Hi, this is my first message to this forums. I couldn’t find any similar question in your forums.
We bought a North Las Vegas house for $270,000 in 2005 and the plan is to move there 10+ years later to retire.
But like the most of Americans that we just glad we still have job now and have to delay our retirement.
The house in Las Vegas only worths about $100,000 now.
With the current rent that we still need to put out $400+ to cover the mortgage.
Not to mention the months we couldn’t find the tenant and the money we spent to fix the damage from previous tenants.
That house is like a black hole to drain our saving and will be continue for many years.
We won’t walk away from this property, no short sale nor foreclosure, as long as we can cover the lose.
I currently have almost additional $30,000 saving and am thinking to buy another house in Las Vegas, and hope to balance out our lost.
I mean with the low interest rate (may not really low for investment property) and low home price, we can get positive rental income to cover the rental from another property, but I understand there will be risk when we cannot find a tenant.
My questions are:
(1) Do you think if this is a good idea?
(2) Is anyone familiar with Las Vegas housing market? Is 2011 a good time to buy?
(3) Can I find a house with $150,000 ($30,000 down payment) in a good location, then rent it out for $1,100?
The house we may stay after 10 years. I always dream to have a house in the hillside to overlook the lights in Las Vegas Strip.
(4) How is the rental market in Las Vegas?
(5) Do we plan too early for our retirement? Should we invest $30,000 in some where else (where?) to get a better return?
I don’t know the rental market in Vegas, but I can tell you that rent of $1100 is way too low if you’re buying for 150k. That rent amount tells me there are a glut of homes to be rented, therefore the rent amount is low. People in Vegas thought they justifiably had the highest value real estate in the world. The reality of the market says otherwise.
No, buying another Vegas property isn’t a good idea. You need to cut your losses, not throw good money after bad.
I’m not in Vegas, but by all accounts I’m being told the market there is still in decline, albeit slower than it was. It’s a good time to buy only if you can afford to carry the property for a decade or so because that’s how long it may take before any appreciable appreciation kicks in.
In the meantime, can you handle the finances of another problem property?
You probably can, but in all likelihood it will have negative cash flow again.
Very soft, from what I see.
Can’t answer that one for you. Way too many variables to know what’s best for you.
I absolutely would not let that house bleed me dry…just my opinion. I certainly understand the desire to not ruin your credit, but in my opinion throwing everything into that house and having NO money to your name is MUCH worse.
Honestly there are no easy answers to your situation, but I would definitely choose the path that results in me having money in the bank which means I’d do a deed in lieu or just let it go period. Keeping it will only delay the inevitable. You are just too far upside down. Even if the Vegas market started to turn around right now you’re looking at probably 10 years minimum before it even approaches 2005 numbers and that’s if everything lines up perfectly. In the investing world they call what you have there a “dog” and it’s usually advised to cut the dogs quickly.
Buying another rental house to offset the negative cashflow isn’t a bad idea but you’ll still have those same expenses you’re incurring now (vacancy, repairs, maintenance, etc) except now times 2. I’m not saying don’t buy in Vegas right now (you probably should because that market is at or near the bottom, you can ride the wave back up) but I’m saying I wouldn’t keep the “dog.” I’d let it go. What’s the worse that could happen? You don’t get arrested or receive lashings in the town square…your credit will get killed but even that will go away.
Think about this, by the time the Vegas market rebounds back to 2005 levels more than likely the foreclosure would have long since completely fallen off your credit report.
I invest in Vegas and the market there is still slowly falling, or should I say skipping along a slightly down hill bottom.
I think if I were you I would take and put away about 25% of that in prudent reserves ($7500) for this property, and I would go into Arizona or Florida and buy a condo or townhouse for all cash including closing cost’s with the remaining $22,500.
You can find your self a 2 or 3 bedroom that will rent for $500 to $700 a month or more and even after paying 10% to management and paying your proration of taxes and insurance each month you can still produce a good income, in this case to offset a $400 dollar negative.
Now just running a negative is not always a bad thing, providing you and your husband are working, the property benifits you on your tax return which offsets on paper some of your $400 dollar monthly loss!
I think sometimes my fellow investors forget everyone is not working for McDonalds, and although $400 a month is an inconvience, for most people it’s do able provided we cut down on some of our other vice’s!
There’s a lot to be said for the integrity of a person who buy’s a property and takes the commitment to pay seriously and value’s your credibility and honor’s your word! Don’t worry about these other recommendations as they don’t take into account the obvious ethics and principles you live by!
Reputation is important when investing and although some things can not be helped in life and financial hardship happens to good people, all to often I hear of the investor that can perfectly afford to make there payments; but opts instead for strategic foreclosure and helps to partially ruin the overall reputation of all investors, basically implying we borrow money with little intent to pay it back!
Thanks for being you and standing up for your commitments!
To each his/her own. You can be honorable but end up dead broke at retirement, but hey at least you paid for an underwater house as long as you could before the bank took it back.
By all means if you can carry the loss or figure out a way to offset it certainly you should do so. But in my opinion if it comes down to paying for that house or being dead broke that house would have to go.
I feel your pain. This exact same thing happened to a close friend of mine here in MD. She bought a house sub2 in 2006, 2 sets of tenants skipped and trashed it, now the value is down 50% from when she bought it. She’s dumped all her savings (a total of almost $25k) into the house and it’s still getting foreclosed. But her situation is even worse than yours…besides having NO money to her name, we can’t even track down the original seller so we can’t do a short sale even if we wanted to because the seller’s name is on the loan.