I was on these forums years ago (AFTER I bought a house in 2005 in Arizona!!) :banghead . Long story short, I never started investing and went a different route instead. I am back hoping to get educated, and hope you all can pass a little wisdom onto me…I have a huge decision to make and don’t want to make the wrong one.
My husband bought our house in 2005 for $225k. :banghead It is in his name only. We owe 200k. House is worth 110-120k. With those numbers, we’re 80k or so underwater. We also put 20k into it for repairs/remodel. So looking at the whole picture, with what we have into the house (down payment/repairs) we are “into” the house 245k. That puts us at 130k or so underwater (not including realtor costs if we were able to sell.)
We are considering our options (rent house out, lease option, short sale, forclose) The one I want to ask you all about is: We are considering buying a second house in my name only and renting this one out. I would attempt to buy this second house in about 6 months after we do some work to our debt/income ratio (I have a 700+ credit score) New house would be in my name only. Would aim for a 150k house, and be going for about a $1000 payment on it. We would move into new house and rent current one out. We want to move to be closer to our daughters school among many other reasons. Mortgage on current house is 1423. Rents are about 900. OUCH! We are considering paying the “new house” mortgage of 1000 and the negative monthly flow on the old house of 523. That puts us at 1523. Not a great place to be, but doable. Maybe when current house has regained some value (10 years?) we could lease option it (way too underwater now)
I know we would possibly have to deal with vacancy, unpaid rent, bad tenants, evictions etc in addition to the neg cash flow. Not what I want and it would be a horrible investment, but it isn’t an investment. It is just trying to save our credit without being stuck in this house for 20 years.
And if it got bad down the road (nobody willing to rent it, cant keep up with payments) we would have to go short sale/forclose route. But it would only ruin hubbys credit. We could still use mine. Worst case scenario… no wait, worst case is bankruptcy and 10 years bad credit.
We really don’t want to go short sale/forclosure be because we would loose the down payment/upgrades we have into the house to a tune of 45k., but we have gotten ourselves into quite a mess. Would it be better to take the loss of what is into the house and short sale, or take the risk of renting it out and waiting for enough appreciation to get out of it?