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I have an I/O ARM and am doing just fine with it. I put 20% down and my place is still worth well above what I paid for it. It has come down from its peak. But it's just fine. 100% financing on I/O would be a different story.
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2022 BMW 530i 2021 MB GLA250 2020 BMW R1250GS |
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Unconstitutional Patriot
Join Date: Apr 2000
Location: volunteer state
Posts: 5,620
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Passive losses can generally only be deducted against passive income/gains. That limitation is modified if you're considered a real estate professional. The basic requirement is that you spend at least 750 hrs pa in RE activities (hunting, buying, selling, managing, landlording, etc).
Do not underestimate the major pain the ass landlording can be, especially on a small scale (one or two properties). The rental vacancy rate is trending near multi-decade highs and a LOT of homeowners are reverting their primary residences to rentals when they can't sell. On the flip side, the upcoming foreclosure monsoon of the millennium and tightened lending will replenish the tenant pool. It might not get better, but it might not get much worse. The numerous homeowners converting 'don't-want-it' properties to rentals is making me seriously consider selling all my rentals. I can't compete with landlords that enjoy taking losses on paper and worse yet, actual cash losses, on their investments. ![]() I like Garth's idea of paying down principal in anticipation of a future refi. I feel renting is a poor option. What's wrong with banking the loss you'd generate renting the property and holding off on a move? The only thing you'd give up is a new shack and another house payment. It can't be that awful. jurgen |
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No Band
Join Date: May 2007
Location: The Casino
Posts: 3,901
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Hey Terry,
I think that if I was in your position that I would shop around for lowest apr fixed rate mortage and pay whatever you need to on the princaple in order to get the loan. It may hurt you a little now but the payoff would be in the savings of interest over the years. I purchased my home on a 5% fixed rate 180 month note and am already 30% paid off on the loan. I would recommend doing the same thing if you can afford to. I wish you the best on this and hope you are able to work it out in a positive way.....
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Registered
Join Date: Jun 2006
Posts: 1,125
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"Subprime" mortgage crisis is what you get when you lower interest rates excessively, as Greenspan did four times in January, 2000--coincidentally when Mr Bush took office. The result was 1% CDs, and adjustable rate mortgages(ARMS) which were too low and inevitably going to rise. There was a boom in the housing market and a jump in real estate values. Despite the recent lag in some parts of the country, real estate, in my view, is still a great investment (especially now), since the population is still growing, last I looked.
I remember at the time of 1% CDs I refinanced my fixed rate mortgage to another fixed rate at 5.3%. Forget what the first mortgage rate was--probably 2 points higher. That seemed to me to be the wise thing to do at the time--staying with a fixed rate. Because I knew sooner or later, Mr Greenspan was going to raise those rates again, as he did, and ARMs were going to approach the fixed rates. I never felt ARMS were the way to go, because of what has happened to a lot of people who found they were in over their heads after a few rate adjustments. The moral of the story is don't screw around with interest rates too much. Too low creates the credit problems we have now. Too high starves the housing market. Right now, rates are probably a bit too high. Of course, I'm one who believes interest rates don't have a damn thing to do with inflation these days--it's all about the price of oil(energy) and cheap goods from China and Asia. The best thing the Fed can do is stop trying to overmanage the economy and the stock market with interest rates, and settle on a low figure which keeps capital investment strong. The best inflation fighters are cheap oil and made in China. And cheap oil means demand < supply, or supply > demand. Take your pick.
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'03 Boxster ***** '82 911SC **** '98 BMW Z3 ** '87 300Z *** '80 BMW 320i **** |
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Did you get the memo?
Join Date: Mar 2003
Location: Wichita, KS
Posts: 32,554
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Quote:
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‘07 Mazda RX8-8 Past: 911T, 911SC, Carrera, 951s, 955, 996s, 987s, 986s, 997s, BMW 5x, C36, C63, XJR, S8, Maserati Coupe, GT500, etc |
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Registered
Join Date: Jun 2006
Location: Florida
Posts: 160
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And just up the road, we're already at a 25% decline.
It's not pretty - particularly since it is going to cost us (no ARM - just an upcoming move). But from a big picture standpoint, it is probably a necessary correction. Home prices here outstripped the abilities of most area salaries. But necessary or not, there's nothing fun about being upside down. I don't think it's over yet.
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'83 911sc '86 944 Generic vehicle made in this century |
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Did you get the memo?
Join Date: Mar 2003
Location: Wichita, KS
Posts: 32,554
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I do feel for you guys, it can't be fun. A friend of mine is attempting to move back to KS from SoCal, and not finding much luck selling his townhome in Orange Co. I think he will be thrilled to break even.
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‘07 Mazda RX8-8 Past: 911T, 911SC, Carrera, 951s, 955, 996s, 987s, 986s, 997s, BMW 5x, C36, C63, XJR, S8, Maserati Coupe, GT500, etc |
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Quote:
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Edministrator
Join Date: Aug 2003
Location: SF east bay
Posts: 24,797
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What's your current market value and loan balance(s)?
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Registered
Join Date: Mar 2003
Location: Naples,FL
Posts: 3,469
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Shockingly enough I did put down 20%.
![]() Cost = $315,000 Owe = $295,000 Worth = $270,000 |
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Dog-faced pony soldier
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That'll help you.
3-6% appreciation is what it SHOULD be and if that's the market in KS, consider yourself lucky - although I don't know if I'd expect it to stay that way for long. . . This is going to get a lot worse before it gets better.
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(the shotguns)
Join Date: Feb 2006
Location: Maryland
Posts: 21,688
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if you are in a situation where you would need to eat up a significant portion of your savings just to sell a house that you may well not be able to afford in a few years then i would call that an emergency. not picking on anybody here but a lot of the comments i am seeing on this thread are going to be memorialized by newspapers in the coming years when they report on the large number of undercapitalized speculators losing their homes. some of you guys are playing games with i/o loans and such that you should not be playing. i certainly hope i'm wrong but i doubt it.
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***************************************** Well i had #6 adjusted perfectly but then just before i tightened it a butterfly in Zimbabwe farted and now i have to start all over again! I believe we all make mistakes but I will not validate your poor choices and/or perversions and subsidize the results your actions. |
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Registered
Join Date: Mar 2003
Location: Naples,FL
Posts: 3,469
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Bad investment yes, but no worse than renting. |
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(the shotguns)
Join Date: Feb 2006
Location: Maryland
Posts: 21,688
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no kidding that is an excellent point! hopefully won't be a big impact but it certainly is something to consider.
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***************************************** Well i had #6 adjusted perfectly but then just before i tightened it a butterfly in Zimbabwe farted and now i have to start all over again! I believe we all make mistakes but I will not validate your poor choices and/or perversions and subsidize the results your actions. |
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Stressed Member
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Here's a good example of the joys of landlording - I just put a very nice house on the market that was rented for the last six months. After a few months of on time rent, the tenants stopped paying and answering the phone. After a couple months of eviction proceedings the owner was shocked that all the carpet, cabinets, appiances, and fixtures were gone. Big insurance claim, lots of out of pocket expenses. So much for the rental paying for itself.
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-------------------- Garth 70 911E 08 Buell XB12XT |
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Registered
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If you already planned to be in a house for a short enough time for an ARM to make sense, then I/O is not necessarily a bad option to add to it. If you have traditional P&I amortization on a 5/1 ARM, you still wouldn't make a dent in your principle balance before the first adjustment. Sure, you could pay extra princ. each month, but you can do that with I/O as well. When I get a real house, the kind I plan to set up with a lift in the garage, compressed air, 220V, you know, the kind I plan to keep for a long time, well, that's the kind of house you want to pay down your princ. balance on as fast as you can. Something like I have now, a shoebox condo to hold me over while I get married and figure out where I'm moving next, is not a longterm kind of house. I can't imagine getting a 30 yr. fixed on something like that, since I don't want to be a landlord after I leave the area. Though I will be for a year or two.
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Registered
Join Date: Mar 2003
Location: Naples,FL
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I considered renting my old condo. When I calculated in maintenance fees, lawn care, pest control, taxes, etc. I took $500 a year loss. The only reason to do this is if you hoped the value would increase. I sold at the top of the market and made %65 on my money.
This market will be prime for renting aside from the above referenced renters. |
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Now in 993 land ...
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If you want to stay in the house, refinance ASAP. Throw your savings at it (you are paying towards the principal, so it's not like you are wasting the money) and get it over with. Speculating that the house will go up in value is very risky. You need to go with worst case. If it drops another 20-30%, you will loose it.
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Cars & Coffee Killer
Join Date: Sep 2004
Location: State of Failure
Posts: 32,246
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Terry, I'd sit down and run some numbers for a "worst case scenario" over the next two years (whatever the maximum rate is on your loan). If you are comfortable with the outcome, great.
If you are not, figure out what you can do now to avoid that situation later. There's a lot of good advice on this thread, but it all comes down to your tolerance for risk.
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Some Porsches long ago...then a wankle... 5 liters of VVT fury now -Chris "There is freedom in risk, just as there is oppression in security." |
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Did you get the memo?
Join Date: Mar 2003
Location: Wichita, KS
Posts: 32,554
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Around here, I'll be shocked if we see any significant impact. Even in the peak of the bubble days, we never saw more than 3-6% appreciation (depending on area of town). There wasn't big money to be made by speculating, but not much risk either. Forclosures are up and rental occupation is at record highs, but our market hasn't really stumbled. We've seen good population growth in the last few years, I think that has helped make up for the forclosures.
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‘07 Mazda RX8-8 Past: 911T, 911SC, Carrera, 951s, 955, 996s, 987s, 986s, 997s, BMW 5x, C36, C63, XJR, S8, Maserati Coupe, GT500, etc |
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