Hi everyone!
Ok I'm a long time reader, first time poster, trying to cut to the chase.
*we are late to ere and have worked years to try to get there and the economy threw a wrench in our plans. We have tried everything and now likely will need to take drastic measures.
* our beautiful wonderful house is our only stumbling block to ere.
*people can't sell their homes here for several reasons. Market flooded with new foreclosures cheap. We are all under water anyways, and things of this nature.
*I watch foreclosures here like a HAWK and I'm almost in tears knowing I could be mortgage free in a tiny 3 bedroom home for nothing, less than most new cars.
*some of the low cost foreclosures will allow a second dream and that's of walking lifestyle. Currently we drive 20- 30-45 minutes (each way) for our basic needs and the gas and time stinks. We have spent time in 2 asian countries and desire that walking, stay outside, tiny home lifestyle.
*we can't, won't, refuse to every get any sort of loan ever again, as in ever. (would only loan ourselves out of our 401k for extreme measures such as reaching ere by dumping current home)
* here's the risky part. We want to get the 401k loan, 5 years of payments, to buy a foreclosure. I'm tired of the great ones slipping away. We are afraid the deals will stop.
*doing this will basically require us to have 2 homes at once. for 5 years there would be two payments though there is no other debt. 2 home insurances. 2 up keeps. 2 homes with possible frozen pipes. That list scares me. Taxes times two.
*biggest question of all, WHAT IF WE CANT SELL THIS HOME? The market is literally flooded and the town overbuilt in a boom.
*due to current mortgage and upkeep on very old cars, (saving for cars monthly) having 2 homes will have us on a very tight budget.
* just to repeat, I'm terrified this house wont sell and we will have 2 homes.
*we could rent the smaller home temporarily but the homes are so tiny that the rental client in that range tend to want low rent prices and they trash the homes. They can cause thousands of dollars worth of damage more than any deposit could cover. Kicking out non paying renters is a real pain here.
*renters here ask for a lot of extras. Things we likely wont be able to afford as we try to sell first house and reach ere.
*insurance is quite higher here if you own a rental.
*rentals site empty here for long periods of time? Even when priced lower than market value?
* we also just DON"T want to be landlords.
*we will have 2 kids in college during all this, though that seems mostly covered (great smart kids with good heads on their shoulders, one is determined to be a young Jacob) Then one child left at home.
I feel like I can reach out and touch our dream but this beautiful nice wonderful home is really holding us back from other beautiful things in life.
Thanks if you have any thoughts.
is this too risky?
Welcome to the forum
I have to say I'm not at all clear what your proposing here and what your trying to achieve. Are you saying you want to downsize, pay off the mortgage and move to a cheaper house, but your beautiful wooden house won't sell ?
Without knowing the numbers its hard to assess your situation.
I have to say I'm not at all clear what your proposing here and what your trying to achieve. Are you saying you want to downsize, pay off the mortgage and move to a cheaper house, but your beautiful wooden house won't sell ?
Without knowing the numbers its hard to assess your situation.
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outsidethebox
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- Joined: Tue Mar 13, 2012 7:13 pm
Yes want to downsize. People try to sell for years here then just end up walking away because they cant sell.
On the other hand. If we dont jump now we wont be able to buy such cute little foreclosed homes again.
I'm suffering yet benfitting from the bad housing situation here.
But we are not ERE enough to own 2 homes while praying first sells.
Is this a time where you suffer in the short time to reach long term benefits?
On the other hand. If we dont jump now we wont be able to buy such cute little foreclosed homes again.
I'm suffering yet benfitting from the bad housing situation here.
But we are not ERE enough to own 2 homes while praying first sells.
Is this a time where you suffer in the short time to reach long term benefits?
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George the original one
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- Location: Wettest corner of Orygun
If you have to ask, then it is probably too risky.
1) Owning two homes with two payments is only reasonable for ERE if you can make the financial math work first.
2) Borrowing for the second home is not in any ERE plan, even if it is borrowing from yourself.
3) Borrowing from your 401k is fraught with problems.
4) Your plan relies on owning a rental, yet you have no inclination to be a landlord. This, I think, is the most overriding concern.
1) Owning two homes with two payments is only reasonable for ERE if you can make the financial math work first.
2) Borrowing for the second home is not in any ERE plan, even if it is borrowing from yourself.
3) Borrowing from your 401k is fraught with problems.
4) Your plan relies on owning a rental, yet you have no inclination to be a landlord. This, I think, is the most overriding concern.
If the rental and sales market are flatlining in your area then taking out a second loan to invest in a second property seems extremely risky. A house you cant re-sell, rent or live in to reduce your living expenses is too expensive at any price. Its just a large drain on your finances.
One alternative - have you considered trying to rent your current home and renting somewhere cheaper to pay off the mortgage quicker ? Or taking in a lodger ?
One alternative - have you considered trying to rent your current home and renting somewhere cheaper to pay off the mortgage quicker ? Or taking in a lodger ?
The only way to make this work is to rent out one of the houses. Why?
There is no guarantee you can sell either house in the future. In fact, it is likely the real estate market is still rather flat in the worst areas 5 years from now. I'm still seeing significant house price cuts in the DC area, which is much better off than most places. Also, there is still a large inventory of foreclosures that hasn't hit the market yet.
Even if you could do this and survive with 2 payments you would lose so much in taxes, insurance, upkeep, and selling into a potentially still depressed market that the only way you stand a chance is to rent one out.
Unfortunately, that seems like the last thing you want to do.
Don't forget the one variable that you have to factor in is what you would have made with this money if it was invested during this time period.
There is no guarantee you can sell either house in the future. In fact, it is likely the real estate market is still rather flat in the worst areas 5 years from now. I'm still seeing significant house price cuts in the DC area, which is much better off than most places. Also, there is still a large inventory of foreclosures that hasn't hit the market yet.
Even if you could do this and survive with 2 payments you would lose so much in taxes, insurance, upkeep, and selling into a potentially still depressed market that the only way you stand a chance is to rent one out.
Unfortunately, that seems like the last thing you want to do.
Don't forget the one variable that you have to factor in is what you would have made with this money if it was invested during this time period.
I think you need to remember that your home and the home you might buy are in the same down market. That means that you may need extra time to sell your current home, but also that the other homes are likely to be there too.
Never fall in love with real estate -- either what you own or what you covet. Better to be patient and not take big chances that will keep you up at night. Put your house on the market when you are ready -- I bet you the other houses will still be there when yours is sold.
Relax -- this is not a race.
Never fall in love with real estate -- either what you own or what you covet. Better to be patient and not take big chances that will keep you up at night. Put your house on the market when you are ready -- I bet you the other houses will still be there when yours is sold.
Relax -- this is not a race.
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outsidethebox
- Posts: 4
- Joined: Tue Mar 13, 2012 7:13 pm
Thanks everyone for your replies.
Maybe I should not have worded this in an ERE way.
Ok hows this? This current house payment is killing me. Hows that? LOL.
I'm sick of this payment. Paycuts and drastic increases in basic needs grew out of proportion to the previously affordable payment.
It made sense at the time, saftey, good school, no more bad neighbors and so on and so forth. But now....I wish I had just paid the last one off.
It's not a race for me at this point. I can't even see the starting line to the race yet, much less the finish line LOL.
Maybe I should not have worded this in an ERE way.
Ok hows this? This current house payment is killing me. Hows that? LOL.
I'm sick of this payment. Paycuts and drastic increases in basic needs grew out of proportion to the previously affordable payment.
It made sense at the time, saftey, good school, no more bad neighbors and so on and so forth. But now....I wish I had just paid the last one off.
It's not a race for me at this point. I can't even see the starting line to the race yet, much less the finish line LOL.
What's the penalty if you default on your current house? If you intend to never take another loan than your credit score doesn't matter.
I know a lady who paid cash for a $40k house, then ten years later got a $160k home equity loan on it which she used to pay for her dream house and signed her other house over to the bank for a zero payment situation.
If the situation is as dire as you say, I'd default on your current home, put your stuff in storage, camp for the summer to save money and then use your 401k money to pay cash for an energy efficient foreclosure.
I know a lady who paid cash for a $40k house, then ten years later got a $160k home equity loan on it which she used to pay for her dream house and signed her other house over to the bank for a zero payment situation.
If the situation is as dire as you say, I'd default on your current home, put your stuff in storage, camp for the summer to save money and then use your 401k money to pay cash for an energy efficient foreclosure.
If a 3 br house is "tiny" then I'm assuming you have tons of free space. Since the current mortgage is killing you, a new loan (without additional income) will be worse.
What if you start renting rooms? If you are a live in landlord you can keep a better eye on things. Take your time finding the right tenant and maybe even price below market to find the perfect person?
I also agree with others that you could rent the larger place and live in the smaller.
What if you start renting rooms? If you are a live in landlord you can keep a better eye on things. Take your time finding the right tenant and maybe even price below market to find the perfect person?
I also agree with others that you could rent the larger place and live in the smaller.
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BeyondtheWrap
- Posts: 598
- Joined: Thu Jul 22, 2010 3:38 pm
- Location: NYC
short answer: yes, it sounds too risky.
longer: instead of going into great detail on lots of speculation, it would be helpful if you shared a lot more detail about the situation if you feel comfortable doing so. some basic info like prices, cities or zip codes, current loan amount and payment, square footage...
as others have shared, you have many more options beyond (1) buy a cheap foreclosed-on house, and (2) maintain the status quo.
longer: instead of going into great detail on lots of speculation, it would be helpful if you shared a lot more detail about the situation if you feel comfortable doing so. some basic info like prices, cities or zip codes, current loan amount and payment, square footage...
as others have shared, you have many more options beyond (1) buy a cheap foreclosed-on house, and (2) maintain the status quo.
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outsidethebox
- Posts: 4
- Joined: Tue Mar 13, 2012 7:13 pm
The bottom line is, we want to leave the rich side of town LOL. We currently live small amongst the big. We are currently in a 1600 sq feet with a large family. We are surrounded by much larger homes.
Our goal is to live in a tiny mill house or shotgun house, if your familiar with those. We are finding newer ones that somehow were built under the 1600 sq ft requirements. The other town is full of shot gun homes. We want to buy one, live in it, then buy others one at a time to rent out.
Our goal is to live in a tiny mill house or shotgun house, if your familiar with those. We are finding newer ones that somehow were built under the 1600 sq ft requirements. The other town is full of shot gun homes. We want to buy one, live in it, then buy others one at a time to rent out.