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All Things Pondered Here

Pondering Many Things....

Real Estate Investing

How I Failed With My First Rental Property And Turned It Into A Loser…

May 13, 2012 by Dave

You Invest In Real Estate for Profits Not To Lose Money

Rental Property Failure monthly lossEveryone who studies Real Estate and rental property (passive income) knows that you rent property to make money, not to lose it.

You don’t rent property for ‘tax breaks’ either  – that gets you nowhere!  Unless you are profitable on your rental, then it can be a ‘bonus’.

My Story

So here is my story on how I screwed up on my (first ever) rental property and why it happened this way.

First of all, I lived in this property for 11 years.

The mortgage still has a fair amount to go and that is part of the reason that I’m not profitable on this property.

This is a condominium so I also pay a monthly maintenance fee.  This fee has more than doubled since the time I moved in.

This is the danger with condominiums, the monthly maintenance  and ‘other’ fees and assessments tend to increase over time.

I also pay a management company because I moved far enough away that I cannot manage this property myself.  Nor would I want to even if I was nearby, truth be told.

The Management company takes an 8% fee for themselves monthly plus 100% of the first months rent.

At the end of the day, all of  this ads up and points to the reality that I do not make any money on this property at all!

In fact, I estimate that I lose about $200 per month on it.

Yes, I knew this ahead of time.  But I was losing more than that on a monthly basis by leaving it empty.

The point of renting it was to stop the loses from mounting.

I did not consider selling an option because the market is ‘so bad’ at the moment.

I was told that it would be a lot easier to rent than to sell.

I was afraid that it would sit empty for many months before selling and that I would lose even more money for a longer period of time.   In addition, leaving it empty would have mandated a return of at least twice-per-year (see below for explanation).

The advice I got appears to be accurate,  we got a renter almost immediately.

Selling it, I figured, would take about 6 months or more in this market.

So now you know my story on my first rental property.

 

Additional Costs That Hit Me

To get the place ready to rent out, I spent an additional 3,000 dollars.

This three thousand was for new carpet and new vinyl in the bathroom and kitchen, painting of one room and some other work that needed to be done.    (looks good btw – too bad I don’t get to live there now)

2 Weeks after the renter moved in the refrigerator which was about 11 years old went out. Compressor was kaput.

The replacement and installation plus the initial service call was about $740 more dollars.

So, I’m closer to about $4000 invested in just the last two months.

In the end. I’ve spent a lot and all that I managed to do was decrease my monthly expenses.   But with the refrigerator going, that obviously increased my monthly expenses.

This is a losing situation all the way around.

Had I sold the property ‘as is”,  even if it took several months, I might have done better.   I would not have had the 4K investment.  But against that would be the monthly losses of letting it sit empty until it sold.

 

Additional Info On This Losing Investment

I had to move away.  I have left this place empty for 3 to 6 month stretches of time over the last 2 years anyway.

Insurance required that I be there physically at least once every 6 months.

Because I was traveling a long distance, the cost of air travel has also been very high.

I thought that renting would help in 2 ways.

1. I would not have the requirement to come back every six months

2. I would earn a little on the property while I am away.

However, no matter how you cut it, I am still losing money.

 

The Questions Are:

 

For Rent - Or For Sale

1. Should I cut my losses and try to sell it before the lease comes due again, effectively  taking advantage of that time.   Or, should I hold on to it and continue to allow it to lose money for me?

2  I am now living outside the area where my condo is  and  have now lost my right to vote in the local area.  Since I don’t live at that address anymore, the state / township wants a physical address for me in exchange for the right to vote.

They will not accept the UPS box in the area where all of my mail is being forwarded too.  What can I do to be able to vote?   I don’t care about the local elections too much, but I do care about State Senator / Reps and of course, the presidential election.

Your Thoughts

This is where I am at now (at the time of this writing) and would like to hear your thoughts, comments, ideas or questions on this matter – comment below.

 

About The Author

 

Possibly interesting posts:

Mortgages and Human Nature

Strategic Mortgage Defaults

The Story Of Johnny The Farmer and The Banker

Make Money with Ecommerce – Maybe…

Filed Under: Real Estate, Real Estate Investing Tagged With: house for rent, rental home, rental property

Foreclosure Options: Short Sale, Mortgage Modification, or Just Walk Away

July 22, 2008 by dsmith

The adjustable rate mortgage sure sounded good a few years back; you got 100% financing at a very low interest rate; fixed for 3 years before it resets or adjusts according to the market.You probably had a plan to sell the home soon or refinance before the rates went up.You didn’t count on the values declining to the point where you owe more than the home is worth, making refinancing difficult to impossible.Your rate continues to adjust, the payment increases significantly, you cannot afford the payments and you are in danger of losing your home.

Following are stages of foreclosure and your options:

Miss one payment: Payments that are 30 days late are reported to credit bureaus to be reflected on your credit report and factored into your credit score.

Miss three payments:Typically, lenders file a notice of default at this time; some are very aggressive and some wait up to a year to file.Some hold off if you have contacted them and made satisfactory payment arrangements.Of course, more late payments are reflected on your credit report.

The notice of default is public record; soon you are receiving mail and phone calls from companies promising to save your home or reduce your payments.You are also an easy target for scam artists who promise to take over your mortgage while you pay them rent; they collect your rent, they don’t pay the mortgage and the foreclosure process continues as your credit suffers more damage.

90 days after the notice of default:Lenders typically give borrowers 90 days from the notice of default to make up their payments, late fees, legal fees and any other charges that have accrued.If the arrearage is not paid up, a notice of sale is sent out and the foreclosure sale takes place within the next 30 to 60 days.At this point, your credit report is quite bruised and your lender may or may not be willing to work with you.

Options:It is important to contact your lender and speak to someone in the loss mitigation department as soon as possible; the earlier in the process you are the more options you will have.Resolving issues early will help avoid serious damage to your credit report.You will be more likely to work something out with the lender before the foreclosure sale, also known as sheriff’s sale.

Look into Refinance Options:If you have equity in your home and your lender hasn’t yet filed a notice of default, you may be able to refinance with a more affordable mortgage.An experienced mortgage broker will be able to help you determine your best option.Do not get into another adjustable rate mortgage or interest only mortgage, leaving you vulnerable to repeating the process.

Workout or Modification:If you enter into a workout agreement with your lender it is important to be focused on a plan that works with your budget.You must be able to make the payments as agreed; if you fail to make the payments, the lender will accelerate the foreclosure process.

Short Sale:If you owe more than your home is worth, it is sometimes in the lender’s best interest to accept a short payoff on the mortgage balance.This saves having a non-performing property on the books that continues to lose value in today’s declining market.A short sale will have less damaging effect on your credit report as you are doing something to meet your obligation to the lender.

Deed in Lieu of Foreclosure:You can offer to sign your home over to your lender in exchange for being released from the mortgage obligation.This keeps you from having to pay off the mortgage and the lender avoids further legal costs to complete a foreclosure.The lender does not have to accept a deed in lieu of foreclosure; typically, he will require that you try to sell the home first.

Credit Counseling Services:Legitimate credit counseling services typically have housing counselors who can analyze your situation and help you evaluate your options.

Let Foreclosure Run its Course:You should save this for your last option after all other methods to avoid foreclosure have been exhausted.In some states and some cases, the lender can go after you for any deficit between what the house eventually sells for and what he is owed.

Foreclosure, though devastating and overwhelming, is not the end of the world.You can get through this difficult time, reorganize and rebuild your life and your credit score.You will be able to get another mortgage and with knowledge and experience gained from this situation, you will be less likely to go through this a second time.

This article was written by David Smith of U-Move-On, a company who helps people find the best solution to their foreclosure problem. U-Move-On assists in evaluating the individual situation and explains all one’s options.They provide the resources and services for help with the entire foreclosure process, credit restoration, finding another nice home, moving expenses, legal help and more.There is no complicated contract to sign and you do not quit claim interest in your home.

 

Contact:

David Smith, Founder

400 Ann Arbor Rd #185

Plymouth, MI48170

734-756-6050

Email:umoinfo@umoveon.com

Website:https://www.umoveon.com

Filed Under: Financial Freedom, Real Estate, Real Estate Investing Tagged With: Bankruptcy, Consumer finance, Customer Service, Foreclosure, Mortgages, Real Estate, Real estate foreclosures, Short sale

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