$30,000 saving

Buying & Selling Real Estate
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$30,000 saving

Paigow Chan
Member since 2011 · 11 posts · 6 votes

We bought a North Las Vegas house for $270,000 in 2005 and the plan is to move there 10+ years later to retire.
But like the most of Americans that we just glad we still have job now and have to delay our retirement.
The house in Las Vegas only worths about $100,000 now.
With the current rent that we still need to put out $400+ to cover the mortgage.
Not to mention the months we couldn't find the tenant and the money we spent to fix the damage from previous tenants.
That house is like a black hole to drain our saving and will be continue for many years.
We won't walk away from this property, no short sale nor foreclosure, as long as we can cover the lose.
I currently have almost additional $30,000 saving and am thinking to buy another house in Las Vegas, and hope to balance out our lost.
I mean with the low interest rate (may not really low for investment property) and low home price, we can get positive rental income to cover the rental from another property, but I understand there will be risk when we cannot find a tenant.

My questions are:

(1) Do you think if this is a good idea?
(2) Is anyone familiar with Las Vegas housing market? Is 2011 a good time to buy?
(3) Can I find a house with $150,000 ($30,000 down payment) in a good location, then rent it out for $1,100?
The house we may stay after 10 years. I always dream to have a house in the hillside to overlook the lights in Las Vegas Strip.
(4) How is the rental market in Las Vegas?
(5) Do we plan too early for our retirement? Should we invest $30,000 in some where else (where?) to get a better return?

Thanks.

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Mike McKinzie
Investor · Westminster, CO · Member since 2009 · 1k+ posts · 1k+ votes
15y

Andy

Another person afraid of "long distance" land lording. Why? Owning rental property is not a hobby that you need to attend to on a continuing basis.

I own 30 properties across six states, Virginia, Colorado, Texas, Oklahoma, Arizona and California. The very LAST thing I want to look at is a house I own or the tenant living in it. I have owned houses for 20 years and never seen them or talked to the tenant.

I remember a seminar I went to decades ago and the speaker said that he had known real estate investors who drive by their rental property EVERY DAY and brag to themselves that they OWN that house. They treat it like it is one of their children. BIG MISTAKE.

My time is better spent taking my wife out on a date, playing with my children or enjoying a real hobby versus showing property to a prospective tenant, unclogging a toilet or doing a lockout.

I used to manage my properties and other people's properties. I had a 2 year old drown in a pool of a house I managed. I had tenants growing pot in the backyard. I had a husband murder a wife in one of my rentals. I have had to take the GARDEN HOSE into one of my rentals to wash it out. I have pulled down wallpaper and had live Cockroaches rain down on my head. I have had to let the DEA into a rental I was managing, via a search warrant. Etc., Etc., Etc.,.... You name it in land lording and I have probably been through it.

I have the knowledge, experience, intelligence and ability to manage my properties, but I don't LIKE TO DO IT. Just a couple of months ago, I had a tenant go around my Property Manager, call me and complain about a rent raise. I told her that if she didn't like the rent raise, she was free to move. I then immediately called my Property Management Company and told them what happened and that I did not want it to happen again. I told my PM company to tell the tenant that if they call me again, their rent will be DOUBLED. The tenant has not called back.

I have said it before and I will say it again. Having all your rentals in one market would be like having all your 401K invested in Enron.

Diversification is a powerful tool to help with your real estate investing. While I agree flipping is better when it is local to you, long term investments can be spread out so you can take advantage of multiple markets.

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  • Mike McKinzie
    Investor · Westminster, CO · Member since 2009 · 1k+ posts · 1k+ votes
    15y

    You might want to consider buying a $30,000 rental elsewhere that will rent for $600 a month. The positive on that rental, about $300 a month, will offset much of the negative on the Vegas home. Just a thought.

    6Reply
  • Andy More
    Residential Lender · Columbia, MO · Member since 2010 · 90 posts · 26 votes
    15y

    1. No. $1,100 in rent on a 150k purchase is not a good deal in terms of cash flow! Plus, I dont like the idea of long distance landlording.

    2. I dont know and anyone who says they do is guessing.

    5. How far away from retirement are you? Mike's idea is good if you know what your doing.

    Good Luck

    0Reply
  • Paigow Chan
    OP
    Member since 2011 · 11 posts · 6 votes
    15y
    Originally posted by Mike M:
    You might want to consider buying a $30,000 rental elsewhere that will rent for $600 a month. The positive on that rental, about $300 a month, will offset much of the negative on the Vegas home. Just a thought.
    Originally posted by Andy More:
    1. No. $1,100 in rent on a 150k purchase is not a good deal in terms of cash flow! Plus, I dont like the idea of long distance landlording.

    2. I dont know and anyone who says they do is guessing.

    5. How far away from retirement are you? Mike's idea is good if you know what your doing.

    Good Luck

    Thank you for the quick responses!
    That is true that 150K for $1,100 rent is not too good.
    According the mortgage calculation, the mortgage on 120K (after $30,000 down payment) is less than $700. So the positive of $400 from $1,100 rent can cover the lost. It should be able to rent more if I am lucky. Mike, in your scenario, do you mean I can buy a property for just $30,000 and be able to rent it for $600? Where can I find such property?! I live in northern Virginia that I don't think there is any deal like that. Andy, I am 48 and my husband is 56. The reason I want to stick with Las Vegas is because we want to retire there and it will be easier to manage in the future. I would think the house will go up at some level after 10 years. Maybe I should rethink about it.
    But I am not familiar with other places...

    0Reply
  • Bryan P.
    Member since 2010 · 136 posts · 3 votes
    15y

    We are 3.5 hours north of you, Lewistown PA. Recently bought our first rental for 22,000 and it rents for exactly 600. It was almost exactly 30,000 in total investment. So that's kinda ironic.

    1Reply
  • Mike McKinzie
    Investor · Westminster, CO · Member since 2009 · 1k+ posts · 1k+ votes
    15y

    Andy

    Another person afraid of "long distance" land lording. Why? Owning rental property is not a hobby that you need to attend to on a continuing basis.

    I own 30 properties across six states, Virginia, Colorado, Texas, Oklahoma, Arizona and California. The very LAST thing I want to look at is a house I own or the tenant living in it. I have owned houses for 20 years and never seen them or talked to the tenant.

    I remember a seminar I went to decades ago and the speaker said that he had known real estate investors who drive by their rental property EVERY DAY and brag to themselves that they OWN that house. They treat it like it is one of their children. BIG MISTAKE.

    My time is better spent taking my wife out on a date, playing with my children or enjoying a real hobby versus showing property to a prospective tenant, unclogging a toilet or doing a lockout.

    I used to manage my properties and other people's properties. I had a 2 year old drown in a pool of a house I managed. I had tenants growing pot in the backyard. I had a husband murder a wife in one of my rentals. I have had to take the GARDEN HOSE into one of my rentals to wash it out. I have pulled down wallpaper and had live Cockroaches rain down on my head. I have had to let the DEA into a rental I was managing, via a search warrant. Etc., Etc., Etc.,.... You name it in land lording and I have probably been through it.

    I have the knowledge, experience, intelligence and ability to manage my properties, but I don't LIKE TO DO IT. Just a couple of months ago, I had a tenant go around my Property Manager, call me and complain about a rent raise. I told her that if she didn't like the rent raise, she was free to move. I then immediately called my Property Management Company and told them what happened and that I did not want it to happen again. I told my PM company to tell the tenant that if they call me again, their rent will be DOUBLED. The tenant has not called back.

    I have said it before and I will say it again. Having all your rentals in one market would be like having all your 401K invested in Enron.

    Diversification is a powerful tool to help with your real estate investing. While I agree flipping is better when it is local to you, long term investments can be spread out so you can take advantage of multiple markets.

    8Reply
  • Paul B.
    Real Estate Investor · Alpharetta, GA · Member since 2010 · 415 posts · 484 votes
    15y

    I think this is a terrible idea. You are under the illusion that your only expense with the second property will be the mortgage payment. The reality is that, at best, you're going to break even on it, so you're not helping yourself at all with respect to your original house, which is bleeding you of $5,000 a year.

    Let me ask you a question. You are upside down on a property by more than half its value; the house you paid $270,000 for is now worth only $100,000. (What exactly do you owe?)

    So, here's the question. Why don't you just walk away? I am not suggesting you do this, but why don't you?

    4Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y
    Originally posted by DeuceSevenOff:
    So, here's the question. Why don't you just walk away? I am not suggesting you do this, but why don't you?

    My crystal ball forecasts an argument coming :mrgreen:

    0Reply
  • Paigow Chan
    OP
    Member since 2011 · 11 posts · 6 votes
    15y
    Originally posted by Bryan Patton:
    We are 3.5 hours north of you, Lewistown PA. Recently bought our first rental for 22,000 and it rents for exactly 600. It was almost exactly 30,000 in total investment. So that's kinda ironic.

    Bryan Patton, thanks for the information! Is $22,000 for a condo? It is a good idea to check out the areas within few hours driving distance. I think I would need to find good real estate agent in the areas that I am not familiar with.

    We owe $188,576.39 on the Las Vegas house. First of all, the walk away will impact our 800+ credit score, right? Secondly, it is kind of irresponsible to do that since both my husband and I still have jobs with stable financial status comparing with millions others are under water. I would think many of you will agree on me.
    Investment means risk. Risk means lessons. Lesson means grows. That is why I am here to ask for advices because we made a bad investment. Walk away is not part of lesson. I do investment only when I have ADDITIONAL cash, not just because I have cash. And I will make sure I have other funds to cover the risk. Your opinions are welcome. I believe people walk away for their own reasons, but we just CANNOT do that.

    4Reply
  • Sharad M.Pro Member
    Carlsbad, CA · Member since 2010 · 1k+ posts · 1k+ votes
    15y
    Originally posted by Paigow Chan:
    Secondly, it is kind of irresponsible to do that since both my husband and I still have jobs with stable financial status comparing with millions others are under water.

    Paigow, I really, really respect you for this. There aren't too many people out there who will do what you and your husband are doing. It's really commendable to see people think like you do.

    Podcast Guest on Show #155
    4Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    15y

    Doing a "strategic default" is a hard decision. I applaud you for wanting to stick it out. That said, over the next 25 years you're going to pay something like $350K to pay off that loan, and you'll end up with a house that might be worth $200K. Not sure how much you've already sunk into this investment, but its a significant drain on your future. My guess would you will pay on this property at least another 10-12 years before its value catches up with with the loan balance, allowing you to sell without bring cash to the table. If you're willing to put that cash into the sale in order to escape, and especially if you can continue to save more, you could be out sooner. Doing a short sale (if possible) or a foreclosure is going to cost you 200-300 points off your credit score. Whether its better to get rid of this financial albatross and suffer that pain now or to stick it out. Once upon a time I'd have agreed with sticking it out. Now I'm not so sure. You're paying a very high price to maintain your integrity and credit score.

    Whatever you do, do not pay $150K for $1100 in rent. That's not a "That is true that 150K for $1,100 rent is not too good" deal. That's a horrible rental. If that's the best deal you can find, absolutely do not invest in rental real estate unless you have some inside knowledge that values are going to skyrocket wherever you're buying. Pretty sure that's not the case anywhere in Vegas.

    The most you can pay for $1100 in rent and be at least break even is $90K. Maybe you want to speculate on future values. Maybe you need a tax shelter (check with your CPA, this is WAAAY overrated, IMHO, on rental properties). Maybe you just want to build future retirement wealth. But if you're buying rentals, at least buy ones that don't cost you each and every month. You already have one of those.

    4Reply
  • Paul B.
    Real Estate Investor · Alpharetta, GA · Member since 2010 · 415 posts · 484 votes
    15y
    Originally posted by Bryan Hancock:
    My crystal ball forecasts an argument coming :mrgreen:

    Heh! No argument from me on this one. I am just thankful that there are still people in the world who live up to their obligations, no matter how painful that ends up being.

    Reading this post, however, really helped put me in the shoes of someone who was terribly underwater. (We're not talking 10-20%, either, but almost 50%!) As staunch a "pay your debts" person as I am, even I would have to think about whether to keep this one. It's a lot of debt to repay with no asset underneath. But I like to think I'd do the right thing here.

    0Reply
  • Stan Jackson
    Real Estate Broker · Fort Pierce, FL · Member since 2009 · 221 posts · 95 votes
    15y

    The ding of a successful Short Sale today would not have an impact on your scores 10-12 years from now, however, the cost to struggle with this under water property will last long behind that same time.

    Create yourself a spreadsheet, take out the emotions and look at the numbers. Maybe the end results will sway your decision to attempt a short sale. And, if the short sale isn't successful, then you have your morals to fall back on.

    In any case, good luck, I wish you two the best!

    2Reply
  • Andy More
    Residential Lender · Columbia, MO · Member since 2010 · 90 posts · 26 votes
    15y

    Mike M., I'm not afraid of long distance landlording I just dont think its a good idea for me and many other people that are willing to get involved. A newbie owning a long distance rental sounds like a disaster. The reason you can successfully LL long distance is probably because at one point you did manage your property and now know what to look for in a manager. With that being said, managing my own property saves me money! I understand the diversification argument however in the OP case, they already own a rental in Vegas so they would be diversifying by buying a rental around their home. Also, I don't drive by rentals regularly to give myself an ego boost, I drive by regulary to make sure there are no shenanigans going on at my property or neighborhood. I think that any good owner or property manager should do this regularly. A quote I like is, "The best pesticide is a farmers footsteps", I think this can be applied to landlording.

    0Reply
  • Loc R.
    Note Investor · Pasadena, CA · Member since 2009 · 849 posts · 544 votes
    15y

    This is turning out to be a great thread.

    Kudos to the OP for wanting to live up to their obligations, and everyone who has chimed in with their suggestions.

    Personally, I have gone back & forth as to whether I should invest in Las Vegas. I have several friends & colleagues who made the move out there. Though none of them are real estate investors, they are cognizant enough of their environment to tell me that, simply put, Las Vegas, the community, was, and still is, overbuilt.

    That doesn't mean you can't find a deal in Las Vegas, it just means you have to know what you're going up against. It also means you have to really know your neighborhoods, and what each neighborhood is trending towards. One tract of 2005 built houses might be inching towards 80% renters while another might be 80% owners.

    To the OP: if you want to retire in Las Vegas, right now would be a great time to acquire the house you want to retire in. Since you are adamant about paying off that loan, here are my initial suggestions:

    If you already own that house (the house you "overpaid" for), then what you do with that $30,000 is up to you.

    If the house you overpaid for is NOT the house you want to retire in, then it's time to do some (window) shopping at the very least.

    Another investment idea would be this: since paying down that overvalued mortgage would only return you the interest rate at which you're paying, how about taking that $30,000 to buy at a note at a 12% yield, and using that income stream to pay towards that "negative" amount you're bleeding out every month? No landlording, just a way to "right your wrong."

    0Reply
  • Michael R.
    Real Estate Investor · NY · Member since 2008 · 313 posts · 87 votes
    15y

    All my rentals are under 100k with must under 25k. Last year I bought 4 properties under 10k. Bought 2 for 3500.00$ both rented one for 500 one for 750. Much better cash flow then you will get with that vegas property. Do a mls search of rochester, ny , memphis, tn, st louis, indianapolis, etc to find profitable investment properties. You can find TONS of property in decent condition with cash flow for under 30k. Keep looking and read up on expenses. You will have tons more expenses besides your mortgage. Even if you don't have the expense right now you need to budget for it in the future.

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    15y

    I agree with Max's last comment - kudos for taking responsibility.That said, a short sale option may be in order as Stan suggested. Not a long term hit to credit,and you give the lender the "option" toaccept less, so you stay on the side of reponsibility.

    I am familiar with Vegas and you can buy rental properties there in decent neighborhoods for $50-$70k and get $1100-$1300 monthly rent which equals true cash flow. Using your cost averaging suggestion, you could help your recovery efforts. I would NOT suggest u buy a home there for$100k+ to rent for $1100 - cash flow loser.

    Podcast Guest on Show #130
    1Reply
  • Paigow Chan
    OP
    Member since 2011 · 11 posts · 6 votes
    15y

    I cannot believe there are so many you provide a lot of great advices! Now I have some deals of what the good investment is. I am so amazing some of you are such savvy investors to turn rentals into great cash flow (though I think Michael R. meant "Bough 2 for 35,000$.." not 3500$, right?), and I was just thinking how to cover my lose (I can image how many of you fell from chair by reading my investment strategy and tried to rescue the "Stubborn Cat".). I agree Mike M not to put all rentals in one market and never teat the rentals like children (it did break my heart when my PM sent me the front yard picture that dead big tree in the front yard due to lack of water, I don't have personal attachment with that LV property, but it was a beauty tree before...).
    More questions from "Stubborn Cat":
    (B.1) Can I really trust any Realtors indicate they have such property in long distance which can turn into cash flow?
    Where can I find those good Realtors?
    (B.2) If we (not rich, still have steady income) can walk away with Short Sale, who is taking the lose? Is the bank? Would that lose spread out to the lending industry? Would that worse the economic even further? I have a young friend who cannot refinance his home due to under value of his house and also worried about his job. He said his friend stops to pay the mortgage because the mortgage is more than the home value even his friend still has job and still live in the house. I hope my young friend won't follow the same. My point is if we do that, then other people with steady income may think they should do the same. I think there should be a regulation to prevent this. If you think back the housing bubble that one of scenarios is so many people using false income to buy/invest houses and the collapse lending system let that happened for years. Don't you see the similarity here if people walk away with cash in another hand? "Stubborn Cat" will stick with how to turn $30,000 into a good investment, I think that will be more "fun" to do and more questions to dig. I really appreciate all your helps.

    0Reply
  • Sharad M.Pro Member
    Carlsbad, CA · Member since 2010 · 1k+ posts · 1k+ votes
    15y
    (B.1) Can I really trust any Realtors indicate they have such property in long distance which can turn into cash flow?
    Where can I find those good Realtors?

    NO. For realtors, definition of Cash Flow = Rental Income - PITI. There are tons of more expenses to consider other than PITI. Are you only looking for properties in Las Vegas? I would try to find some investors on this website that are based in LV area and see if they can recommend someone, but I would still do tons of due diligence before buying another property. Make sure you post the details of the property you are considering on this website. Investors here can help you make a more informed decision.

    Yes, the bank will be taking the loss. But the bank's loss will be another investor's/homeowner's gain.

    Yes

    Yes, but probably not as much as a foreclosure would. IMO, foreclosures are much worse for the economy than SS are.

    Again, I really respect your thoughts and values. Honestly, I have no idea what I would do if I were in your situation. I like to think I will do the right thing and stick it out. I agree that we shouldn't try to take the easy way out of our problems. If we make a decision, then we need to own up to it and take full responsibility. I understand that it's a lot easier said than done.

    Good luck to you with your next investment decision. Now that you are on this website, I am sure it will turn out a lot better than your previous one. Please feel free to post any questions that you may have.

    Podcast Guest on Show #155
    0Reply
  • Michael R.
    Real Estate Investor · NY · Member since 2008 · 313 posts · 87 votes
    15y

    No I did buy both properties for 3500$ each (three thousand five hundred) Got them though a mailer campaign I did. Both were decent had new roofs and one had vinyl siding. One I had to put new vinyl windows in one last month but no big deal. The owner needed to sell quick and I could close quick.

    Bought one in dec for 2k. Needs a rehab- owner started and never finished. Has all new drywall and electric. House was boarded and I saw someone cutting the grass and asked if he owned and wanted to sell. He wanted 3k but I said Id pay 2k and he said that was good enough. Deals are to be had but they do take work to find.

    0Reply
  • Paigow Chan
    OP
    Member since 2011 · 11 posts · 6 votes
    15y

    Hi Michael R, wow, good for you! May I ask where the properties are. In last few days, I just realized I have been living my little world for too long.

    The more I learn from this website the more I find out that people are here to share success stories to inspire each other. I will need to work on that. No wonder I couldn't find a "Smilies" bursts into tears!

    2Reply
  • Andy More
    Residential Lender · Columbia, MO · Member since 2010 · 90 posts · 26 votes
    15y

    Michael R,

    I just sent out my second mail comapaign today so I like to hear sucess stories like yours! What do you think the market value of these properties you purchased are? Do you plan to flip or hold? Who was your mail campaign targeted too? Thanks

    0Reply
  • Mike McKinzie
    Investor · Westminster, CO · Member since 2009 · 1k+ posts · 1k+ votes
    15y

    Paigow
    There are quite a few investors right here on Bigger Pockets that flip properties. Off the top of my head, J Scott, Will Barnard, Alex Craig and many others and across many markets. I have seen Alex Craig offer properties in the $30,000 to $50,000 range, in the Memphis, TN area, that rent for $500 to $1,000 a month.

    Maybe one the BP flippers can steer you towards a quality investment that will offset your current rental loss!? :D

    Now for a little humor. I have nothing against folks managing their own property, it is just for me personally, my time is more valuable then driving by rentals to make sure no shinannigans are going on.

    Originally posted by Andy More:
    A quote I like is, "The best pesticide is a farmers footsteps", I think this can be applied to landlording.

    I prefer, "A watched pot never boils," personally. Besides, once a farmer reaches 100 acres or more, that is a heck of a lot of walking!!!!
    0Reply
  • Michael R.
    Real Estate Investor · NY · Member since 2008 · 313 posts · 87 votes
    15y

    The two I bought for 3500$ are worth about 20-25k each. I hold them both as rentals though. i think I will make more money in the long run just renting them out. The one I bought for 2k could sell for about 35k once rehabbed. The owner was real distressed thats why I got it so cheap.

    I advertise to people who owe taxes and people that own the house free and clear. Most of the time people laugh at my offer but sometimes they will call me back when they get more desperate. If I buy a house with taxes owed I will usually try to buy for 1$ then take subject to back taxes. I will work out a payment plan with the company who holds the tax lien. So I basically get the tax company to finance me. They usually require 15% of taxes owed down and then finance the rest over 15-18 months which is not a bad deal. I try not to drive around and look for distressed properties anymore I just look up the tax records and send out mailers. If I am out and see a house I like that looks distressed I will send a flyer though. I am investing in Rochester NY right now.

    Also my houses are not in areas where I would want to live but I invest to make money. I do keep my places nicer than most though.
    Good luck

    0Reply
  • Josh Ambrose
    Residential Real Estate Agent · Select a State · Member since 2011 · 22 posts · 2 votes
    15y

    I sell Real Estate in Vegas and I agree with the looking for the properties in the 60-70k range that rent for 1000+ a month, but if you can find a property like Michael R. found, go with those all day.

    0Reply
  • John C
    Real Estate Investor · SouthCentral, IA · Member since 2010 · 97 posts · 45 votes
    15y

    Those amazing deals like Micheal R is getting are out there and they are almost abundant. The last two properties I bought, both distressed, cost $5000 and $5500. One needed about $3000 in rehab and Im almost done with it. It will rent for $550 I am thinking. Other will need about $5000 repairs and will rent also for around $550. Deals are out there, just got to be willing to bid that low!!!

    0Reply
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