, and you dont live at the beach..I am not going to go live in a trailor, ride a bicycle, and  live like I have nothing. That is not what we have worked so hard for, the reason my back is so bad is because I have worked my ass off. Nope..thank you, but NO thanks!

tmac

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #29 on: February 04, 2013, 06:59:10 AM »
I think you might be on the wrong forum.

Jack

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #30 on: February 04, 2013, 07:25:16 AM »
actually why not [live on Social Security + $6,160/year]? If everything is paid for, besides, my husband is still working, and will be working for a while, he is only 51.
You are forgetting about his inheritance .

No, I'm not forgetting about his inheritance. Earlier, you said "NO I am not counting on that" -- so I didn't either. And you're correct not to count on it; after all, what if your father-in-law suffers a slow [expensive] decline instead of dying abruptly?

Get rid of our pleasure, Bike, cars? I am not going to live like that! We have not worked all these years to not be able to enjoy our live while we still can.

Suit yourself, but understand that buying those expensive toys is why you've had to work all those years in the first place!

What good is a lot of money if you are to to enjoy it by the time that you finally have it? That is what my Father did, he saved his whoile life and died in his sleep at 83...and for what?  He was so tight and cheap, held onto that money so tightly, he would not buy cable, or a computer, drove an old car,  he was old school. Where did it get him? He left it all behind...I begged him to use it for himself before he died..to enjoy life, in fact I had no idea what he had in the bank, but I knew that at the very least he could have afforded cable, and long distance on his phone.

If he left all that money behind, you must have inherited it. What did you do with it? Is that where your $255k in cash came from (meaning you didn't actually save anything yourself)? Or did you squander it somewhere, or what?

Some of your points are good, but I don't agree with all of them...You have no idea , you do not live in Fl, and you dont live at the beach..I am not going to go live in a trailor, ride a bicycle, and  live like I have nothing. That is not what we have worked so hard for, the reason my back is so bad is because I have worked my ass off. Nope..thank you, but NO thanks!

You don't live at the beach either -- not yet, anyway -- and even if you do move there you won't be able to afford to stay for long if you don't get your finances in order!

But you're right, I don't understand why you need a 300 HP sports car to commute to work or a 7,000 lb SUV to haul a 1 lb fishing rod! What I do understand is that you could have the same amount of fun for less money if you, for example, ditched the Hummer and swapped the Z for a Miata, which gets at least somewhat better fuel economy, can hold your fishing rods with the top down, and might fit enough luggage for trips. (A sporty hatchback like a Civic Si would be even smarter, although perhaps not quite as fun.)

Based on what you've told us, you can have the Harley and Hummer and 350Z and live in a trailer and eat cat food when your money runs out, or you can have a townhouse near the beach and live frugally. Not both. And that's not my opinion, that's cold, hard math.

I appreciate your advice, but I have to disagree..we may live to regret it, but times have changed, money does not grow the way it used to, and to tell you the truth, if Obama stays in office our money wont be worth squat anyways. At least I will have my home paid for, and he won't be able to take that from us too.

You do realize this is Mr. Money Mustache, not Occupy Wall Street, right? I'm going to second tamara's sentiment: if all you're here for is to whine, complain and get validation for your shortsighted and consumerist choices, you don't belong here.

SunshineGirl

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #31 on: February 04, 2013, 09:08:06 AM »
For me, Lucy, if you were willing to sell your current place, even if it cost you more money to do so, and then you paid cash for the townhouse that you moved into - that would be one thing.

Beach property does not always go up. You said yourself that the unit you want to buy sold for much more six years ago -- so the property you now covet HAS gone down in value. But, you are looking at it as a place to live forever, right? So if you buy it, you should NOT look at it as something you could sell for a profit down the road.

The property you already own may not ever go up. It may go down much further. You just don't know, and that's what's bugging me the most about your posts. You say you're risk averse, yet you're about to take a HUGE risk if you buy this property without getting rid of the old one. Your husband lost a well-paying job. You lost a well-paying job and you might not work again. His new job pays less than half of what his old one did. These are all facts that should cause you to be very, very careful with your money and your decisions. It seems as if you've done pretty well staying out of debt, but you've not managed to save much at all. You were fortunate with an inheritance - it came through no diligence and self-discipline on your part.

I just don't get the sense that you're thinking in a way that will enable you to live the life you really seem to want to live. It's very hard for some to take a loss on a property - but people also don't look at property that is financed in a way that is at all logical. For instance, people say they buy a place for $100,000 and they are happy to sell it for $125,000 several years later, but they didn't MAKE anything on that property, because everyone conveniently neglects to factor in the interest they've paid over the years. In two years, you may be able to sell your condo for $10K more than you can sell it for now, but you are also in the meantime paying that in interest - so you're playing a psychological game with yourself. Stay there or not - but don't hang on thinking it will come up in value.

And, if you intend to pay cash for your next place, who cares about your credit? Not to mention, it's hardly a unique situation these days.


lucy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #32 on: February 04, 2013, 11:35:08 AM »
Sunshine...Thank you, for at least understanding..let me add, I am newly married , only 2 years now. My Husband had that other well paying job before we met. What I have acquired, I have done that on my own. I raised 2 kids, after being divorced when they were 12 and 16...both went on to graduate college. I bought this present condo after my divorce, I received no child support, and paid my bills without any help from him, OR govt assistance..that includes food stamps, medicare etc. I paid for my own insurance, and never had any assistance of any kind. EVER, so that is why is said that i have done pretty well so far, and that is the reason my Father trusted me in his will. Mind you, he did not do that for any other of the kids. So yes, I CAN say that I have done pretty well, making my own decisions, as well as raising both children who both graduated with high honors. Proud, you bet I am! I didn't have a Husband making any decisions, even when I WAS married to him, he always screwed up, and was a total financial drain, so I left, and I gave him everything, house , furniture etc.
I started over clean and fresh at 42, and went back to college for some courses. 2 years of college in fact.
For the others to say that I am spoiled and want what I want now, is very offensive, because I know how hard I have worked, and btw, my Father never helped me along the way either. I never asked, I am too proud for that. Lost my Mom at 16 so she was not there either..in case they are thinking I had help from her.

We made the offer, now my goal is to take your advice and get out of this one. I am thinking that you may be right, to let it go, and it may cost me some more money, but in the end it will be freedom for me, and my husband.

They may not accept the offer, we will know in 2 days, and it is contingent on a couple of things, making sure the inspection passes, and that there are no back association dues. The reason I know it is appreciating already is because we looked for 2 years, and they are selling fast, like in 2 days the offers are made. The prices are higher than they were. You cannot say that it has depreciated because of the area, but it is only because of the housing bubble, and FL was hit VERY hard.So , I know that it will go up, but if it doesn't I don't care right now,, I am not interested in selling it.
We need to igure out how to switch the homestead to the beach home, and what to do to get ready to unload or to rent the present condo out. Not sure if its worth trying to rent it out. I have no desire to become a landlord.
Thanks again..and any input is still welcome :-)

lucy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #33 on: February 04, 2013, 05:49:27 PM »
After some careful researching today I can sort of understand some concern here.For one, the condo we are presently in has steadily declined for the past 2 years, my fear is that it won't be worth trying to get into another place until we figure out a way out of this one. I looked  at the latest sales in my area and it is astounding how things have changed in the past few years.
I have looked into a few options, but I have not found one that is a win win, even if we do not purchase another place at the present time.   We still will be here, and still have the dilemma of continuously paying for something in a declining market.
So what do we do with this one?
Harp is not a possibility, we have money in the bank
refi- they will ask me to pay down points, and it is already underwater
Short Sale isn't an option because again, money in the bank
Foreclosure isn't going to work for the same reasons.

If we become a landlord the only thing that makes sense is to rent this one out, that seems to be the only option if we want to move. The question is, will that be worth it for us, it can be good and bad.
We have thought about paying off this Condo, but I think that is a really stupid idea, what if we cannot sell it in the long run, I'd hate to loose out on 81000.

I guess we will be here and hope the Market takes another turn for the good. I don't know.
Still looking for a solution. :-/ 

arebelspy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #34 on: February 04, 2013, 06:25:43 PM »
I don't think you actually understand the various mortgage related processes.  You need to talk to your lender, as well as some mortgage brokers.

Essentially all of this was wrong:
Quote
Harp is not a possibility, we have money in the bank
refi- they will ask me to pay down points, and it is already underwater
Short Sale isn't an option because again, money in the bank
Foreclosure isn't going to work for the same reasons.

Please, go get some professional help/opinions on your situation.  :)
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Done by Forty

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #35 on: February 04, 2013, 07:42:08 PM »
I guess we will be here and hope the Market takes another turn for the good. I don't know.
Still looking for a solution. :-/

I don't think the solution is in either property.  As you probably know from reading the blog, the real solution is in the money you take in, and the money that goes out. 

lucy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #36 on: February 05, 2013, 05:20:27 AM »
Thought of something last night.;

put down 100k on the beach home,take out a mortgage the remaining 30k  at lower interest
use 30K from savings and talk to bank of existing condo holder, and pay difference , underwater prob 30k, and give it back to bank.

using my logic 
condo  mortg  613.00
condo Dues     300.00
                       ----------
                         913.00 mth  X  3 years = 32,860.00
gas   to work   300.00         x  3 years      10,800.00 
                                                                  ---------------
                                                                   43,660.00 

Condo balance is 81000.
value                   45-50K
                            ----------
negative equity    -30-35k

I think we are in a loosing battle staying here, and paying for a condo that has lost all of its equity over the past 3 years , and probably will never recover.
I don't think that using this as a rental will ever work, it was built in 1969, and it will always need to repair something. Plumbing, electrical, etc. Not to mention landlord ins etc.

Only other option is to stay here, and keep throwing money down the drain.


We googled the surrounding area and found that there are many other Condo's in this community that were hit very hard, they are all underwater, some worse than us. It is  hard to believe that 6 years ago we had close to 40K in equity.
I also checked to see the going rent.It has declined also, they used to rent for 1000-1200 , now they are renting the same unit that we own for 750-850 per month.

It does not make sense to stay here.
i need a way out, does anyone know what to do , or how?

My name is the only name on this condo..I bought it 15 years ago. So I am not sure how this effects my husband credit wise, but if we paid to breakeven, can't we hand the keys over and walk away? Everything else is in  joint acct.
« Last Edit: February 05, 2013, 05:31:05 AM by lucy »

arebelspy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #37 on: February 05, 2013, 06:44:46 AM »
You can sell it, a regular sale, and bring cash to the table to close.  You don't have to pay it down to breakeven first.

Example: You owe 81.  Get accepted offer for 50.  Buyer pays 50 at closing, you pay 31.  Bank gets full 81k owed, your credit isn't hurt at all (because it wasn't a short sale, foreclosure, etc.).  You paid what you said you would.

I'm planning on doing something similar with a condo I own that I'm underwater on by about the same amount (will have to come out of pocket about 30k at closing).

Or you can walk away as is, or you can do a short sale, or you can stop paying and have it foreclose.  All are options.

But you don't just pay it down to what's owed and then give it back, that will hurt credit.  Go through a traditional sale and bring cash to closing is the proper way to do it.
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lucy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #38 on: February 05, 2013, 06:59:20 AM »
I have checked the area, and they are selling, but it seems to take a long time. I do not want to sink another dime into a black hole.

I thought about your idea, but what if it takes a year? I have even considered calling those "WE BUY HOUSES"  but I am not sure how it works, do they buy, and you pay the difference?

No matter what, it makes sense to let it go..If we walk away, they would come after me for the money right? 
Let me ask you this...only my name is on the Condo, I purchased it 15 years ago, as a single woman. I am now married, and our bank accounts are joint, . Is my husband still liable? Can they consider a joint acct when or if they tried to sue?
The other problem is, the dues are 300 a month, if we walked away, they would also sue us..correct?

Don't you think its useless to stay here, even if we don't purchase  again? 
But if we did,  our payment would be drastically reduced even if we borrowed against the beach place to pay difference on the negative condo.

OK...so where do I start?
I just spoke to my lender GMAC who told me they are no longer serving my loan, and they went into Bankruptcy.
I would like to know the fastest way out to avoid the build up of dues.
Do we continue to make payments?


HEY..WOULD ANYONE LIKE TO BUY MY CONDO FOR 50,000.???
ITS ONLY 25 MINUTES FROM BEAUTIFUL BEACH, AND 10 MIN FROM DOWNTOWN. :-)
« Last Edit: February 05, 2013, 07:04:14 AM by lucy »

trammatic

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #39 on: February 05, 2013, 07:18:14 AM »
Go talk to a number of realtors and tell them you want to have a contract on your condo in 30 days...in an extreme case, if you were to list your condo at 20k now, it would sell tomorrow.  If you want to be gone soon, then find the price that will make people pick it up.  They only take a long time now because the prices are higher than the market thinks they're worth.

DoubleDown

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #40 on: February 05, 2013, 08:48:44 AM »
Wouldn't selling the Hummer bring you about $30k to pay off the difference between what is owed and the sale price for the condo? Seriously, do that.

SunshineGirl

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #41 on: February 05, 2013, 09:52:26 AM »
Excellent idea, DoubleDown!

lucy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #42 on: February 05, 2013, 10:03:12 AM »
No, have you seen the price Hummers are going for now? We bought this one with 33 thousand miles on it, out the door for 23,000. 
3 years ago

lucy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #43 on: February 05, 2013, 10:06:45 AM »
If we walk away, (not really what we want to do) but if we did..would we be sued if we gave them the keys and left? Especially if we had the 30k to cover the difference? I have read that banks are so bogged down they don't bother to sue you.

I guess we should look for an attorney, and what kind? real estate, or foreclosure att?

Staying here is a no win situation..

arebelspy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #44 on: February 05, 2013, 12:19:05 PM »
Please, go get some professional help/opinions on your situation.
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needmyfi

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #45 on: February 05, 2013, 04:58:52 PM »
I just read this whole thread and all the comments.  I'm curious to see if you have indeed bought the condo.

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #46 on: February 05, 2013, 05:08:00 PM »
I just read this whole thread and all the comments.  I'm curious to see if you have indeed bought the condo.

As I understand it, she proceeded with putting in an offer on it yesterday.  She may not know for a few days if her offer was accepted, they counter, or went with another offer.
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lucy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #47 on: February 05, 2013, 05:57:09 PM »
We got a call today , they said they have multiple offers.

Now can we go back and offer less? Our Realtor said that may mean they are less, we wont know.
Not sure what we want to do now. We Have our own  Condo hanging around our neck now. We are not going higher, in fact I wonder if we can offer less. 

Anyone want a great deal on a Condo in Fl? lol    TALK TO ME! :-)
« Last Edit: February 05, 2013, 05:59:50 PM by lucy »

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #48 on: February 05, 2013, 07:30:07 PM »
Anyone want a great deal on a Condo in Fl? lol    TALK TO ME! :-)

Sure.  What're the rent comps?

I'll pay any price, as long as I can set the terms.
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lucy

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Re: HELP..Lucy needs advice on a property investment to rent out
« Reply #49 on: February 05, 2013, 09:18:51 PM »
Rentals in the area are going pretty low right now between  800-900 for a 2bedroom 2 bath

what are the terms?