REALLY MESSED UP 11 posts by 7 users

Posted: 09/18/2008 at 08:11PM

How much do you owe on them? You could always sell them through a Lease Option...get a consideration up front to lock in a 12 or 24 month purchase price..drive up the monthly rent a few hundred higher than the current and offer rent credits if the tenant exercises the right to purchase. I would charge about 5% up front for the option fee which credits to the purchase price if the option is exercised. That is one way to sell them if you don't want to mess around with listing on the market.

Posted: 09/18/2008 at 09:44PM

Sure but the great thing about the lease option is if you do get some consideration up front then that can make up for the negative cash flow each month...doesn't matter what the market does...if your tenant doesn't exercise then find another lease option tenant and get another consideration up front...

but we haven't found out yet how much is owed on these properties...tough to gauge the situation without knowing the debt service

Posted: 09/19/2008 at 06:34AM

Cycles in real estate happen everywhere. So, if this had just been part of a typical cycle, I would agree. It wasn't. The bubble that's now burst was caused by easy availability of money. Anyone could get a loan and could get terms that made it possible for the to buy (though not keep) expensive houses. Demand went up, prices went up. Find the Cash-Shiller data, and have a look. What happened for 2000 to 2006, and that's still unwinding now has no historical precedent. Once that finishes unwinding, we will get back on the historical trend line. That line is driven by inflation. Since we're so far above it, we have to fall quite a bit to get back on track. Further, since the financial markets are in such chaos, and its hard to get loans, we may end up falling even below this trend line.

Once we're back on track, will follow that trend, with the 7+/- year cycles you mention.

The good news, if you can call it that, is that inflation shows every sign of getting very high. So, that will run the trend line up faster, making for less of a fall before we hit the trend.

If you could acquire some great deals (i.e., generate more income), it still wouldn't make sense to keep them.

I miscalculated on the loss (what I get for posting late at night). I'd guess it more like $1000/month. So, if you can get a 5% option money, it would still only cover the loss for a year.

Look, they're investments. They turned out to be bad investments. No different that a stock or other investment. They suck. Dump them.

Posted: 10/09/2008 at 07:03PM

Christina, When you consider the momentum of the loss you will have to compensate for once the market at least stabilizes (probably a few years), it is difficult to see how you compensate for that loss.
Yours is a difficult situation. It is kind of like asking if you want to get shot (sell now) or bleed to death (hold the properties). It appears that you are not a candidate for the bailout or short-sale.

Sorry but this is a good lessons for newbies to do their homework up front.

Best wishes and good luck,
Dwayne

Posted: 10/10/2008 at 03:07AM

This is precisely what happened to me in the late 80's. The only difference was my problem was and is: Retaining value. Bought a property for 65K. 6 months later the bottom fell out, it became REO heaven. With my ARM I was negatively cash flowing for $200 a month. I hung in there and a few yrs later picked up an REO unit for $13K. Although I'm in a positive cash flow situation on both with one debt free, the rental market was and remains strong so that's were I've stayed. During the recent bubble, values went back up to $65K. I didn't sell. Value today is $40K. The fluctation in almost 20 yrs clearly showed that this investment did not appreciate with the rest of the market. But it cash flows well...............so I just lease out and go about my normal course of business.