How to Pay Off Mortgage That is Underwater (property tax, fees, financial)
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Purchased a home in FL in 2004 and am underwater. ...
home will appraise probably 40k under what we owe ...
There has been no mention in any post of the selling expenses.
I have a similar situation where my home, originally purchased for $515k is
worth $400k and underwater by $25k. However, at that price level, it would
cost about $30k or so to sell it - ( assuming it's still perfect - not likely ).
Therefore, if we wanted to sell, we would have to
bring $55-60k to a close and not just the $25k.
For a $200k house, $25k under, one would have selling
costs of, maybe, $16k or so and need $40k at close.
For your $40k under situation, I wonder if the closing costs
have been factored-in for a total cash-to-bring-at-close?
Quote:
Originally Posted by akrobat
I know I have at least two options:
(1) stay in the house
(2) rent the home out ...
Sorry, but for option (2) you misspelled go into a new business -
- the landlord business. --> financial ruin by a thousand cuts.
If you really have to/need to move, pick option (3) move and sell the house, just take
the money out of the retirement accounts and pay the taxes and get on with your life.
If you are really stressed about depleting your retirement accounts, after you move,
get a part-time job on Saturdays or something and gradually build it back up later.
Yes at the moment 401k is excluded. People scramble to hide their money rather than pay their debts.
But so you get my point => Florida is a deficiency state. If you won't touch your bank account they will do it for you.
Not necessarily. Just because Florida (or any other state) is deficiency state doesn't mean they'll always go after you, but they could. OP, the best thing you can do is meet a specialist on ways to avoid foreclosure. It could be a Realtor, and attorney, whoever, but get face to face with a local and go through it.
Just stay in the home. You don't have to move and the market will turn. Then you'll be kicking yourself for selling so low.
And being a landlord isn't a "hassle". There are so many people that are scared of it, but reality is it's not that difficult and a lot of people make a TON of money doing it. If you don't want the "hassle", hire a property manager.
Taking out another loan to pay off this one would probably put you in a spiral that you can't get out of. Too many people tried to leverage themselves into houses they shouldn't be in, and that's what put us in this mess in the first place.
For your $40k under situation, I wonder if the closing costs
have been factored-in for a total cash-to-bring-at-close?
They were factored in in my mind but I didn't include that in my original post. Whoever buys the house will likely be FHA so I would have to pay their closing costs on top of all other standard fees and taxes. So I know it is more than just what I would lose on the low appraisal.
Quote:
Sorry, but for option (2) you misspelled go into a new business -
- the landlord business. --> financial ruin by a thousand cuts.
I waiver between the landlord business being ok (and just ok, it isn't ideal by any stretch) or being a horrible idea. Are you basing your advice on prior experience? So many people rent that I keep thinking it can't be that bad but what do I know? I do know my house will never look the same (and it is in very good shape right now, we maintain it very well and it is only 5 years old). If I rent, I'm prepared to accept that. I would love to hear personal experiences from anyone on the board.
Quote:
If you really have to/need to move, pick option (3) move and sell the house, just take the money out of the retirement accounts and pay the taxes and get on with your life.
If you are really stressed about depleting your retirement accounts, after you move, get a part-time job on Saturdays or something and gradually build it back up later.
I have not completely eliminated this as a possibility although the p/t job would be almost impossible as my job requires a lot of extra hours at night and during weekends. However, I could just budget really well and try to throw extra money into some other retirement avenues (already max out the 401k) in the future.
I waiver between the landlord business being ok ... or being a
horrible idea. Are you basing your advice on prior experience?
So many people rent that I keep thinking it can't be that bad
but what do I know?
Clearly nothing. You just said so. Don't feel bad.
Neither do I. Most people don't.
Quote:
Originally Posted by kevcrawford
And being a landlord isn't a "hassle". There are so many people that are scared
of it, but reality is it's not that difficult and a lot of people make a TON of
money doing it. If you don't want the "hassle", hire a property manager.
Hire a manager - increase your costs - lose money faster.
You must be a property manager.
The time to enter the landlord business is after you have given it a lot
of thought, on a small scale and with money that you can afford to lose.
I know lots of people who have made money as a landlord. It's because
they bought their rental property at the right price to make a profit on
it, not because they were desperately trying to avoid a loss that they
have already experienced and are currently in denial about.
I personally don't know how to be a landlord either. I personally do know
that the key to making money investing is to cut your losses, not by making
money on everything I touch. The money in your house is already gone.
Quote:
Originally Posted by kevcrawford
Just stay in the home.
You don't have to move and the market will turn.
akrobat has already stated that they want to move - soon.
Quote:
Originally Posted by kevcrawford
Then you'll be kicking yourself for selling so low.
What if the "turn" doesn't come for five or ten more years?
You don't know when it will come. If you say you do, you're delusional.
When the market first starts "turning" you know that millions of those who are
currently in denial about their loss and renting out their property will be dumping
homes by the millions. The "turn" will be in the wrong direction at that point.
If you are expecting the "turn" to come right away and be strong then you can
go ahead and invest in the stock of a homebuilder or an REIT. Both of those
investments will take off a lot faster than the price of your home.
Purchased a home in FL in 2004 and am underwater. Due to the rash of short sales and foreclosures in the neighborhood, we're being told that the home will appraise probably 40k under what we owe (and about 120k under what we originally paid). We have cash that we can bring to close but not that much without touching our retirement accounts.
I will not consider foreclosure (we wouldn't qualify for a short sale because there is no hardship move) because I do not want to ruin my credit which is in tip top shape. I know I have at least two options:
(1) stay in the house
(2) rent the home out
Neither option is appealing. I'd like to move as the neighborhood is starting to turn worse due to the economic situation and I don't want the hassle of being a landlord. However, I will obviously consider these options if I have no choice.
I also read somewhere that folks have taken out personal loans to be able to close. That is something I'd be interested in because I could just get rid of the house and pay off the loan instead of paying off the house. I know my interest rate on the loan would be higher but I just want this house gone.
However, an idea just came to me and I want to know if it is absolutely stupid or something I should consider: would it be absolutely crazy to purchase a new home and take out a HELOC to pay off the first home? I can afford to purchase a new home without needing to sell my current home and would be putting 20% down so I would have equity in the home.
Now, I have no idea if I would qualify for the HELOC but that issue aside, I'm just wondering if this is even something worth entertaining. I never took out equity from my home (thank god) and am not excited about the idea of doing it here but the new home I buy would be a "forever home."
Thoughts?
You might check into some new modifications that were announced March 26th to help underwater homes owners that are current.
Obama's administration's new push also seeks to more aggressively help borrowers who owe more on their mortgages than their properties are worth, offering financial incentives for the first time to lenders to cut the loan balances of such distressed homeowners. Those who are still current on their mortgages could get the chance to refinance on better terms into loans backed by the Federal Housing Administration.
You might check into some new modifications that were announced March 26th to help underwater homes owners that are current.
Obama's administration's new push also seeks to more aggressively help borrowers who owe more on their mortgages than their properties are worth, offering financial incentives for the first time to lenders to cut the loan balances of such distressed homeowners. Those who are still current on their mortgages could get the chance to refinance on better terms into loans backed by the Federal Housing Administration.
Refinancing might lower monthly payments by lowering the interest rate but you still owe the same amount on the principal so it doesn't do anything for someone trying to sell an underwater property.
Obama's new plan won't help either even if the OP qualifies, which is unlikely, since it will lower the principal only if it's more than 15% more than the current value and then will lower the principal over the course of three years. Again, anyone who needs to sell now is out of luck.
Clearly nothing. You just said so. Don't feel bad.
Neither do I. Most people don't.
Hire a manager - increase your costs - lose money faster.
You must be a property manager.
The time to enter the landlord business is after you have given it a lot
of thought, on a small scale and with money that you can afford to lose.
I know lots of people who have made money as a landlord. It's because
they bought their rental property at the right price to make a profit on
it, not because they were desperately trying to avoid a loss that they
have already experienced and are currently in denial about.
I personally don't know how to be a landlord either. I personally do know
that the key to making money investing is to cut your losses, not by making
money on everything I touch. The money in your house is already gone.
akrobat has already stated that they want to move - soon.
What if the "turn" doesn't come for five or ten more years?
You don't know when it will come. If you say you do, you're delusional.
When the market first starts "turning" you know that millions of those who are
currently in denial about their loss and renting out their property will be dumping
homes by the millions. The "turn" will be in the wrong direction at that point.
If you are expecting the "turn" to come right away and be strong then you can
go ahead and invest in the stock of a homebuilder or an REIT. Both of those
investments will take off a lot faster than the price of your home.
So, to get this straight, your entire post was saying you don't have any idea about renting, but that I'm wrong? Nope, I'm not a property manager, but I've probably done more real estate deals in the last month than you've EVER done.
I'm not really sure the reason for your post, but it comes across as inane and unintelligent. The OP said they didn't need to sell, but wanted to. Well, we do lots of things we don't want to because they make more sense.
Being a landlord is nothing more than putting a renter into your property, making sure you keep funds set aside and taking care of the home. It's not rocket science, especially if you're just handling one or two.
Stop attacking random posters just for answering a question. Especially when you obviously have NO idea of what you speak. It just comes across as being childish and unintelligent.
So, to get this straight, your entire post was
saying you don't have any idea about renting, ...
No. Clearly there was more content there.
You just failed to see it through your rage.
Quote:
Originally Posted by kevcrawford
... I've probably done more real estate deals in the last month than you've EVER done. ...
How is that relevant to a decision to rent?
Quote:
Originally Posted by kevcrawford
I'm not really sure the reason for your post, ...
Unfortunately, that is obvious. Fortunately, practice makes perfect. Continuing to read and
trying to understand what it is you are reading improves your reading comprehension over time.
Quote:
Originally Posted by kevcrawford
but it comes across as inane and unintelligent.
I'm sure it did to you.
Quote:
Originally Posted by kevcrawford
Being a landlord is nothing more than putting a renter into your property,
making sure you keep funds set aside and taking care of the home.
It's not rocket science, especially if you're just handling one or two.
Yet, you couldn't offer any numbers that might give the OP
some hope of making a rental pay ( make a profit ).
Quote:
Originally Posted by kevcrawford
Stop attacking random posters just for answering a question.
Especially when you obviously have NO idea of what you speak.
Clearly I do. I can do math. Pulling in rental income is not the same as making a
profit on the rental. Making a profit is the aim of going into the landlord business.
Clearly you don't know anything about being a (profitable) landlord or you would
have asked questions such as what is the property worth?
What is the expected rent for said property?
The neighborhood is in decline. Will the gross rental income be over 1%
of the property value? Since, for you, being a landlord is simply about
collecting rent, but were you aware that the OP will still be obligated to
pay insurance, taxes, and interest on the loan? What about maintenance?
It appears that in your world, such things are mere trifles. If you collect
a couple hundred dollars in rent, you view it as good. A done deal.
There was a time when you could rent at a loss, but make up for it with future capital
gains. Betting on a "turn" as you put it previously, is just that - a bet. It's gambling.
The prospective landlord should ask themselves; If I was going to move into another
house, would I up and just buy a property ( exactly like the one they are moving out
of ) and put it up for rent? Would I volunteer myself to spend the time and energy
and stress to enter into this new business that I know nothing about with money
that represents the only money I have outside of my retirement accounts?
If the answer is no then why would you rent out your previous residence?
Quote:
Originally Posted by kevcrawford
It just comes across as being childish and unintelligent.
I'm sure it did to you.
You're just mad that I called you out on piece of bad advice.
Not knowing the details about being a landlord is not the same as
not knowing how to analyze a business deal. That's what this is.
There are now thousands of people renting out $200k(+) properties
for $1,000/month. Just because they are collecting rent doesn't
mean that they are not going ( more ) broke one month at a time.
There is a big difference between revenue/return and profit.
I only invest to make a profit.
No. Clearly there was more content there.
You just failed to see it through your rage.How is that relevant to a decision to rent?
Unfortunately, that is obvious. Fortunately, practice makes perfect. Continuing to read and
trying to understand what it is you are reading improves your reading comprehension over time.
I'm sure it did to you.
Yet, you couldn't offer any numbers that might give the OP
some hope of making a rental pay ( make a profit ).
Clearly I do. I can do math. Pulling in rental income is not the same as making a
profit on the rental. Making a profit is the aim of going into the landlord business.
Clearly you don't know anything about being a (profitable) landlord or you would
have asked questions such as what is the property worth?
What is the expected rent for said property?
The neighborhood is in decline. Will the gross rental income be over 1%
of the property value? Since, for you, being a landlord is simply about
collecting rent, but were you aware that the OP will still be obligated to
pay insurance, taxes, and interest on the loan? What about maintenance?
It appears that in your world, such things are mere trifles. If you collect
a couple hundred dollars in rent, you view it as good. A done deal.
There was a time when you could rent at a loss, but make up for it with future capital
gains. Betting on a "turn" as you put it previously, is just that - a bet. It's gambling.
The prospective landlord should ask themselves; If I was going to move into another
house, would I up and just buy a property ( exactly like the one they are moving out
of ) and put it up for rent? Would I volunteer myself to spend the time and energy
and stress to enter into this new business that I know nothing about with money
that represents the only money I have outside of my retirement accounts?
If the answer is no then why would you rent out your previous residence?
I'm sure it did to you.
You're just mad that I called you out on piece of bad advice.
Not knowing the details about being a landlord is not the same as
not knowing how to analyze a business deal. That's what this is.
There are now thousands of people renting out $200k(+) properties
for $1,000/month. Just because they are collecting rent doesn't
mean that they are not going ( more ) broke one month at a time.
There is a big difference between revenue/return and profit.
I only invest to make a profit.
Wow. What a child you are. The OP asked for basic advice from all folks, and many offered it. They did NOT however offer specific financials, mortgage amounts, current rents, etc., to make it possible to do a very detailed worksheet on profit/loss/etc.
YOU however came in with your all knowing wisdom saying that anyone that recommends they rent is stupid, but you knew nothing of the situation.
You sound like you're nothing more than someone that tried to manage a rental, but couldn't handle it. Just because you spend your time ranting and raving against anyone that believes in the power of passive income, doesn't mean you know what you're talking about.
You may not be able to handle it, but many, many people make a very good living off of owning properties and having others pay for them.
Grow up.
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