Bought a brand new townhouse in a developing area of Palm Beach County Florida. I put 10% down. Got a good investor rate of 6.65% fixed from Wells Fargo. That will leave me a mortgage of $1550 (including taxes, insurance, HOA). I plan on renting it the market value of $1400. This is all I can get so I’m upside down $150–I know, it hurts.
If the place goes up a conservative 3% a year, I will accumlulate $6800 a year in equity. Take that $150 X 12 = $1800, so now my equity is about $5000 a year, but wait, what about the mortgage interest , expenses, and taxes I can write, I’m hoping it will cancell the $1800 out of pocket so I might even be a head of $6800. If I’m there 4 years, thats $27,200 in equity at a modest 3% a year. I know its not the greatest but it is my first investment, any feedback.
I live in San Diego. The entire country is focusing on us to have the biggest of the bubble bursts. Very similar to the market you are in.
They say “time heals all mistakes in San Diego real estate” Hopefully you will find yourself in the same position, although I see a couple of years of negative returns before you get back to the 3% positive appreciation. Hopefully I’m wrong.
I don’t think I recall reading the other side of this. Name if the price of the property went up, does the builder get any share of the upside? Then why should he have any share of the down side? It just sounds like a lack of personal responsbility. You take on risk when buying a property and when it works out, your reward is the money from the appreciation. The other risk is that the market goes down and then you lose your money. I think the builder is blameless for the current market conditions.
Anyway if you want advice on how to get out of your 24k investment, consult an attorney, there’s usually a way out. If there’s a mortgage contingency, maybe if you were to get laid off, you’d get all your money back. Maybe it’s time to switch jobs and notify your lender that you’re no longer working and therefore don’t qualify. Just gotta check the contract carefully first.
Also regarding your plan, of just taking the monthly hit. I know of a few people in this state that do that also because everything is priced so high, that’s the only way to make money, lose some money each month and make it up at tax time and then cash in when you sell. They have pretty long time horizons so they’ll probably make money no matter what when they sell in 10-15 years.
That’s what I and alot of investors are doing that are in it for the long haul. The taxes and insurance in Florida are just killing us but no one can sell now. You just have to hold on and hope the rent checks keep coming.
Well it seems like the first thing that would come out of my mind is this:
When did your neighbor buy the property? If he/she bought it many years ago, then sure selling below FMV is pretty common. I just saw a property today where the owner bought it for $6000 in 1983 in CT. But guess what? It was a very negotiable deal, because like the rest of us he does put a higher value on his ROI then what the market tell his house is worth. Oh, and btw, his property on the market at 55K.