[(former)FormerSanDiegan]

2008 – After 5 years your loss on monthly carrying costs is about 42K. But you still have the 70K loss as well as any additional loss/gain in value over the next 5 years. (I’m guessing another 15% loss or about another 30K).

So, you can either take a guaranteed 70K hit now, or gamble and take a 70K +/- any additional depreciation, plus another 42K loss (plus about 28 K reduction in taxes) over 5 years.

I think this is a bad 5-year bet. If you are likely to sell in 5 years, then you ought to sell now. If you plan to hold for 10 years or more, however, it would probably work out OK.

Also, if you have sufficient assets (e.g. 70K) to sell now and pay the loss, then you probably could also handle the risk of carrying this as a rental.

[(former)FormerSanDiegan]

2008 – After 5 years your loss on monthly carrying costs is about 42K. But you still have the 70K loss as well as any additional loss/gain in value over the next 5 years. (I’m guessing another 15% loss or about another 30K).

So, you can either take a guaranteed 70K hit now, or gamble and take a 70K +/- any additional depreciation, plus another 42K loss (plus about 28 K reduction in taxes) over 5 years.

I think this is a bad 5-year bet. If you are likely to sell in 5 years, then you ought to sell now. If you plan to hold for 10 years or more, however, it would probably work out OK.

Also, if you have sufficient assets (e.g. 70K) to sell now and pay the loss, then you probably could also handle the risk of carrying this as a rental.

[(former)FormerSanDiegan]

That’s a whopping .75 cut total over the past couple months… For a grand total of $62.50 a month reduction in my HELOC….

And they say this is supposed to help us how??!!

That 62.50 per month for you is roughly equivalent to a decrease in gas prices of $1 per gallon.
(assuming $3 per gallon, one 16-gallon tank fill per week).

I think most people would love to see their own personal $1 per gallon reduction in gas prices. Wouldn’t they ?

[(former)FormerSanDiegan]

That’s a whopping .75 cut total over the past couple months… For a grand total of $62.50 a month reduction in my HELOC….

And they say this is supposed to help us how??!!

That 62.50 per month for you is roughly equivalent to a decrease in gas prices of $1 per gallon.
(assuming $3 per gallon, one 16-gallon tank fill per week).

I think most people would love to see their own personal $1 per gallon reduction in gas prices. Wouldn’t they ?

[(former)FormerSanDiegan]

That’s a whopping .75 cut total over the past couple months… For a grand total of $62.50 a month reduction in my HELOC….

And they say this is supposed to help us how??!!

That 62.50 per month for you is roughly equivalent to a decrease in gas prices of $1 per gallon.
(assuming $3 per gallon, one 16-gallon tank fill per week).

I think most people would love to see their own personal $1 per gallon reduction in gas prices. Wouldn’t they ?

[(former)FormerSanDiegan]

It might just be me, but ignoring what is typically one’s largest asset in computing net worth seems ridiculous.

[(former)FormerSanDiegan]

It might just be me, but ignoring what is typically one’s largest asset in computing net worth seems ridiculous.

[(former)FormerSanDiegan]

It might just be me, but ignoring what is typically one’s largest asset in computing net worth seems ridiculous.

[(former)FormerSanDiegan]

2008 – OK. Since you have good credit and increasing income you have to weigh the potential future prospect of losses and carrying costs versus the guaranteed loss of selling now in the weakest market in over a decade.

Your property is already down 25%. What’s the opportunity cost of spending the 70K to unload the property versus spreading that out via negative income over the next decade ?
Assuming you make less than 150K, you’ll get a decent tax break on the rental loss. Including depreciation, I’m guessing you’ll likely get a tax loss of about 16-18K per year, saving you up to about 6K in taxes. (Depreciation of a 275K condo would equate to 10K per year in depreciation loss for tax purposes).

If your loan were a fixed rate loan and you were negative $500 per month as a rental I would recommend keeping the property at this point. The problem is that you do not know what your payments will be in 2010. You need to know this and project out what it would likely be.

The worst thing to do in my opinion would be to keep it for now, then unload it in 2010 when your payment resets and you can’t afford the escalated payment at a point when the market is near its lows another 10 or 15 % below today’s value.

[(former)FormerSanDiegan]

2008 – OK. Since you have good credit and increasing income you have to weigh the potential future prospect of losses and carrying costs versus the guaranteed loss of selling now in the weakest market in over a decade.

Your property is already down 25%. What’s the opportunity cost of spending the 70K to unload the property versus spreading that out via negative income over the next decade ?
Assuming you make less than 150K, you’ll get a decent tax break on the rental loss. Including depreciation, I’m guessing you’ll likely get a tax loss of about 16-18K per year, saving you up to about 6K in taxes. (Depreciation of a 275K condo would equate to 10K per year in depreciation loss for tax purposes).

If your loan were a fixed rate loan and you were negative $500 per month as a rental I would recommend keeping the property at this point. The problem is that you do not know what your payments will be in 2010. You need to know this and project out what it would likely be.

The worst thing to do in my opinion would be to keep it for now, then unload it in 2010 when your payment resets and you can’t afford the escalated payment at a point when the market is near its lows another 10 or 15 % below today’s value.

[(former)FormerSanDiegan]

2008 – OK. Since you have good credit and increasing income you have to weigh the potential future prospect of losses and carrying costs versus the guaranteed loss of selling now in the weakest market in over a decade.

Your property is already down 25%. What’s the opportunity cost of spending the 70K to unload the property versus spreading that out via negative income over the next decade ?
Assuming you make less than 150K, you’ll get a decent tax break on the rental loss. Including depreciation, I’m guessing you’ll likely get a tax loss of about 16-18K per year, saving you up to about 6K in taxes. (Depreciation of a 275K condo would equate to 10K per year in depreciation loss for tax purposes).

If your loan were a fixed rate loan and you were negative $500 per month as a rental I would recommend keeping the property at this point. The problem is that you do not know what your payments will be in 2010. You need to know this and project out what it would likely be.

The worst thing to do in my opinion would be to keep it for now, then unload it in 2010 when your payment resets and you can’t afford the escalated payment at a point when the market is near its lows another 10 or 15 % below today’s value.

[(former)FormerSanDiegan]

Also, what are the ramifications of excluding one’s primary residence. I know it’s supposed to balance things out. But what if you have 500K of equity in your house and 700K in other assets. Your net worth is 700K according to the survey. Suppose tomorrow, you take out a Home Equity Loan for 300K and put it in the bank. Presto, you are a millionaire.

Consider two cases:

Joe Frugal: Joe owns his 1.3 Million personal residence, complete with 20-acres, a fallout shelter and supplies for armageddon after the housing bust. Joe also owns 350K of gold bullion, and 350K of Euro-denominated CD’s. According to the survey his net worth is 700K. (If you included his residence it would be 2 million)

Jim Upsidown: Jim bought his house in 2005 for 2 Million with a zero-down option ARM. He used what would have been his downpayment to invest in Ostrich Futures, which paid off big.
His house is now worth 1.3 Million, but he built up an ostrich nest-egg of 1.1 Million. According to the survey Jim has a net worth of 1.1 Million. He’s on of our lucky millionaires. (unofortunately, if you include his principle residence his is worth only about 400K.)

[(former)FormerSanDiegan]

Also, what are the ramifications of excluding one’s primary residence. I know it’s supposed to balance things out. But what if you have 500K of equity in your house and 700K in other assets. Your net worth is 700K according to the survey. Suppose tomorrow, you take out a Home Equity Loan for 300K and put it in the bank. Presto, you are a millionaire.

Consider two cases:

Joe Frugal: Joe owns his 1.3 Million personal residence, complete with 20-acres, a fallout shelter and supplies for armageddon after the housing bust. Joe also owns 350K of gold bullion, and 350K of Euro-denominated CD’s. According to the survey his net worth is 700K. (If you included his residence it would be 2 million)

Jim Upsidown: Jim bought his house in 2005 for 2 Million with a zero-down option ARM. He used what would have been his downpayment to invest in Ostrich Futures, which paid off big.
His house is now worth 1.3 Million, but he built up an ostrich nest-egg of 1.1 Million. According to the survey Jim has a net worth of 1.1 Million. He’s on of our lucky millionaires. (unofortunately, if you include his principle residence his is worth only about 400K.)

[(former)FormerSanDiegan]

Also, what are the ramifications of excluding one’s primary residence. I know it’s supposed to balance things out. But what if you have 500K of equity in your house and 700K in other assets. Your net worth is 700K according to the survey. Suppose tomorrow, you take out a Home Equity Loan for 300K and put it in the bank. Presto, you are a millionaire.

Consider two cases:

Joe Frugal: Joe owns his 1.3 Million personal residence, complete with 20-acres, a fallout shelter and supplies for armageddon after the housing bust. Joe also owns 350K of gold bullion, and 350K of Euro-denominated CD’s. According to the survey his net worth is 700K. (If you included his residence it would be 2 million)

Jim Upsidown: Jim bought his house in 2005 for 2 Million with a zero-down option ARM. He used what would have been his downpayment to invest in Ostrich Futures, which paid off big.
His house is now worth 1.3 Million, but he built up an ostrich nest-egg of 1.1 Million. According to the survey Jim has a net worth of 1.1 Million. He’s on of our lucky millionaires. (unofortunately, if you include his principle residence his is worth only about 400K.)

[(former)FormerSanDiegan]

What part of town ?

When does the ARM reset ?
What is the index and margin of the reset ?

Since you are a few years into loan it is likely to increase significantly. Is the 500-700 per month negative based on the I/O loan ?

Is 8400 per year (negative cash flow) a lot of money to you ?

How much will your cash flow improve by moving ?
Raise in new job/ lower cost to rent.

If your new job pays more and your new rent (in the place you move to) is less than you can rent your old place for, you could consider keeping the place and renting it out.

1 BR condos are at the bottom of the food chain. Your unit seems to be on the leading edge of the bust (down at least 25% already). It’s value will probably drop to the point where someone could buy it as a rental and have positive cash flow. That means another 50K or more in depreciation.
That said, it might be difficult to sell at the price you want to sell it. FOr the 70K or so you might have to bring to closing, you might be able to carry the negative for about a decade. Sometimes it’s too late to sell.

Is your credit good ?

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