FB turned landlord

[Tavo]

I’ve been a lurker for quite some time now and since this has recently become an “advice” site, I thought I’d give it a whirl. Hit me with what you’ve got. Believe me, I’ve put myself through far worse than whatever you have to say at this point. Who knows, maybe this will serve to be a lesson to someone out there.

In 2004 I was your classic, “honey we should buy now or we’ll get priced out of the market” dreamer. Since my wife and I had just moved to San Diego and didn’t know where we would set-up long-term, we bought a nice condo conversion in downtown. The idea was to live in it for a couple of years but hold on to it as an “investment” (say 10-15 yrs). After all, property was appreciating like internet stocks in 1998 (that should have been my first clue). Boy, I was convinced that while San Diego is not Manhattan, you can’t replicate this weather and people were going to flock to this new hip urban paradise. I figured that even if my property didn’t cash flow positive after I rented it out, the yearly appreciation would make up for it. Ha!

Anyway, as a way to “protect” myself I did get a 30 yr fixed loan at sub 6% (I had to fire my first broker who kept pushing the I-O loans) and bought a “class C” condo conversion worth less than 2x my combined yearly income. Of course, I went for the 100% financing option. Hey man, money is cheap, why not leverage as much as I can?

By late 2006 my wife and I were busting out of our “condo” and needed to move on. Unfortunately, at this point the market was getting weaker, but shit hadn’t hit the fan just yet (i.e. no talk of the CDO/CMO mess, no defaults/ foreclosures en mass, and no recession). While we may have sold at a small loss, I wanted to see this investment out. After all, investments go up and they go down right. I was still sold on the long term prospects of San Diego so we were sticking to the plan.

Since I am a bit of an MLS junkie, I was excited to start looking for a house again. This time I was going to get a “deal” on a Craftsman in North Park. This was going to be our long term home so I was ready to deal with a slight downturn in the market. However, since I was convinced of the “temporary” downturn I was not going to buy until I got a deal (at least 15% off the list price).

I wrote a few lowball offers with no luck. Folks were still holding pretty tight, as many still are. Then in early 2007 my realtor said she had the “in” on a short sale in Morely Field! Remember, at this time short sales were still a little new to everyone. It took us 5 months to finally work through the short sale with the bank, but we got the house! To top it off, we got it for 20% less than what the previous owner purchased it for. This guy was a flipper and made some serious additions to the house. Unfortunately, he couldn’t keep up with the payments. Oh well, his loss was my gain.

Now, here I am in Q1 of 2008 (9 months later). My condo has now dropped about 20% in value and I’ve lost all the “equity” in my current home (this, I guess, I expected). My condo negative cash flows about $1k per month (ouch!), and I don’t have cash to unload it. Even if I did, I prefer the slow bleed. Renters are good, but that is just one of many variables I have to deal with.

So, if you housing bears (realists) could write an end to this script, what would it be? Better yet, what would you do to prepare if you were me? Essentially, I am trying to figure out what I’m in for financially with this depreciating asset around my neck. I figure that if I prepare for the worst case, I can’t go wrong any longer. I’ve considered walking on my condo, but I refinanced into a lower rate loan which may now be non-recourse. I haven’t given this a whole lot of thought or research because it’s just not the right thing to do IMO. However, in a serious pinch, who knows. Thanks for the replies and advice.

Tavo

[Anonymous]

Just a couple of comments before those a lot more knowledgeable about the market weigh in.

First, let’s cut the sh*t. Why are you asking about walking if you don’t think it’s the right thing to do?? My point is, you HAVE thought about walking and that’s exactly what you’re going to do if it’s in your own best interest. Can you afford the 1k a month? Even if you can, if you can get out of it, you’re gonna walk. Are you asking for permission?

If the loan is non-recourse, you’re screwed.

[Anonymous]

Just a couple of comments before those a lot more knowledgeable about the market weigh in.

First, let’s cut the sh*t. Why are you asking about walking if you don’t think it’s the right thing to do?? My point is, you HAVE thought about walking and that’s exactly what you’re going to do if it’s in your own best interest. Can you afford the 1k a month? Even if you can, if you can get out of it, you’re gonna walk. Are you asking for permission?

If the loan is non-recourse, you’re screwed.

[Anonymous]

Just a couple of comments before those a lot more knowledgeable about the market weigh in.

First, let’s cut the sh*t. Why are you asking about walking if you don’t think it’s the right thing to do?? My point is, you HAVE thought about walking and that’s exactly what you’re going to do if it’s in your own best interest. Can you afford the 1k a month? Even if you can, if you can get out of it, you’re gonna walk. Are you asking for permission?

If the loan is non-recourse, you’re screwed.

[Anonymous]

Just a couple of comments before those a lot more knowledgeable about the market weigh in.

First, let’s cut the sh*t. Why are you asking about walking if you don’t think it’s the right thing to do?? My point is, you HAVE thought about walking and that’s exactly what you’re going to do if it’s in your own best interest. Can you afford the 1k a month? Even if you can, if you can get out of it, you’re gonna walk. Are you asking for permission?

If the loan is non-recourse, you’re screwed.

[Anonymous]

Just a couple of comments before those a lot more knowledgeable about the market weigh in.

First, let’s cut the sh*t. Why are you asking about walking if you don’t think it’s the right thing to do?? My point is, you HAVE thought about walking and that’s exactly what you’re going to do if it’s in your own best interest. Can you afford the 1k a month? Even if you can, if you can get out of it, you’re gonna walk. Are you asking for permission?

If the loan is non-recourse, you’re screwed.

[Tavo]

No, not asking for permission. If that’s what I was asking for I’d go straight to “youwalk.com” or something like that. While this is currently a very bad investent for me, I don’t want to screw up my credit. Of course, if it comes to feeding my family or walking, yea I’d walk. Thank god I’m not in that position and can afford the $1k loss. Thanks for the insightful response….

[Tavo]

No, not asking for permission. If that’s what I was asking for I’d go straight to “youwalk.com” or something like that. While this is currently a very bad investent for me, I don’t want to screw up my credit. Of course, if it comes to feeding my family or walking, yea I’d walk. Thank god I’m not in that position and can afford the $1k loss. Thanks for the insightful response….

[Tavo]

No, not asking for permission. If that’s what I was asking for I’d go straight to “youwalk.com” or something like that. While this is currently a very bad investent for me, I don’t want to screw up my credit. Of course, if it comes to feeding my family or walking, yea I’d walk. Thank god I’m not in that position and can afford the $1k loss. Thanks for the insightful response….

[Tavo]

No, not asking for permission. If that’s what I was asking for I’d go straight to “youwalk.com” or something like that. While this is currently a very bad investent for me, I don’t want to screw up my credit. Of course, if it comes to feeding my family or walking, yea I’d walk. Thank god I’m not in that position and can afford the $1k loss. Thanks for the insightful response….

[Tavo]

No, not asking for permission. If that’s what I was asking for I’d go straight to “youwalk.com” or something like that. While this is currently a very bad investent for me, I don’t want to screw up my credit. Of course, if it comes to feeding my family or walking, yea I’d walk. Thank god I’m not in that position and can afford the $1k loss. Thanks for the insightful response….

[Anonymous]

Ok, you just said you don’t want to mess up your credit. However, if the loan is non-recourse and you walk, you mess up your credit. So what are you asking then?

You just said you can afford the $1k a month loss by renting it out. So, what are you asking then?

We both agree it was a bad investment.

If your loan was non-recourse, you could dump the house, come out smelling like a rose and GET OVER. But it’s not, so that’s not gonna happen.

Cut the sh*t please.

[Anonymous]

Ok, you just said you don’t want to mess up your credit. However, if the loan is non-recourse and you walk, you mess up your credit. So what are you asking then?

You just said you can afford the $1k a month loss by renting it out. So, what are you asking then?

We both agree it was a bad investment.

If your loan was non-recourse, you could dump the house, come out smelling like a rose and GET OVER. But it’s not, so that’s not gonna happen.

Cut the sh*t please.

[Anonymous]

Ok, you just said you don’t want to mess up your credit. However, if the loan is non-recourse and you walk, you mess up your credit. So what are you asking then?

You just said you can afford the $1k a month loss by renting it out. So, what are you asking then?

We both agree it was a bad investment.

If your loan was non-recourse, you could dump the house, come out smelling like a rose and GET OVER. But it’s not, so that’s not gonna happen.

Cut the sh*t please.

[Anonymous]

Ok, you just said you don’t want to mess up your credit. However, if the loan is non-recourse and you walk, you mess up your credit. So what are you asking then?

You just said you can afford the $1k a month loss by renting it out. So, what are you asking then?

We both agree it was a bad investment.

If your loan was non-recourse, you could dump the house, come out smelling like a rose and GET OVER. But it’s not, so that’s not gonna happen.

Cut the sh*t please.

[Author]

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