Time limit-Please answer soon! - Posted by Mickey

Posted by Katherine (Hawaii) on September 19, 2001 at 15:39:38:

Tom’s right. If you plan on renting it out you need to have some positive cash flow even if it’s only $200 a month. You should seriously rethink your decision, anyways, I think real estate prices are going down right now so don’t be in such a rush to grab anything on the market.

Right now I’m planning to buy this 1b/1ba for $30,000 LH until 2041. Maintenance fee is $190 and mortgage should be $250-300. There’s a renter there already that wants to stay there and he’s paying $650 every month on time. I think you should start out w/ something small like that if money is tight.

Time limit-Please answer soon! - Posted by Mickey

Posted by Mickey on September 19, 2001 at 06:06:12:

Ok, I am at the loan application stage of my first purchase. I signed yesterday, my hubby will go in today. Should I be pruchaseing a “good deal”, knowing I will have to depend on getting a renter before the first payment is due? Probably not. But it’s a risk for the opportunity to get the ball rolling for my investments. What advice can you give before it’s too late?

DON’T just make offers! - Posted by Ron (MD)

Posted by Ron (MD) on September 19, 2001 at 08:36:36:


Based on the information you gave…coupled with the critical information that you didn’t even think to give…it is clear that you have no business entering into this deal.

You’re right, it is very unlikely that you will be able to walk away from closing with cash. Furthermore, sensible investors don’t want to have to borrow money up front to pay for expected negative cashflow down the line.

As for what exactly to do now…

The listing agent and your buyer’s agent will both be very unhappy with you. You will definitely earn a (well-deserved) bad reputation with them. As far as hurting your reputation long-term with your local RE industry, it is doubtful unless you are in a very small town. Don’t get me wrong, I’m not saying you should shrug off what you did…it was dumb and unprofessional, but it won’t put you out of business forever.

As for the economic cost, it may be zero. Don’t let your husband sign the contract or loan app. Presumably, you have a financing contingency in your purchase/sale agreement that will allow you to recover your earnest money if you cannot get financing. You are very unlikely to get financing if your husband (and bread winner) won’t co-sign the deal.

I would be very apologetic and humble and be honest with your agent and mortgage broker, leaning heavily on your over-zealousness and inexperience. Presumably, the house isn’t even officially off the market until your husband signs, so the seller hasn’t lost any sales time.

Going forward, you need a lot more studying. Also, seek advice here before you sign a contract.

Ron Guy

Put the pen down and back away! - Posted by Mark-NC

Posted by Mark-NC on September 19, 2001 at 07:48:36:

I am going to get right to the point. You are setting yourself up for a fall. Just because you can buy the place Doesn’t make it a deal.

If you have no reserve and you are not making your money going into this deal you are breaking 2 cardinal rules of real estate investing.

In my opionion you should not do this, be smart about your investing and keep your risk to a minumum when you get started. Do some cash deals first and build up your reserves before you even attemp a situation like this. Other wise the ball you get rolling will turn into a giant snowball of problems and possible financial ruins.


Re: Time limit-Please answer soon! - Posted by Katherine (Hawaii)

Posted by Katherine (Hawaii) on September 19, 2001 at 06:19:31:

Well, sounds like you do have a decision to make.

First, do you have enough money to cover the first payment if (worse comes to worse) you can’t find a renter? What about emergency money (at least couple hundred) if something should break? You need a little bit of back-up so you feel better about hte purchase. That’s just my point of view.

On the other hand if you are really confident that you will find that renter then go for it. Also, you’re right it is important to get started…if you keep putting it off because you’re scared or the money is tight then you’ll never get started.

It’s a tough decision, but one that you have to make yourself because it’s your money and your investment. Last bit of advice, follow your heart if in doubt. Listen to what your heart/mind is telling you. If you are positive and confident about it then definitely go for it. Good luck!

Re: DON’T just make offers! - Posted by Mickey

Posted by Mickey on September 19, 2001 at 09:16:57:

Thank you, too, Ed, for being harsh, but honest. I mean that.

Mark speaks the truth ! nt - Posted by Tom – IN

Posted by Tom – IN on September 19, 2001 at 08:20:39:


Re: Put the pen down and back away! - Posted by Mickey

Posted by Mickey on September 19, 2001 at 07:59:31:

Thanks Mark. I guess I’m kinda leaning that way, but also afraid to let it go. I asked Tom another question before I saw your response. Do you want to look at it?

Re: Time limit-Please answer soon! - Posted by Mickey

Posted by Mickey on September 19, 2001 at 06:43:24:

Thanks Katherine. I don’t have back up. I had planned to, but the payments will be $1010 plus ins. & taxes. I’m not sure I can get a renter for more than that. I should be able to because of the area, but I know my family couldn’t pay that high rent. Once the loan closes we’re stuck, right. This loan is suppose to be one where we can’t sell for at least 1 year. I really wanted to get a partner who’d pay 1/2. The down payment is already taken care of. If someone will take 1/2 the mortgage payment, I would split 1/2 the proceeds from the sale.

Re: Time limit-Please answer soon! - Posted by Tom – IN

Posted by Tom – IN on September 19, 2001 at 07:41:47:

If you aren’t sure that you can get a renter for at least $1300 per month, then walk away from this one. You are going to have vacancies, and you are going to have maintenance. The worst part is that you are going to have maintenance the worst when the building is vacant.
Sounds like this is not a good deal. Is this a fixed rate mortgage? If not, remember that we are now at our lowest interest rates in several decades. In the long run, interest rates are gonna go UP. When the interest rates go up, your payments go up.
You haven’t given us any details, but I’d bet that you have agreed to pay a price equivalent to about 100 or 110 months rent. You need to look for properties where you can buy them for perhaps 50 to 70 months rent.
In short, why be in the rental business if you can’t make a profit? Unless you are wealthly to start with, why buy a property which won’t cash flow?
Why don’t you revamp your program so that you market yourself and let Motivated Sellers find you. Then you can buy properties at wholesale or below, instead of at high retail.