looking for advice 2

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Submitted by manu on February 18, 2011 - 11:12am

Hello everybody,
I haven`t posted in a while but have been following this site for the last few years.

Even though last time I posted I got a lot of bitter responses (and sure I will be getting some more this time)I still feel the need to see what you guys think about my new situation as I think there are a lot of smart people on this site

Please refer to my first and last post from 2007


Anyways, this is what happened since then:

we were able to sell the money pit for 1270000 in January 2010 (160000 above appraisal).
I can`t tell how much money we lost in the transaction (I like to think something close to the 70000 commission) and we have been renting since then.

Even though we might have lost some money, we definitely gained a lot in peace of mind, our marriage has been doing much better since we don`t get all those headaches anymore and would say it was worth it.

We have been renting in the same neighborhood for a little over a year.
We are currently renting a 2000 detached condo in an exclusive gated community attached to a golf course/Country Club.

It has been like vacationing at a resort and we have been enjoying the carefree lifestyle and adapted pretty well to the downsizing.

In the meanwhile I have been following the market waiting for the right time to jump back in.
In the process though I realize I have become a permabear and as the prices slide down, so does the amount I am willing to pay for our next house.

We got so comfortable renting we don`t see any immediate need of moving but....

The rental I am currently living in just went on the market about a month ago. Our lease was up and we found out that the owner wanted to sell it...we considered buying ourselves (currently listed for 539000) but I think it is sooo overpriced is not even funny.

So for the time being we are renting month to month and we were able to get a screaming deal: we only pay 1/2 rent for the inconvenience of having the place available for showings.

In over a month we only had 5 showings by the way.

So here we are having to move into another rental or having to buy something in the imminent future.

In the meanwhile the market got flooded with similar units in the same development.
These units were built in the 1996/1997 for anything between 270 to 290000 depending on lot (facing golf course and so on).
At peak of the bubble MOST of them resold in the high 700000, some even close to 900000 (!).

There are currently 5 on the market ranging between 485000 to 545000 (with alot more in different stages of foreclosure still not hitting the mls).

My husband and I went to see one of them (same floorplan we are living in, REO, for 489500...no offers so far and already price reduced once).

We have talked to the REO agent about putting an offer for 405000 and see what happens...he doubts we`ll get it but he thinks we might get a counter at least.

The particular unit sold beginning 2003 for 410000 and need about 40000 to bring it to par with our rental which is more upgraded.

Although these units are not my dream house I can definitely see us leaving in one of them for few more years without having to move to other rentals or feeling pressured to buy a house just because we need a place to live.

If we can get it for close to 400000, we can still move out and be able to rent it out down the road for even money or a couple of hundred dollars cash flow per month (would not call it investment).

Also in the meanwhile we can get tax reduction and pay down the loan fast before we convert it into a rental down the road (we currently have income well over 400000 and ZERO tax deductions)

Also if the property keeps going down in price we are still saving about 30000 a year or so in rent.

So, what shall we do?
-find another rental (I am not too in a rush as I am paying only 1/2 rent right now and that`s cheap. Also don`t think my landlord will be able to sell anytime soon)
-Lowball the REO and try to get it close to 400000
-wait for REO to sell and then lowball our landlord based on recent REO comp sale

Ultimately I would like a 2000-3000 sq feet home on half a acre in this same neighborhood...there are few for sale but nothing worth considering...they were all built in the 60s and I know (given my last money pit)that they would take hundreds of thousand of dollars to fix up...the cheapest ones are currently in the 500000 but no view and septic tank....I`ll pass on those.

Well, thanks for reading (if you made it this far).
Looking forward to hear from you,


Submitted by matt-waiting on February 18, 2011 - 11:53am.

It sounds like you are holding all the cards. My guess is that you would prefer to buy the place you are currently in (for a fair price).

If the market for your rental condos is in the $450K range, then offer the owner 440 and do the transaction without any real estate agents. You save on moving costs. He saves the real estate agent's fees. You have a good idea of the property already and you could pay a lawyer by the hour to help with paperwork.

If he says no, show him the sold comps. In my opinion there should not be that great of a disparity in condo prices and he will eventually learn that his condo is not special (and you will learn that people won't sell a huge amount below market). Until he realizes that, keep renting at half price.

If you are really an evil person at heart, tell him if he does not accept your offer, you will not allow him to show the property anymore, stop paying rent, and become a holdover tenant.

Submitted by FormerSanDiegan on February 18, 2011 - 11:56am.

If you can buy a place that you are comfortable living in for ~1x your income that would roughly cash flow as a rental, I would call that a no-brainer.

Monthly payments on a 400K loan would be in the 6-7% range of your income. Many people could afford that as a second home.

If you dedicated ~20% of your income (less than the average houshold devotes to housing) to paying off the property, you could pay it off in 5 years and own it free and clear and then go find your dream home.

Buying your unit or a similar unit to live in for a few years seems to be a low-risk obvious solution to me.

Submitted by SD Realtor on February 18, 2011 - 5:54pm.

The more I look at what is happening to our currency the more I am convinced that taking advantage of low rates is a good idea. The fed/treasury and the powers that be that pull their strings were successful in convincing our society that they had no choice but to save the world when they bailed out Wall St. Now we are told that the recovery is underway and that this was really the only path we could have taken. The destruction of our currency is a slow process that will continue over the next few years. One day we will look back on the good old days and we will lament the rates we have right now.

With that said I think those that take advantage of this opportunity will look back and be happy they took advantage of the low rates today. So if you can find a condo you like then go for it. Agreed as well that if you can work a deal with the current owner without involving any agents you both can share in saving money. However since it is already listed that will be tough. I would also advise you to wait the seller out. Lets see how they feel in May after 4 a few months on the market.

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