Debt Conoslidation Articles

Losses And Gains In Real Estate

It’s a tough real estate market nowadays in this horrible economic situation we have found ourselves in. Home prices have plunged throughout the country and are still falling in places. For those who bought when the market was overvalued a few years ago, times are especially tough. Mortgages were given to any Tom, Dick or Harry and they had ridiculous terms which left those mortgage holders in a bad way.

I live in California, where the prices of homes five years ago was way above the assessed value and people routinely had buyers with fat checkbooks knocking down their door to get into homes. Unfortunately, I had just moved to Los Angeles, and I needed a place to live. Going with the conventional wisdom of buying is better than renting, I bought property.

This mindset put my wife and I into a condo that we could not nearly afford. When we applied for the mortgage we were sure we would be denied but when they said yes, we just figured they were smarter than us. Well, the mortgage was an interest only and so we were not building equity. When my wife got pregnant again, she decided to leave her job and full-time salary with it. We were setting and had set ourselves up for trouble. As things got worse and bills piled up, we found ourselves on decrepit furniture with home space heaters to warm us.

As was bound to happen, the housing market and economy collapsed. Our home devalued quickly but our mortgage payments did not. Now, not only could we not afford the home, we couldn’t sell it at a profit and barely sell it at a loss. We went through a bankruptcy to get rid of our debt and decided that to free ourselves up from all financial burdens, we would sell the home through a short sale if we could.

We are currently doing much better renting a home. I hate that we went through what we did but, had we not, we may not have learned some valuable lessons.

Income property is where I would put my money. I would have a tenant to pay the bills for me. The home would need some work when we bought it but not too much. Nor more than a coat of paint and a few cheap home decor accents wouldn’t take care of. The home would not be more expensive than I could afford and would even be quite a bit below my price range. Finally, the mortgage would be fixed and income earning.

I wouldn’t want to do this again and have to worry about covering mortgage monthly without the income to do it. I would own something with obvious value and not sell until it was a truly decent resale property regardless of the economy.