Tag Archives: mortgage

Stir Crazy

So last weekend Dad and I found a house as we were walking around a neighborhood we liked. I took note of the address to look up the tax records, and lo and behold the house was listed and expired about a year ago. My hopes started going up, and over the past week I have become obsessed with this house.

Every time we have been interested in a house in the past there has always been something insurmountable. The price is too high, or the houses in our price range have a steep driveway, are next to a freeway or railroad tracks, are on a small lot, have no room for a garage, etc. I really want the next house we move into to be a long term house that we can grow into, but I also am desperate to get out of our tiny house in our crappy neighborhood. This house seemed like the perfect solution. It would be affordable, it’s not updated but it’s the mid-century style we want, and it’s on a large level lot with a 2 car garage.

There is, however, a glaring insurmountable issue. The woman who lives there isn’t motivated to move. She’s very old and according to the prior listing agent couldn’t find a place she wanted to go.

The problem with us waiting is that Dad would have to qualify for the loan. We are about 60k upside down on our primary residence so we can’t sell.  I cannot qualify for both mortgages. Currently, Dad would have no problem qualifying with his salary. However, last week we agreed that he would quit on the 16th of this month to make some headway in his own business. We have enough savings to last a few months while he gets off the ground. However, once he’s self-employed it will take 2 years of history before he qualifies again for a loan. So basically we have to move now or we’re stuck in this house for another 2 years.

We’ll see if any developments happen with this house over the next few days. Dad is willing to not quit if we can move towards closing on this house, but that seems unlikely. If the owner wants to move in 6 months, we’ll either have to pass up the deal or get really creative. Arg.

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Property Value Twist

I’m under contract for Rental #3. I have a purchase price of 25k. I was expecting there to be around 15k in repairs putting me at a 40k price for a lower rent than my other properties at $850 per month.

Two problems came up today that I’m concerned about.

#1 – The repairs are going to be a lot more than I’d expected at about 25k. There are roof and mold issues that are going to need some very expensive repairs.

This I could deal with if I got a good enough price reduction. The next issue is the biggie.

#2 – The appraisal came back on Rental #1 ( which I’m mortgaging to buy #3) at only 45k.  At a 75% mortgage plus closing costs I’m walking with about 29k. And #1 is in the same area as #2 and slightly larger with 1 more bedroom.

If you’re an investor by now you’re putting together the pieces. The whole point of mortgaging these properties was to be able to at least buy one more with each mortgage. The closing costs are relatively the same for higher priced vs. lower priced properties, so I’m paying a higher percentage for lower amounts. If a better property than the current one I have under contract will only appraise for 45k, then putting even 40k total into this one seems a little silly IF I’m planning to mortgage it, which I am.

There are other areas of town where there are a wider spread of values, making it easier to have “instant equity”. I don’t like those areas as much for steady rental, but if I’m only going to mortgage 6 and buy 8 more in the next 2 years I just don’t think I’ll have enough cash if I’m only getting 30k out of each one that’s mortgaged.

Plus there was a dead bird in front of the garage today. This just doesn’t seem like a good sign.

UPDATE 10-30 I ended up cancelling this contract. The seller wasn’t willing to go down in price and there are other deals where the repairs wouldn’t be so incredibly extensive. Sheesh. A ton of time for me and the contractors for nothing.

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Taking the Plunge – Signing the Mortgage Papers for Rental #1

It’s a little scary, and expensive, to cash out your equity. I signed all the paperwork today to do so. When all is said and done I’ll be paying about 4k to get 50k out of Rental #1 (as long as it appraises).

We bought Rental #1 in May 2010 and had it rented by September 2010. Definitely spent a little too much money and time before renting it, but we now have a wonderful tenant who is on a 2 year lease.

Now I’m dying to buy #3 but don’t yet have the cash. It should be in my hands in two weeks, but I should really stop shopping and checking availability on listings as I have to submit proof of funds with any offer I submit.

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Budgeting During the Holiday Season

Just finished the October budget. As usual, we’re over where I want to be and I’m concerned we won’t be able to stick with it. But we’re going to a wedding this month out of town. And I’m going to a friend’s birthday out of town. And we’re starting to buy Christmas presents. The list goes on.

My goal is to stay under $6000 per month for our personal expenses, including insurance, childcare, basically everything. Our largest expenses by far are food ($700 budget for groceries, $400 for eating out) and our mortgage ($1350). Daycare is another $600. Utilities tend to run about $300. I’ll get together a total list if anyone would be interested.

In any case, our budget for this month is right at $6700.  We’ll see if we can do it.

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