anyone get burned in the recession - how do you plan to recover?

[Jbellefeuille]

I bought my first RE investment in 4th Q 2007 for 1 SFR for $168k original mortgage PITI $1450

3 bdrm 1 bath, I rent out 2 bedrooms for $400 & $500 each to college students

SF Homes are now selling in short sales around me for $60-$130k, two duplex 2 doors down sold for around $230k each within 2 months of being on the market, 4 plex next door is going for $280k and has been on the market for 3+ years with little change in price.

I am in the affordability and stability plan trail period currently- Modified payment $1050

I was unemployed for 6 months of last year and took a significant pay cut.

Anyone else have similar stories? how are you going to recover? what is your plan?

strategy lock in new rate via loan modification, modify home into a duplex

 

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[EastWind]

Re: anyone get burned in the recession - how do you plan to recov

how are you getting burned? listen, forget how much you paid for it, and how much it's worth. it's about what you are GETTING OUT OF IT. imagine that you bought a house for $500k, and your mortgage is $3,000 a month. Now, imagine that the house is worth only $100k. You are very under right? Now if you are renting it out for $6,000 a month, then what's the problem? You are renting out 2 rooms for $900, your mortgage payment is $1050. Now, IF YOU LIVE in the house, it's no problem. So, you are essentially paying $150 for your own room. Helluva deal so long as you can keep those other rooms rented! It only becomes a problem if you can't rent out the other rooms.

If you don't live in the house, then I do advise you to get rid of your other house assuming you have another and can. ie, No family, single guy and move into the spare room. free up the other expense from the other house and come out ahead.

 

[kwerner]

Re: anyone get burned in the recession - how do you plan to recov

3 bdrm 1 bath, I rent out 2 bedrooms for $400 & $500 each to college students

strategy lock in new rate via loan modification, modify home into a duplex

You're going to modify a 3br 1ba into a duplex??

 

[hakrjak]

Re: anyone get burned in the recession - how do you plan to recov

How did you expect $900 per month in income to cover the mortgage on a $168K investment?.

Hehe - Funny that you use this example. I have a house I leveraged myself into at 100% LTV about 7 yrs ago for $152k, before I knew what the hell I was really doing -- and I collect $995/mo rent on it to this day. How do I cashflow? Well, the note was a 2 yr ARM, and has been floating free every since... Is currently down to close to 3% with a payment around $650. Nuts! A little ballsy, but really have no choice -- If I were to re-fi it now, the cashflow would be negative! And there's no equity in it, so no point in trying to sell it right now...

Cheers,

-Hakrjak

 

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[NoMoneyDown]

Re: anyone get burned in the recession - how do you plan to recov

Hehe - Funny that you use this example. I have a house I leveraged myself into at 100% LTV about 7 yrs ago for $152k, before I knew what the hell I was really doing -- and I collect $995/mo rent on it to this day. How do I cashflow? Well, the note was a 2 yr ARM, and has been floating free every since... Is currently down to close to 3% with a payment around $650. Nuts! A little ballsy, but really have no choice -- If I were to re-fi it now, the cashflow would be negative! And there's no equity in it, so no point in trying to sell it right now...

Cheers,

-Hakrjak

That sounds similar to the very first investment property I bought. A HUD f/c for $101k. I purchased it with 5% down and an 80/15. Refi'd a month later at 80% LTV using an ARM. The rate was around ~5% at the time, and moved up to 7.5%. It then went down and is at 3.25% today with a payment of $500. Tenants just signed a new lease last Sep for $1250/mo. $750/mo CF and taxes+ins are about $3500/yr., making it realistically $458/mo CF. The bummer is I had to pay to fix the HVAC (twice) and install a new W/H last year, which added $800 in expenses. Still, even with that I'm making almost $400/mo CF. And that's not including all the tax write-offs (expenses, depreciation).

 

[hatterasguy]

Re: anyone get burned in the recession - how do you plan to recov

I don't know anyone who got burned to bad this time around. But a lot of the guys I work with lost their shirts in the 80's so they learned.


But it doesn't sound like you got burned, it just sounds like you paid to much and didn't run the numbers.


I don't want to say I got burned because I didn't, I still made decent money. But I was into the lot for my first house by about $30k to much, the RE market in my area kind of crashed pretty good at the end of 08.

 

[rcardin]

Re: anyone get burned in the recession - how do you plan to recov

Not necessarilly burned in the same way.
Property 1 took a 1 month vacancy in August just when we went back to work. 1200 in rehab and 1 month out of pocket payment.

Property 2 is in the process of getting the woman out who hasn't paid rent since Sept. Since it is a contract for deed it takes a little more research and default cure time. Minimum 60 days after first notice to vacate. All in all it will be 4 payments out of pocket before I can even get her out of the property. Add in another 2-3k in rehab, she's been there for 3 1/2 years, and we are probably out 6-8k on that house alone.

During a good economy both would have been rented solid with no problems. Both tenants lost their jobs and could no longer afford to stay in my properties. 1 was skilled labor finish carpenter and the other drove buses for a school district.

So did I get burned in the recession? NO

Did I get burned by the recession? Yes! In the neighborhood of about 7-9k:cuss:

Plan for recovery has changed in the last year. We are selling our rentals and taking the cash we can get, should net about 30k. Next move is to the coast in another 18 months. :banana:

 

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[Runum]

Re: anyone get burned in the recession - how do you plan to recov

Next move is to the coast in another 18 months. :banana:

Moving to PA Rick?

 

[Jbellefeuille]

Re: anyone get burned in the recession - how do you plan to recov

Just to clear it up. The plan was to live in the home and rent it out as I complete school. It hasn't been a bad deal thus far. I am entering my final year of school and the mortgage payment will become permanent in Feb at $1050 per month.

I originally was planning on finishing the basement and adding another room.

As far as the duplex option:

It's something I have been considering as my home is already zoned for a duplex and I have already discussed getting a variance from the city as my lot is about 40 sq. ft too small for a traditional duplex. Not that big of a deal. The city said getting the variance wouldn't be a problem.

Because of the area I am in a one bedroom rents for about $700 per month. I was thinking of finishing the basement and turning it into a mother in law apartment or doing an upper and lower duplex split as I am considering moving out of the property.

I was just curious if anyone else has dealt with remodifications?

 

[hakrjak]

Re: anyone get burned in the recession - how do you plan to recov

That sounds similar to the very first investment property I bought.

Further evidence that we're doing each other's deals in parrallel universes haha

- Hakrjak

 

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[rcardin]

Re: anyone get burned in the recession - how do you plan to recov

Greg,
18 month plan to sell out and move to Corpus summer 2011. All depends on the job market down there. Tired of the city life!

 

[dfphoto]

Re: anyone get burned in the recession - how do you plan to recov

Hi group, I'm in the photography industry, and it's dying quickly. In 2005 after Rich Dad Poor Dad, I bought a condo in Dallas for 43k rented it out for 650 a month with all fees it was costing me about 505.00 a month. 4 years later, after the HOA really f*^^ked up and got us into 650k in debt plus bankruptcy to the HOA and our complex in the hole I have it rented out for 815 the one thing I was not computing was property tax going up each year nor the previous HOA screw up.

Now the condo costs me about 635.00 a month but I put 12k into for tax write offs.

in 07 I bought another condo for 41k rented it out for 650.00 put 2k into it....

So in 2010 I am sort of sick of the long distance thing not too much going on but a bit of a hassle so looking to sell via land contract that seems to be decent way to get out but wondering if anyone has done it...

If my career wouldn't have come to an end maybe I wouldn't be crying but it sure changes things....

 

[EastWind]

Re: anyone get burned in the recession - how do you plan to recov

dfphoto, hang in there. digital camera is sure killing the photography industry. and i think rich dad poor dad screwed a lot of people more than the economy. LOL.

 

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[dfphoto]

Re: anyone get burned in the recession - how do you plan to recov

Hi thanks I did not get burned by RDPD, I made money every month I've owned the two places even with getting *^^^^ed by the HOA we're suing the former board members so... I'm ok. I'm only selling because I'm bored...


DF

btw. I tried to send personal message but it said 5 people needed to follow this thread.... I don't understand it....