In dire need of real estate advice...

Hello all,

My name is Samuel G and I am new to the real estate investing game. That aside, I own a house in the Las Vegas area with approximately $50,000 in equity. However, my loan is for $381,000, I am in to it for $42,000, but the builder is offering the competing model homes at $300,000, thus not allowing me to refinance, or do much else. I have a family renting the unit, paying approximately 60% of the mortgage each month but I am curious if anyone happens to have any advice to fix this situation short term.
Thank you kindly,
Samuel

You own a house with a mortgage of 80 000$ above market value.

There is no easy cure for the number one mistake in real estate and that is buying it wrong.

I understand that, and I am trying to explore many options but do you have any clear cut recommendations?
Samuel

Recommendations depend on your personal financial situation.

  1. Keep the house, make the payments.

  2. Quit paying the mortgage, let it go into default, see if the lender will take a deed in lieu of foreclosure.

  3. Negotiate with the lender to allow a short sale (lender accepts less than amount owed) then sell the house.

  4. Negotiate with the lender to reduce the payments to the 60% same as rent.

Others are way more experienced in short sales and foreclosures. If I were in your shoes I would see a real estate attorney and get advice on how this will impact your credit. Then I would contact the lender and try to resolve it with their help.

FurnishedOwner

If payments are current, there is no way in hell a lender will ever negotiate some sort of short sale.

If income is stable, there is no way in hell they will accept payments to be less.

You can try… but I wouldn’t bet on it.

You are left with option 1 and option 2.

The option that won’t ruin your credit is to wait it out. The market goes down, and then it goes up again. So your house at some point will again be worth what you paid for it.

Why would you want to borrow more against the house when it already is a big loser? A bigger mortgage payment isn’t going to help you out.

If you rent it to the open market, can you get more rent than your relatives are paying you?

You can add cash to the deal to sell it.

Just about anything else you do is going to ruin your credit.

SamuelGabin,

Glad to meet you.

Very familiar with the Vegas Market, bought and sold around 250 houses there using my Subject To method of creative investing.

However, let me take you back to the early 60’s in Vegas when you could purchase any house in the valley for $15 dollars down, no credit check and it was yours. The builders had overbuilt dramatically and the housing market was in a slump.

A few of us investors starting buying these houses for $15 bucks down and then renting them out for what ever the traffic would bear, just to make sure they were occupied. Then we waited for the market to turn and it did within a few years. Those same house were worth almost double what we paid for them. I believe the market will turn around in Vegas.

If at all possible keep it rented until the market turns or try selling it the creative way. Sold the creative way you would have your payments made or very close to it, then have your contract set up so your buyer re-finances in about 2 years.

John $Cash$ Locke

Just saw this report: http://realestate.msn.com/slideshow.aspx?cp-documentid=7813768&imageindex=15

“One upside: the area’s demographics. Solid population, household and job growth will provide for healthy demand once the market recovers, Porter says.”

Sam,

I’m missing something - how do you have 50k in equity?

that aside - who’s paying the other 40% of the mortgage payment?

if the answer is another tenant from another property - that’s okay.

if the answer is from your business (meaning you have a steady income from customers in your business that pay you and your using part of that revenue to pay that other 40%) then that’s okay.

if you’re paying for it out of your own pocket…and don’t have any other income to supplement that expense - that’s not so good.

IF you can afford that - then heck - it’s costing you money now, but in the LONG TERM - factor that money into your basis, of what you put into the property (on paper - just so you can figure your roi over the long haul).

what about increasing rents?

what about making it a multi-family (collect more rent)?

where do you live? if you own another home - why not sell the one you live in (if you can make a profit on it) and live in your “investment” property?

bottom line - you didn’t buy an “investment property” so why force yourself to treat it like one?

I have 50,000 in equity from upgrades I have put in, and the value of the house is greater (under the right circumstances) than what I purchased it for.
I have tenants living in the property currently. Their contract is up in December, and I have been informed by Section 8 that the comp rent is 3600 a month, for a 6 bedroom, same size. So, if I could get even 2600-3000 a month, I would be doing exceptional, and could wait it out till I received an extremely solid offer.
Thanks TMCG.

And to $Cash$, can you describe your creative method please?

SamuelGabin - I still don’t understand how you came up with the 50k equity… I don’t want to be mean… But if you owe more money than you can sell the property for, you don’t have equity in the house (per definition).

You may have spent the money making upgrades, but if you can’t get a buyer to pay for it, then you haven’t built your equity.

Equity = Value of the home - money you owe on the property.

And value of the home is defined by how much the market is willing to pay for your house. In this case, it seems that you are competing with the developer. Do you think you can get someone to pay you more than they could pay to the developer? Probably not.

In regards to the increase in rent - I wouldn’t rely on Section 8 information. Why don’t you do a research in your neighborhood to figure out how much other properties similar to yours are going for. Be realistic in your analysis. It may be bad now, but depending on your research you may find that you have a real opportunity to increasing rents after the 1st of the year. This may be the solution you are looking for.

I wish you luck. Have a great day!

If what you live in now can be sold for a profit - sell it and move in to this “investment property”.

Otherwise you’re going to be operating in the red. AND if you rent Section 8 - forget it - your place is going to be destroyed. Section 8 pays rents and repairs, but the headaches for ONE PROPERTY that is NOT an investment property will greatly outweigh the benefits.

And quite frankly, I don’t see a benefit here. If you live in it and ride it out, this may be to your advantage. You put the upgrades in the home, you might as well enjoy them.

my loan is for $381,000, I am in to it for $42,000, but the builder is offering the competing model homes at $300,000,
= no equity. And you have a loan for $381k?? For a single family residence?

This is NOT an investment property. Do not force it to be one.

And refinancing - what are you looking to accomplish with a refi?

Good luck man!

Does anyone happen to know a legitimate property management group for the Las Vegas/Henderson NV area?