Scared as hell about a house...

[The Captain]

So DH and I are looking for a house in an area better suited for DD.

A year ago at this time I had one very managable mortgage.

5 months ago I finally got over analysis paralysis and purchased two rental properties (took more courage then I can even begin to describe - I'm VERY conservative).

Next Saturday we will likely put in a no-contingency (subject to appraisal/financing only) offer on a home in an area with better schools and more kids nearby.  It's a (surprise!) HUD home so I think we'll have to move fast as it's well below market.

So I will have four mortgages until we sell our current home.  What the hell am I thinking?

**GACK!**

[NancysSummerSip]

Captain, if I remember right, you are in the Chicago area (?)

When I get up there, I have to meet you. I wanna meet someone with your kind of chutzpah.

[The Captain]

Mar 5, 2014 10:03:44 GMT -5 NancysSummerSip said:

Captain, if I remember right, you are in the Chicago area (?)

When I get up there, I have to meet you. I wanna meet someone with your kind of chutzpah.

Yep - I think you were looking for recommendations on type of ethnic or local specialty lunch, I gotta buy you a drink.

Course the only question is which house will we meet at?

[NancysSummerSip]

Mar 5, 2014 10:09:30 GMT -5 The Captain said:

Mar 5, 2014 10:03:44 GMT -5 NancysSummerSip said:

Captain, if I remember right, you are in the Chicago area (?)

When I get up there, I have to meet you. I wanna meet someone with your kind of chutzpah.

Yep - I think you were looking for recommendations on type of ethnic or local specialty lunch, I gotta buy you a drink.

Course the only question is which house will we meet at?

I would not put you in that position, of course. A bar or restaurant will be fine. I'll buy, BTW. You'll be broke, I'm thinking. Or at least slightly cash-poor. And I've got a list of places to check out. We'll have our reservations set by the end of the month, so I'll have a better idea by then, but we will likely be based in downtown, or along Lakeshore Drive.

[milee]

I'm really excited for you, captain. A little more than a year ago, I wanted to get rental property around here (didn't want to be a long distance LL), but some wonky things have happened in our local market and I'm not comfy enough with my knowledge of how they'll play out to make the leap. Unfortunately, by the time they get sorted out, I think most of the opportunity will have passed, if it hasn't already around here.

Very cool that you're going for it. Keep us up to date with your results, please.

[achelois]

Mar 5, 2014 9:58:53 GMT -5 The Captain said:

So DH and I are looking for a house in an area better suited for DD.

A year ago at this time I had one very managable mortgage.

5 months ago I finally got over analysis paralysis and purchased two rental properties (took more courage then I can even begin to describe - I'm VERY conservative).

Next Saturday we will likely put in a no-contingency (subject to appraisal/financing only) offer on a home in an area with better schools and more kids nearby.  It's a (surprise!) HUD home so I think we'll have to move fast as it's well below market.

So I will have four mortgages until we sell our current home.  What the hell am I thinking?

**GACK!**

You have been around Phil too long?     

[busymom]

Mar 5, 2014 9:58:53 GMT -5 The Captain said:

So I will have four mortgages until we sell our current home.  What the hell am I thinking?

**GACK!**

Maybe you're thinking you want a LOT of passive income when you retire?   Now you just need reliable renters!

[whoisjohngalt]

Mar 5, 2014 9:58:53 GMT -5 The Captain said:

So DH and I are looking for a house in an area better suited for DD.

A year ago at this time I had one very managable mortgage.

5 months ago I finally got over analysis paralysis and purchased two rental properties (took more courage then I can even begin to describe - I'm VERY conservative).

Next Saturday we will likely put in a no-contingency (subject to appraisal/financing only) offer on a home in an area with better schools and more kids nearby.  It's a (surprise!) HUD home so I think we'll have to move fast as it's well below market.

So I will have four mortgages until we sell our current home.  What the hell am I thinking?

**GACK!**

OMG, you are my HERO.  I am very conservative and risk averse too and I would love to have a rental.  I think I might have to get over my commitment issues first

[Bonny]

Well the real question is how much do you owe on those four mortgages?

Three years ago we had four mortgages which totaled over $1.2M.  But we paid off the SF Bay Area home and now "only" owe about $900k on the three remaining mortgages. 

[The Captain]

Mar 5, 2014 11:13:42 GMT -5 Bonny said:

Well the real question is how much do you owe on those four mortgages?

Three years ago we had four mortgages which totaled over $1.2M.  But we paid off the SF Bay Area home and now "only" owe about $900k on the three remaining mortgages. 

phil5185 and Bonny - I am nowhere in your league, yet.

If we buy this house our mortgages in total will be about $575K.  When I put it like that the number scares the crap outta me, but the two rentals are covering carrying costs and are cash flow positive about $1.5K a month.

Maybe in a few years I'll have as much debt as you do, something to aspire to!

[The Captain]

Mar 5, 2014 11:03:34 GMT -5 busymom said:

Mar 5, 2014 9:58:53 GMT -5 The Captain said:

So I will have four mortgages until we sell our current home.  What the hell am I thinking?

**GACK!**

Maybe you're thinking you want a LOT of passive income when you retire?   Now you just need reliable renters!

So far (knock on wood) we have that!

[Tiny]

Mar 5, 2014 9:58:53 GMT -5 The Captain said:

So DH and I are looking for a house in an area better suited for DD.

A year ago at this time I had one very managable mortgage.

5 months ago I finally got over analysis paralysis and purchased two rental properties (took more courage then I can even begin to describe - I'm VERY conservative).

Next Saturday we will likely put in a no-contingency (subject to appraisal/financing only) offer on a home in an area with better schools and more kids nearby.  It's a (surprise!) HUD home so I think we'll have to move fast as it's well below market.

So I will have four mortgages until we sell our current home.  What the hell am I thinking?

**GACK!**

Just breathe... in... out.... in... out... nice and even. It will be OK.   You are brave AND smart. It will be OK.

I've discovered that buying houses is alot like getting tattoos.  You can't have just one, and after a bit of time the 'itch' starts and you need another one.      I swore a year ago in May (2 months after closing on, and then making habitable a Fannie Mae forclosure) that I'd NEVER do that EVER again. Not EVER.   And here it is, less than a year later and I'm looking at sad and sorrowful foreclosures AGAIN and working thru how I'd finance it and how much it's gonna cost to make habitable and on and on and on.   I've already got 2 mortgages (on 3 houses) and am suppose to be looking to get a HELOC to give me some cheap-ish $$ so I can finish up the fixups on the Fannie Mae Special (would that make it a Hud Hut??) and I can do some needed maintenance on my house.  

Having another SFH rental would be nice though...  

ADDED:  if you are in the Chicago area - there are still some nice prices on very nice (or what could be very nice) houses - in the price range(s) well above the 'close to the bottom of the barrel' houses that I look at.   I'm assuming you went after one of the nicer houses with a nice price and got it! so CONGRATULATIONS!!!

[Bonny]

Mar 5, 2014 11:22:59 GMT -5 The Captain said:

Mar 5, 2014 11:13:42 GMT -5 Bonny said:

Well the real question is how much do you owe on those four mortgages?

Three years ago we had four mortgages which totaled over $1.2M.  But we paid off the SF Bay Area home and now "only" owe about $900k on the three remaining mortgages. 

phil5185 and Bonny - I am nowhere in your league, yet.

If we buy this house our mortgages in total will be about $575K.  When I put it like that the number scares the crap outta me, but the two rentals are covering carrying costs and are cash flow positive about $1.5K a month.

Maybe in a few years I'll have as much debt as you do, something to aspire to!

Actually, I don't think phil5185 owes that much. He's got one rental left and no mortgage on his home. So maybe $200k?

The riskiest thing I did was to take over the payments on my mom's condo 5.5 years ago. $451k loan and basically no equity at the time. And my husband was dead set against it. Talk about catching a falling knife!

Fast forward 5.5 years and now we have about $200k net equity with a total investment of $20k. The loan is still in my mother's name so if I had to I could still walk away with very little risk to me or my credit.

What helps is not focusing on the debt but your net worth and making sure things work o.k. cash-flow wise.

You don't take stupid risks. You'll do fine.

[The Captain]

Mar 5, 2014 10:23:38 GMT -5 milee said:

I'm really excited for you, captain. A little more than a year ago, I wanted to get rental property around here (didn't want to be a long distance LL), but some wonky things have happened in our local market and I'm not comfy enough with my knowledge of how they'll play out to make the leap. Unfortunately, by the time they get sorted out, I think most of the opportunity will have passed, if it hasn't already around here.

Very cool that you're going for it. Keep us up to date with your results, please.

Milee - I was in you place about 6-8 months ago.  At some point you gotta pull the trigger.  I don't know what's going on in your neck of the woods.  In my area we are going through wave two of foreclosures (as I predicted about 1 or 2 years ago).  Folks will still need a place to live and the area I target is close to public bus, train and highway transportation.

In a way it's kinda funny/sick/say because I have at least 6 or more properties I've identified as next on the "buy" list, of which I'd be able to easily get 2 if not three if we weren't going to pull the trigger on the primary residence.

There's no dipping your toe in the water, ya gotta jump right in!

[The Captain]

Mar 5, 2014 12:10:20 GMT -5 Bonny said:

Mar 5, 2014 11:22:59 GMT -5 The Captain said:

phil5185 and Bonny - I am nowhere in your league, yet.

If we buy this house our mortgages in total will be about $575K.  When I put it like that the number scares the crap outta me, but the two rentals are covering carrying costs and are cash flow positive about $1.5K a month.

Maybe in a few years I'll have as much debt as you do, something to aspire to!

Actually, I don't think phil5185 owes that much. He's got one rental left and no mortgage on his home. So maybe $200k?

The riskiest thing I did was to take over the payments on my mom's condo 5.5 years ago. $451k loan and basically no equity at the time. And my husband was dead set against it. Talk about catching a falling knife!

Fast forward 5.5 years and now we have about $200k net equity with a total investment of $20k. The loan is still in my mother's name so if I had to I could still walk away with very little risk to me or my credit.

I've always wanted to ask about this, how can a loan still be in a dead person's name?  Who's name is on the title?

What helps is not focusing on the debt but your net worth and making sure things work o.k. cash-flow wise.  I'm slowly getting there.  Coming from a blue-collar background it's taking quite a shift in thinking.

You don't take stupid risks. You'll do fine.   Hope so.  DH just looks at me and says - "If you say we can handle it them I'm sure it's fine".

[milee]

Mar 5, 2014 13:50:33 GMT -5 The Captain said:

Mar 5, 2014 10:23:38 GMT -5 milee said:

I'm really excited for you, captain. A little more than a year ago, I wanted to get rental property around here (didn't want to be a long distance LL), but some wonky things have happened in our local market and I'm not comfy enough with my knowledge of how they'll play out to make the leap. Unfortunately, by the time they get sorted out, I think most of the opportunity will have passed, if it hasn't already around here.

Very cool that you're going for it. Keep us up to date with your results, please.

Milee - I was in you place about 6-8 months ago.  At some point you gotta pull the trigger.  I don't know what's going on in your neck of the woods.  In my area we are going through wave two of foreclosures (as I predicted about 1 or 2 years ago).  Folks will still need a place to live and the area I target is close to public bus, train and highway transportation.

In a way it's kinda funny/sick/say because I have at least 6 or more properties I've identified as next on the "buy" list, of which I'd be able to easily get 2 if not three if we weren't going to pull the trigger on the primary residence.

There's no dipping your toe in the water, ya gotta jump right in!

I was ready...

But this has always been a little bit of an odd market with large numbers of retirees, foreign purchasers and investors who read about the foreclosure crisis.  Average house price is a little under $200k, but for the last year or more, over 70% of all purchases are for cash.  (Think about how odd that is - not just luxury, not just cheapo slums, but of all purchases - 70%+ are cash.)  So some of the normal techniques investors use to get decent prices - like offer cash - aren't a standout or helpful here.  And in fact, if you're not ready to pay cash, a reasonable number of sellers aren't entertaining your offer.  Ups the stakes and eliminates the benefits of leverage.

Then, we had two large investment groups come in and buy chunks of over 100 each of 3/2 rental type houses over a period of 4-6 months.  That was basically 100% of the housing stock of that type for the entire area.  They paid cash and drove prices on that type of house up by 15% - 20%.  So now not only are prices higher, but as a LL, you'd be competing against these large groups that have deep pockets to withstand vacancies, etc. and may not be making the same decisions a small LL would make.

Also, we're at ground zero for the Biggert Waters Act impact.  Although I agree with the principals of the act (people who live in high risk flood areas should be paying the actual premiums on their house, not be subsidized by others), there are still some huge issues that are being worked out and I don't think they really have the actuarial or flood assumptions correct yet.  In our area, we have about 50,000 houses that will be impacted and are seeing huge increases (like going from $1k a year to $14k a year in premium.)  So right now, if you buy a house in a flood zone and it's not at the new required levels like most of the old stock isn't, you'll have a huge premium which is making that house all but impossible to sell in the future.  At the same time, the few houses for sale that aren't impacted have had their prices artificially increased.  So it's a huge gamble if they'll repeal the Act, fix the flood zone data and actuarial assumptions or not.  On a $150k house, make the right guess and you'll probably make an extra $20k - $50k profit.  Guess wrong and you'll probably be out $50k.  Too much risk for a situation that is IMHO not very predictable.

Or maybe I'm just overthinking.  Don't know. 

[The Captain]

milee - Ok, you have a few more variables then I do, hands down.

Are you in a costal area?  I've read about large (wealthy) condo associations getting the flood maps redrawn to their advantage basically shifting all of the new costs to individual owners who can't afford the cost to protest:

www.cnbc.com/id/101423117

Man, I've got a lot of stuff to deal with but this is out of bounds.

[milee]

Yes, coastal area. Condos have had decent luck with getting remapping, individual homeowners.... not so much.

I don't agree with the remapping thing, either. Let's get a decent, reasonable system and make it work. But the idea that a 1000 square foot home that has been here for 50 years and never flooded, is worth $70k and used to have a $1k a year flood premium now has a $14k flood premium (just one of many, many examples) is crazy.  In less than 5 years your flood premium alone would pay to replace the house.  I can't see that this makes sense.

[Bonny]

The Captain said:

I've always wanted to ask about this, how can a loan still be in a dead person's name? Who's name is on the title?

The loan is secured by real property which gets transferred to the heir. The loan remains in the dead person's name but the property get re-titled to the heir. So in my case title is in DH's and my Trust but the mortgage is still in my deceased mother's name.

In a normal "transfer" of title (say a sale to another party) the bank would not allow a new person to just take over the loan. There's a "Due on Sale" clause in the note. However under the Garn St. Germain Act there are some exceptions; scroll down to section "d" here: www.law.cornell.edu/uscode/text/12/1701j-3

In my case d 5 applies.

I had to submit paperwork to the bank to prove my mother died and that I inherited her interest but that's about it. Mortgage paperwork continues to be addressed to "Estate of Bonny's Mother". The bank's records indicate that I'm a qualified person to discuss the mortgage and I've had no issues with the bank accepting payments.

This bank has never hassled me about formerly assuming the loan but when I was dealing with my mother's little rental, that bank tried to get me to formally assume the mortgage. No way and I knew I didn't have to. They cracked me up telling me it would help my credit et cetera, LOL. Of course the bank was sleazy Countrywide Mortgage.

[The Captain]

Welp, the house we were interested in went under a contingent contract.  The only way we can get it now is if we go in with no contingency (we are already approved for financing, my banker e-mailed me the approval letter yesterday).

We are having a real estate agent over tonight to give us an idea of what our current house should sell for.  While I can carry both mortgages at the same time, I have no desire to do so for more than 3-4 months.  I also can't take a bath on the current house.

Note that I do not expect to get as much as we paid (and we've put about 60K into the property) for the present home.  But I have to pull some equity out of it or I wouldn't consider moving.  Remember, we've been here for almost 11 years and put 20% down.

DH is not happy with me and thinks we should run over and sign the contract right now, but I refuse to be backed into a corner.  We both have to be comfortable with the decision.

This is the stuff I hate.

[Pants]

Captain - don't worry! If everything goes downhill you can move in with Rukh! (Or my in-laws, who are close to you. They have way too much space anyway...)

[The Captain]

So here's the thing.  This (as with some rentals I've marked as hot) proves my market instincts are pretty good.

I didn't think the house we wanted would last long.  We could likely still get it, but that would mean (as I originally thought) no  contingencies.  

My instincts tell me our house will not sell until summer, which is when it shows best (in ground pool, hot tub in gazebo, 2+ acres of nice yard etc).  

It will all hinge on what the RE agent thinks we can sell for and if that's even close to what my instincts are telling me based on the comps I pulled. 

[Bonny]

Hey The Captain,

I'm sure I've bored you all with the story of buying the house here in the Bay Area almost 19 years ago, but it bears repeating...

DH and I were looking for the "move up" house. Had been looking for about 2 years when a house up the street (literally 4 doors up the hill) came on the market. We found ourselves in a competitive bid situation with our across the street neighbors.  We both had contingent offers (sale of our home). I wasn't working full time and wasn't comfortable going non contingent so I "let" them have it. 30 days later they still hadn't sold their home and I got my signed job offer from the Transit District. That evening I called up the listing agent and bumped their offer because we dropped the contingency. We moved the MIL into the old house (she was on temporary assignment in Oakland). That took the pressure off of me starting a new job, new house and trying to finish up stuff and sell the old house. We sold it the following summer.

By far the best property we've ever bought. Worth almost 3X what we paid for it.

Good luck!

[bean29]

The Captain,

Well, maybe you should put a secodary offer in on the house you want and list your house.  DH and I have done secondary offers 2-3 times and always been offered the house in the end.  You can withdraw a secondary offer before it is accepted so it does not prevent you from looking around, but if the primary offer falls apart they will probably give you a shot at it.

[The Captain]

Well we had the Real Estate agent out yestday evening to give us an idea of what our house would sell for.  Let's say I was pleasantly surprised.  She even commented on how well maintained and updated our house was for it's age (built in 47).

Apparently our little neck in the woods is somewhat desirable. 

We put in a no contingency offer on the Hud home.  Now we wait and see.  Hopefully it all works out.

[Bonny]

[Pants]

Mar 8, 2014 11:11:19 GMT -5 @tbird said:

Mar 6, 2014 15:15:39 GMT -5 Pants said:

Captain - don't worry! If everything goes downhill you can move in with Rukh! (Or my in-laws, who are close to you. They have way too much space anyway...)

Notice I didn't say she could move in with me...

[The Captain]

Mar 8, 2014 21:39:45 GMT -5 Pants said:

Mar 8, 2014 11:11:19 GMT -5 @tbird said:

Notice I didn't say she could move in with me...

Hey now!!!

[The Captain]

We went and looked at three more houses yesterday.  (Freddie Mac is slow to respond according to our agent, we hope to maybe kinda sorta have some type of response by Monday).  

One house was so far off from the listing I really think there should be some kind of penalty to the listing agent.  I have asthma so central air is a must (we can install the whole house hepa filter).  One house listed central air but only had a tiny unit on a poorly done in-law addition over the garage.  The rest of the house was in crappy shape as well on a slab so putting in central air isn't really a possibility.

The second house had promise but we'll have to tear up all the carpeting and put in solid surface flooring.  It's also configured a bit weird upstairs and we'd want to fix that at some point.  The lot was also small and I feel like we'd be sitting in our neighbors laps.

The third house was very nice, well built decent sized lot.  Basement was finished amazingly well (best I've ever seen).  Only three drawbacks:

1.  Living room is small - can only fit one couch and our entertainment center
2.  Kitchen was small.  No room for microwave, single oven, and very few cabinets.  This is kind of a deal breaker for us
3.  No soaker tub.  I have to have a soaker tub (we can put one in so this wasn't the deal breaker).

As scary as it sounds, I do really hope we get the house we put the offer in.  If there is such a thing as Karma please send some my way...

[Bonny]

Sending good karma your way...

And don't be in such a hurry. Like WWGW's tag line says Power is with the person able to walk away.

You've taken on a lot in the last few months. Your back is not against the wall to do anything. Use that to your advantage!