Real estate investors get no sympathy

May 8th, 2009, 3:00 am · 11 Comments · posted by Mathew Padilla

Randy Johnson, president of Independence Mortgage Co. in Newport Beach, author of “How to Save Thousands of Dollars on Your Home Mortgage” and a mortgage broker since 1983, answers questions…

Syed in Westminster asks:
Q. I have a question regarding my rental property in Las Vegas. When I bought the property it was $90,000 and now its $30,000. I have a second on this property, so in total I owe Chase Bank $121,000. I pay about $1,100 monthly (with association fee), and maximum I can get in rent is $700. Please let me know if there is any way I can save my property from foreclosure.

A. Sorry, but I think that you are between the proverbial rock and a hard place. I see nothing on the horizon that might save you as most of the rescue programs seem to be for owner-occupants. That said, it is always a good idea to exhaust all possibilities with the lender before giving up.

(Blogger’s Note: I was curious to see if there really are condos for sale in Las Vegas for $30,000. The answer is Yes. On www.realtor.com I found 249 listings with maximum value of $30,000 in Las Vegas.)

Editha asks:
Q. Current situation: 15-year mortgage balance is $111,000 at 5.17%. It will be paid off in 2018 and payment is $1,217 a month. I have a second 15-year for $83,000 at 4.75% — I just started this loan a few months ago. Payment is $649 a month. Also, I would like to pay off all credit cards in three to four years. I have approximately $15,000 in credit on four cards. I’m paying each card $150, for a total monthly of $600. I’m able to handle all my payments. My question: Will it be wise for me to refinance and consolidate to a new 30-year loan and just forget about the fact that I will be done with my mortgage in nine years?

A. Just refinancing your 15-year loan doesn’t make sense, as you can’t drop the rate enough. If the second is fixed, no worries there either. But if it is a Home Equity Line of Credit, it is variable, and the rate will go up some day, so you could fix it at today’s low rates. If you decide to do something, I’d pay off the credit cards on which the rate is surely north of 15%. Bottom line: the economics are not compelling, so do what you are comfortable with.

That’s it. If you want Johnson to answer a question, email it to Mathew Padilla at mapadilla(at)ocregister.com. Include your name or nickname and the city you live in — that information will be published with your question.

Johnson will answer up to three questions each week, so keep checking back for a response. If many questions are submitted, it could take a while to get a response, or he may never get to it. Also, readers keep submitting variations on the same question, which has already been answered: what to do when you can no longer afford your mortgage. I have decided not to publish most of those questions, because they are repetitive, although I appreciate the difficult situation many homeowners are in these days.

Read prior questions and answers by clicking on the headlines below…

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Craig Rolfe says:

May 8, 2009 at 6:11 am

To Mathew Padilla,

If you had to pick between Orange County, Ca or Orlando Florida which area do you think would make more money in the long run? I am hitting 40 and i am tired of paying rent

Thanks
OCCJ

Post Reply

NationalBubble.com says:

May 8, 2009 at 10:11 am

would you have been happier losing all your down payment had you bought a couple of years ago?

patience my friend, patience.

you need to give sellers time to realize that the housing bubble is not coming back any time soon. You’ll get much better prices in any of those places a year from now.

Post Reply
Mathew Padilla, Reporter says:

May 8, 2009 at 10:47 am

Craig,

Good to hear from you. But I have no idea, and, personally, I’d wait a while, perhaps a long while, before buying in most places. The best time to buy is when rates are high and prices low, because you can refinance next time rates drop. But who knows when rates will rise.

Post Reply
Larry P says:

May 10, 2009 at 10:42 pm

Craig, what jobs are there in Orlando? Or any part of Florida for that matter? Florida is a one-trick pony economy now that Real Estate speculation has come crashing down: Tourism! That is LOW WAGE! Also, half of Florida will be under water in 3 or 4 decades besides being hit annually by ever-fiercer hurricanes if most models of Global Warming are right. Have fun with that! Florida RAISED the property taxes on its citizens this year AGAIN (same last year) and I have seen homes with taxes and insurance that equaled in the monthly amount due the amount of the mortgage for the home they were being charged on…..you want cheap homes with high expenses with no hope for a dynamic financial future, choose Orlando. You want long term growth, do as National Bubble says and sit tight and be patient but do it here in Orange County.

Post Reply

T.O. Jason says:

May 8, 2009 at 9:48 am

$30,000 condos are surprising, but so are loans with current combined LTVs of 400%! How would you like to be an investor sitting on a pile of those?

Talyssa says:

May 8, 2009 at 11:19 am

someone should tell Editha about snowball calculators. Its unlikely that all 4 cards have the same interest rate, so instead of splitting her 600 dollars evenly between them she should be paying minimums on 3 of the cards and putting all the rest down on the highest interest card until its paid off, rinse, repeat. I realize its not specifically relevant to her mortgage but paying off her credit cards faster (which this WILL do) will mean she’ll have more money to turn on the mortgage later. Or put in savings. Or whatever.

Liar Loan says:

May 8, 2009 at 1:40 pm

Nice advice Talyssa!

Post Reply

Enlightenment says:

May 8, 2009 at 12:06 pm

Suckers!

Bill-1a says:

May 8, 2009 at 10:31 pm

Mathew, I can’t believe you said to wait a while, maybe a long while before buying…..although I agree, I would think all your real estate cronies would be pis-ed to see you say that.

Tex says:

May 18, 2009 at 1:49 pm

And of course California has no earthquakes or forest fires, etc., - right? You can purchase nice homes currently in parts of Florida for well under $200K - and even under $100K. Property taxes are generally probably not a whole lot higher than California, and there is no state income tax either. Overall tax bill; probably a good bit lower than California. Jobs are a major issue, true; but California “ain’t looking too good” these days either; not now — or into the forseeable future. Houses are to be lived in, and not to be objects of speculation. Very long-term, houses go up at just imperceptibly over the underlying rate of inflation (see chart link below). As things get totally out-of-whack as they have done within the past decade, the country will “experience” a “once” in every 2nd- or 3rd-generation “economic gravitational reset” of housing prices. If this didn’t happen, then everyone would have to pay a million dollars for a 6′ X 8′ outhouse by this time. How many “normal working folks” do you think could “afford one” at that price? The “supply” of “greater (California) fools” has finally run out. “Economic gravity” is going to bring California back down to earth HARD. VERY, VERY HARD. It’s long past time for all Americans to “relearn” the economic truths of past generations. You’re going to have to cut your lifestyles back; WAY BACK (and actually start to “save the old-fashioned way.”) One hard-earned and hard-saved buck at a time!

A History of Home Values (graph 1890 to 2006)
http://www.investingintelligently.com/wp-content/uploads/2006/08/a_history_of_home_values.png

May 26, 2009 at 1:50 pm

Home Prices Continue Downward:
http://online.wsj.com/article/SB124334273595354315.html

House Crash News:
http://patrick.net/housing/crash.html