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real estate musings

December 26th, 2011 at 03:46 pm

Happy Holidays everyone! I enjoyed reading everyones Christmas blog and hearing about their family celebrations.

BB's father came down here to GA for a week and we spent the day watching movies. Relaxing day for sure.

On the real estate front, I last stated that we were going to look at a property for a rental income.

We went and saw the place that day, it is very impressive. I call it "The Chocolate House". It is painted a chocolate brown with white trim. It is a duplex and with 4300 sq ft it is huge! One of the biggest duplexes I have seen in the city. The upstairs is 5 bd 2 bath, and the downstairs is 4 bd 2 bath. It needs to be cleaned up, fresh paint and it'll be ready to rent.

It's a foreclosure listed at $189,900. We put in an offer for $165,000 with 10 day closing. The bank countered at $185,000 and asked for 10% earnest money.
We have countered at $170,000 with 10% earnest money. We are waiting to hear what the response is.

We went out and looked at it again 2 days ago to double check everything before we countered. We went over it as thoroughly as we could. It has been winterized, so the water and electricity is off. But assuming those areas are good, for work we found:

Thorough cleaning/touch up paint needed
Washer/Dryer upstairs needs to be replaced
Stove downstairs needs to be replaced
Upstairs toilet missing
Upstairs kitchen sink faucet needs to be replaced
Some porch boards needs to be replaced

The biggies is the roof and siding.
The roof might be leaking in spots. Because there are water stains along the outer edges of the ceiling. It is either the roof or the gutters are not working. We'll get a roofer up there if we go under contract. If it can be patched for a year, we'll be ok. If not, then we wont buy the house.

The siding. The paint is peeling pretty bad. It could use a paint job today. But can wait a year or two. The siding has not yet been impacted by peeling paint so no rot.

The numbers:
We think we can rent the upstairs for $1600 a month, and the downstairs for $1400 a month. With a $3,000 income, we will put $1k a month away for future repairs, $400 for taxes and insurance, and that will leave $16oo cash flow for the investor.

If we save $1k a month for 9 months, we can put on a new roof. After that, if we save $1k a month for another 7 months, we can repaint the whole house. So the big items will be taken care of in the next 1.5 yrs.

The next big question is the electric/plumbing/HVAC.

We feel that paying $170k plus $5-10k in repairs/closing costs is the very top of what we can afford. So if any of the systems are out, we are not going to go forward.

The reason we feel good about this house is because a very high end investor owned the property and restored it before he went into foreclosure. He had a reputation to use high end rehab materials and saw his projects as a restoration of the community. His vision was in line with mine, to have a quality product that will last a long time and add to the value of the area.

So we feel optimistic about the systems.

In the meantime, to keep BB from having his heart set on this property, we have tried to find back up properties.

We found one yesterday that we thought had already sold. We saw the "For Sale" sign out front and checked online. It had sold in Nov, but the deal fell through so it's back on the market.

The duplex had belonged to a contractor friend of ours in 2009. So now we refer to it as "Jason's House" We had dinner there once. He lived in the top floor with his wife and son. A few months after we met him, his wife got a job in another state and they moved.

The house did not sell and went into foreclosure.

The current owner bought it for $130k and now has it listed for $200k.

We walked around it yesterday and looked at the pics online, it does not need anything to make it renter ready. Actually, the bottomn floor is already rented for $1400/month. It's 3300 sq ft.

BB called our realtor today and learned that the new owner put alot of updates into the house, and thats why they are asking $60k more than they paid for it.

So thats a bit of bad news. We were hoping there was a lot of negotiating room. Noneless, we are going to look at it today.

If the numbers figure that the Chocolate House and Jason's House are the same all in, then we'll be on an even playing field and I'm not sure what we'll decide.

But having Jason's House enter our conversations has really calmed BB. He is much less into the Chocolate House now and he's being more conservative with what he is willing to pay for it.

Thats exactly what we needed, so even if Jason's house is a no go, it accomplished my goal of showing BB that there are new opportunities everyday and we dont have to be fixated on one place.

California Property is going up for sale

December 4th, 2011 at 12:13 am

I have decided to sell the CA property. BB and I went out to visit it last week and decided selling was the best option.

We went out to CA for 5 days. We spent 3 days in the city, staying on Haight street. It was great, but expensive! But great.

Then we headed a little south and spent 2 days in San Mateo to see some old friends of mine.

I met with the long term tenant in the condo, and she has not found a job yet, no promising prospects.

I met with a realtor and we discussed next steps.

The condo is in surprisingly good shape, and surprisingly huge!

The realtor said we need to paint it nuetral, fix the heater, paint the cabinets, clean the carpets and stage it before putting it on the market. Maybe get some new light fixtures too.

The realtor is really fixated on staging, saying its really important.

I dont know, if you walk into an empty condo- does staging really compel you to put in an offer? Wouldnt taking the $2k to stage it maybe be better spent on a granite countertop? Or would nice furnishings be a better bang for your buck?

The realtor also said if it does not sell within a month, to increase the realtor commission by 1% to get realtors to work hard on bringing buyers in.

Regardless, the tenant is moving out in January, and BB and a contractor friend of his is going to fly in to complete the fix ups. He'll stay at the empty condo for 2 weeks and do all the necessary remodeling with the realtors input. She said she will go to Home Depot with BB and pick out the fixtures and stuff for him.

So we are hoping the remodeling is $5k, flights for the men $1k, food for the men $500, rental car $300 ...and then staging $2k.

So thats the plan...right now. pics of the place are below. Input appreciated!








Capital Gains Question

December 2nd, 2011 at 02:17 pm

Hey guys,
I have a financial question. I have heard that the current regulations regarding taxes and house selling is: no capital gains taxes are paid from the first $250k earned from the sale of a house.

I have heard this before, but it just sunk in for me last week.

My question is: does this apply to me too? (In essence it boils down to that.)

Regarding my Impulsive Purchase that BB and I bought last year:

We bought it for $160k and put $120k into it. So one way or another we have paid $280k for the house. If we sell it for $400k…we are almost at the $250k appreciation level from the sales price even though half of the appreciation is from money we put in?

I guess my question is- is the $250k appreciation a “free and clear” appreciation (accrued from property value up to $530k), or will I just get the benefit of not paying capital gains on money I put in and invested in the property?

I am guessing the $120k I put in counts towards the first $250k appreciation break.

Was there a loophole that I could have utilized to ensure that my $120k counted towards the cost of the house and not towards an upward appreciation?

We are not planning to sell! I just want to know how it all works, now that I have a grasp on the concept.

Closed on "The Impulsive Purchase"

February 27th, 2010 at 02:19 am

"Prepare to enter the poorhouse- you little b*!^h." -That line from the TV show "Entourage" has been playing through my mind all day long.

I know it's because I closed on the "Impulsive Purchase" today. It was very anti-climatic and I really feel somewhat- I don't know- disappointed maybe.

BB wasn't here to go through it with me so the responsibility was on me. I was so afraid something would go wrong I refused to let myself get excited about it. I really wished BB was with me- maybe it would have been more exciting. And since it is currently rented I didnt get the satisfaction of walking into the building after the closing.

I just cleared out my bank account, signed all the documents and handed over almost $12,000.00 for what feels like nothing in return. The realtor didn't even bother to bring the keys to closing, telling me he will drop them off "later" (he lives next door to me so it's not shady- he can just be lazy sometimes). After I handed over the big giant check I was given some papers and told I was done.

On the way home I drove by the property. "Yup- that's the house- it's still standing" I thought as I drove by it.

What worried me was that the seller (also the selling realtor) did not bring me the $1000.00 in rent deposits the current tenants paid. I was expecting the money at closing- as some sort of perk me up. But nope. The woman waited for me to bring it up and just nonchalantly goes- "oh yeah. Ok. I'll get that to you."

I was kind of thinking- "When!? When will you get it to me? And How?!" But it seemed like everyone had their own agenda at the closing. My realtor was busy checking to be sure all his docs were in order to present to his real estate company- the lawyer was monotonously handing me papers to sign- and the seller/realtor was bantering with my realtor.

So I let it go and tried to trust her.

I have to chase her down anyways because 1 of the renters is Section 8 housing and the housing authority said it is too late in the month to re-route the rent check to me. The rent for March is going to the old seller who will need to give me the money.

Nobody brought up the 2 days of prorated rent that she owes me either. I was going to let it go I guess. It's $85.00 which hurts me to lose but I feel like I am already going to be chasing her for the $1000.00 deposit and the March rent- so might be better to let the prorated rent thing slide in my pursuit of the bigger money.

It makes me nervous. But BB called my realtor and asked about it and was reassured that if I don't get the rent money and the deposits by the end of next week- we can go and try to revoke her real estate license.

I don't want to revoke anyone's real estate license. I just want to build my bank account back up.

So I thought today would be fun and exciting like it was when we bought our first place- but it wasn't.

I am also annoyed because although I put down $5600.00 on the loan- the loan only reflects $2898.00 was paid towards the principal because an FHA charge was wrapped into the mortgage. And no one told me about it. Sneaky sneaky these mortgages are. So I handed over almost $12000.00 to see $2898.00 come off the principal.

But we own it. It's not completely cash flow positive but close. If the 2 units collect the rent the owner says they do- I will have to cover a gap each month of $83.00. Neither unit has an existing lease- 1 family has lived there for 14 years and the other tenant has been there since 2002. The seller was sneaky and listed in her advertisement that the place was collecting $1700 a month- a good $500 a month more than what she disclosed after our offer was accepted. But looking at the property appraisal- it says that the building collects $1350 a month- which would pot me in the profit margin of $55 a month (which I would take!) So now I just have to wait and see what the rent money is when it's handed to me I guess. Because the seller has been so conflicting with the information-I don't really trust her at all.

Closing on the 'Impulsive Purchase' tomorrow

February 25th, 2010 at 10:29 pm

I have taken to calling the new duplex/townhouse our "Impulsive Buy". It was impulsive- having looked at only 1 other property and putting in an offer on this place 3 days after we decided to start looking. And the place is currently a duplex but we live in a duplex so it gets confusing calling it a duplex. So it has come to be known as the impulsive purchase house.

We close on it tomorrow. Almost 13 months after we closed on our current home (It's still my dream home). I want to record my experience with the closing cuz I found it so helpful to go back and read my entries from our last home purchase.

This time:
Our closing costs are $5770.00 ($2130.00 less expensive than last year)

Interest rate is 4.875% (less than 5.5% interest rate of last year)

We were accepted for the loan on the first try! (different lender than last year too)

But this time they needed different documents than last time. This time the bank asked for proof that there is no mortgage on the CA property. Well how do you prove that? They did a title search on the property and found no liens on it-they ran my credit report and saw I was not responsible for paying a mortgage on it. They saw my bank statements for the past 2 months and saw I never made a payment for a mortgage on it. ...not good enough. They wanted more proof. They also asked for this info on Tuesday. Closing is on Friday. That left me scrambling. But we got through it.

This time BB is in FL for baseball during the closing. The lender was supposed to FedEx him the papers to sign and have him send them back. The plan was to send the documents by 11am Wedensday morning to ensure a timely trip for the documents. No they did not get sent out at 11am. Or 1pm. Or 2pm. About 3pm I get an email saying the documents will be emailed to BB when they are ready and he will need to sign/notorize and send them back.

BB does not have a computer in FL. (We thought he would get a free one through the team but it never panned out...he doesnt need/want one anyways.) So I called/emailed the lender that this was a new plan and BB has no computer. If the lender wanted this new plan to work she would need to call BB when the docs were emailed so he could drive to a printing place like Kinkos and print them out. The lender emails back that she thinks she can send the docs through FedEx in time to get them to BB. So she FedEx's them at 6pm (7 hrs later than planned!). But then she emails me that she forgot the Truth in Lending disclosure and will email that to BB in the morning (today)(Totally defeats the purpose of mailing them- dont cha think?).

BB got the package about 2pm today, drove to Kinkos and printed out the last document. He was annoyed because the lender never marked where he was to sign anything. So he told me he is hoping he signed everything but will not be surprised if he missed somewhere.

BB went to FedEx the paperwork back but the shipping label the lender included for BB to use is not an overnight label. So BB had to purchase an overnight delivery label (for $50.00!)and I am really ticked off because I know they built the label into a price somewhere. So we paid for a label we couldnt use- and had to purchase a new one.

So hopefully the documents make it back before the closing. I am a little ticked off that everything waited till the last possible second- it would have been nice if BB had more than a 3 hr timeframe to review everything before he had to ship it back.

But what can you do- at least we are closing.


Not listed as

February 8th, 2010 at 03:30 pm

Things between me and BB are back to normal. Things were normal again 2 days later. The fight helped to clear the air and we are back on board with each other again.

Regarding the new townhouse we are purchasing: The selling realtor (who is also the owner) wont list the house as "under contract." She still has it up for sale. She is afraid our financing will fall through- or she wants higher offers. My realtor is fuming mad over this. He is first a friend of ours- but since he is a realtor we used him to buy the place. He got tipped off that something was off when the owner/selling realtor called him ansd asked for the keys to the place because she was showing it. Then over the weekend our realtor got several cash offers for the place and he is sure the owner/seller has received about the same volume. But together we double checked our contract and as the seller- she signed and dated everywhere- so it's binding. We got the place. The mortgage appraisal is today.

In other news- someone somewhere got hold of my credit info and started buying things in France. My CC company was great in alerting me and shutting it down.

Thats about it. Off to read all of your blogs now.

I dont wanna go

February 3rd, 2010 at 03:37 pm

So BB and I had a heart to heart last night. About the new Townhouse purchase.

Over the last few days it has quietly dawned on me that I am really really in love with our current house and the idea of moving out of it causes me to cry.

I have been fighting this feeling because logically- moving to the townhouse is a big step up. Plus I was initially excited about the whole thing and never told BB in the beginning that I dont want to leave. So I have kept quiet.

But last night I just kept bursting into tears every time I thought about something in the house that I would miss.

Last night it was the thought of leaving all the huge oak trees that line our street and the crepe myrtle tree directly in front of the house. It is so fun to watch squirrels running up and down those large oak branches in the summer.

The new street has 1 large oak tree and the rest is all skinny sapling trees.

So I confessed to BB that I dont want to move. I dont love the new townhouse- at best I Kind-of-Like-It. I explained that I put everything into this house- every decision with this house was heavily pondered and I always wanted to use only the best materials because I love the house and considered every expense a long term investment. My heart sings when I pull up to this house after work and this house makes going to work everyday worth it.

The new townhouse is good. I dont love the house- but I do love the location. But I cannot say that I wont have fits of regret leaving our current house.

BB surprised me. He loves our house too! He completely understands and he said he feels very similar. He is excited for a big kitchen. He is excited for more room and to live in a reletively safe neighborhood. But he much prefers our house to the townhouse.

But he feels very strongly that moving into this townhouse is a step towards increasing our net worth. I actually agree. The townhouse purchase price is insanely low. It's in the worst condition of a completely renovated middle class location. If we renovate and upgrade it- we should have no problem selling it for a profit.

We dont want to try to "flip" it because that seems risky given the market and numerous flip failures everywhere.

Plus- this might be a one time opportunity to really make some money and we dont want to be impatient and lose a very marketable property by selling in a down market.

Plus- if we do "flip it"-we are still living in a house in a bad neighborhood. Though I personally love the neighborhood and the city is making strides to crack down on crime in the area- it's still one of the best houses on the block. BB wanted to wait a few years for the market to rebound and our neighborhood to improve before putting more money into it.

So thats the decision we came to. We will go forward with our plan to renovate/ upgrade and move into the townhouse. We will live in it a few years and wait for the market to improve. When renovations on the townhouse are done, BB and I will talk about the potential future value of the house. When the townhouse hits that pre-determined value- we sell. Meanwhile- the craftsman home duplex will be earning rent and still be ours. We then take the money and re-asses the craftsman home neighborhood. If we want- we return back so I can enjoy the oak trees and coffered ceiling.

I just had to make BB promise me I would not get "trapped" in the townhouse. He has been so excited about the place I could not determine if it was the thrill of the deal-the idea of demo and renovation, or if we were going to be constructing his dream home. I was worried that BB would enjoy the townhouse so much that he never wanted to leave.

Luckily- BB is on board with me- and see's this as a temporary adventure to get us to a more secure future.

2010 goals- SQUASHED

February 1st, 2010 at 09:21 pm

So I am not too huge a fan of this rental property deal. I am still coming to terms with all the events and regularly go from excited anticipation to anxiety/worry. I still love this 1st home and consider it the ultimate betrayal to move out- even if we are not selling it, and plan to return to it one day.

BB is SOOOOOO excited it is as if he has hit the lottery. I am not so sure why he is so excited. I know he is tired of no dishwasher, and a tiny bathroom...but really? He is that sick of our small unit that he is nearly dancing at this project?

I think it's the chance to be Mr. Handyman. It's all about the demo and reconstruction.

And I think he is excited to go back into the shopping spree mode we were in when we first bought this place.

When I think of the long term consequenses of buying the property I am happy. In a year from now construction will be done and we will be enjoying it. Our networth will be up and we will be able to plan better for the future.

But short term- my financial Mojo is all messed up.

THIS WASNT IN MY BUDGET! This was not a part of my 2010 plans or goals. I had everything nailed down to the dollar and cent for this upcoming year. Now everything is screwy.

Now I have to spend $1k in ernest money this month, $12k for closing costs and down payment next month, and $400 for a home warranty.

BB keeps adding on expenses after expenses and he is in full blown planning mode. I am tired of babysitting him. I feel like he logically cons me. He lays out a logical plan about how "the roof needs to be replaced within a year but the home warranty will pay for it."

I say: "Huh? Home warranty? I forgot we need one of those. How much is it?"

BB: "$400.00"

Me: "ok. Well if it will replace a roof I guess we should get it."

Him: "If there is a big storm that comes in the first year then the warranty will replace the roof. Theres only a $500 deductible."

Then I get off the phone feeling like..."Wait. what just happened? I thought the roof was fine?"

So you see folks? He just managed to get me to commit to a new roof, a home warranty, and to a $500 deductible all in the span of a few minutes.

He never once talked about how HE would pay for any of this. Grrr...

I think I need to have another talk with him.

Inspection went well

February 1st, 2010 at 06:26 pm

Inspection went well- I guess. Since we are planning to almost gut the place and start over I guess there was no need to really go over everything with a fine tooth comb. Our contractor acted as the inspector, and basically talked numbers with us.

Learned a few things:
The upstaires renters have been living there for 14 years. So there is no lease- and I do not feel the need to create one. They pay $600 a month.

The building is coded for section 8 housing. The upstaires renters are section 8 and the downstairs renter is section 8.

The downstairs woman has lived in the unit several years as well but is ill and has gone to live with her daughter. She is planning to move her stuff out and vacate the apartment- but the government assistance checks will continue to pay her $500 a month rent until that day comes (and based on the stuff in there I dont think it's coming too soon).

The air conditioning unit is about 3 years old, the water heater is about 1 1/2 years old.

No sign of termites.

The building is in better condition than the contractor expected, it is only tilting about 1/2 an inch instead of 3 or 4. (I guess this is good news?!)

Because it is section 8 housing the place has lost a lot of it's historical character. The molding is 80's, most of the wood floors have been covered in tile or carpeting and we are not sure of the condition. The ceilings were dropped down to make room for ductwork, and almost everything is a handyman special repair.

Now for the down and dirty numbers:
The contractor gave us a worst case scenario price for everything we might possibly want to do and it is up to us to whittle down our wants into our price range:

Structural
Lift the house $2500
New electric $2500
1 Window repair $500
Stairs (build Trim & handrail): $3,000
Total:$8500

Downstairs
Kitchen: Heart Pine & Raised Floor: $4,000
New ½ Bath under the stairs: $4,000
New Kitchen (Including appliances & labor): $14,000
Raise the ceiling $2,000
Plaster, paint, trim $2,000
$26,000

Upstairs
Guest rooms (Carpet & raise floor): $2000
Plaster,paint & trim $2,000
Bath upgrade $1200
Masterbath/Master bedroom $7,000
$12,200

Finished Attic
Carpet/paint/demo $3500

Total:$39,220

So those numbers dont scare me. When we did a walk through to look at the place he told us he could do a complete upgrade for about $40k- so thats what we had prepared for.

The plan going forward is to continue renting the units through August while BB is away. The combined rents will pay for the mortgage and expenses -$120 / month. If the downstaires renter chooses to vacate by April- we already have a plan to rent to some baseball players in town for the summer and can charge them $800 a month. Therefore the mortgage/taxes/insurance will be completely covered.

In September when BB returns- he and the contractor will work everyday together to get the project completed. The project is estimated to be a month long.

BB and I will take out a $40k HELOC to complete the project. BB has promised me to stick with the budget- he promised he will not come to me requesting more money. He knows that after $40k the well is dry. If we stick to the $40k HELOC our finished investment will still be about $80k below what the current upgraded comps are for on the street, and I want to be sure we are definately in a position of immediate equity when the reno has finished.

Monthly mortgage/expenses plus HELOC will leave us paying about $800 a month out of pocket once we have rented the unit of the house we currently live in.

So thats where we are with the project. I know things will go wrong but the whole project is too far away to even worry about right now.

I am just glad we have a gameplan.





Mortgage going easier the second time around...

January 30th, 2010 at 01:20 pm

Well I feel justified in our duplex purchase.

BB went to the bank yesterday and I THINK our mortgage is nearly completed. I had all the docs I thought they would need in order (learned from last year)- and the woman was equally organized. She ran the numbers to do a FHA loan or a conventional loan and the FHA loan is cheaper for us. We don't have 20% to put down on this one so we will have to pay PMI regardless, and the FHA loan has lower interest rates. We locked in at 4.8%. Our closing costs are $5500 +/- $200. I am not completely sure how much we want to put down- we COULD put down 10% but that would wipe out our expendable cash reserves completely. I plan to run the numbers tonight but I think we might put down 5%.

The woman told me the bank manager already approved our loan and she was not counting our rental income because that would mean we made too much money to qualify for the loan!

When BB heard that he says to me: "Gamecock, I TOLD you we could afford it! Why do you always act like we are broke? Will you relax now and let me have more spending money?"

I actually had a good reply:
"BB, I save all our money so we can do impulsive things like buy houses when we recognize a good deal. Everyone we know thinks that buy was a steal but we were the only ones who had the cash to make it happen."

Talking to the bank lender who told me we have plenty of money and that this loan would be no problem was re-assuring. But I hope BB's head doesn't swell and get him dreaming...

So today is inspection- I think. Our realtor has had a heard time getting ahold of the other realtor to get keys to the place. Plus it is raining so I would prefer to put off to tomorrow. I dont think the inspector will spend as much time on the important things like termites, roof and foundation in the rain.

Oh yeah- everyone remember the BIG yellow Colonial type house from 2 posts ago that spurred this whole house buying process? It is holding an open house today and the auction is next weekend. I'm going to check it out- just to see what the inside looks like. I am leaving my checkbook behind!

Another duplex in our lives

January 28th, 2010 at 02:47 pm

So BB and I have found a property we are going to make an offer on. It's a 1900's Federal style duplex located 1 block from the main central park of the city.

Right now there are 3 offers on this foreclosure. We would be the 4th. So I dont have much faith in getting it. But we'll put in an offer and see what happens.

The plan right now is to leave it as a duplex with the 2 active leases. This is how haphazard we are doing this: We have not even seen the leases yet.
We know they are leases because people are living there. The real estate listing states that it collects $1600 month in rent. This would cover the mortgage, taxes, insurance and give us a $2-300 extra a month (depending on the interest rate we get).

When BB returns from baseball season in September- we will re-asses the situation and see if we have the cash saved up to convert it into a SFH. Hopefully we will- and we will renovate it in a month and move in. We will rent out the unit we are currently living in and that will almost pay the mortgage on the SFH.

I am giving BB lots of rein on this one. I remember how AWFUL it was getting a mortgage last year and BB has promised to do everything.

Truthfully- I dont think we have a chance to get it. Even if we go in full price- the comps in the city show it is listed for about $70k below what anything else is listed for. I am familiar with the property- it was listed for sale $150k over the current foreclosure price when we were looking for houses last fall.


Need opinions

October 25th, 2009 at 02:47 am

A new opportunity has come up that has caught my interest. I have been tossing the idea around in my head for the past day or so and need to kind of vent about it to see how I really feel.

A foreclosure has come on the market in my town. It is not advertised for sale yet- my realtor friend told me about it because I have a friend who is interested in investing in the area. The friend is interested in this property too- but I don't think it will work out for him.

I kind of want think it is a very good deal and am not sure if I shouldn't invest in it.

This is a 2 unit property- very similar to my own- but a little smaller. Shotgun style with a double balcony-one unit upstairs and another unit downstairs. Foreclosure asking price is $115,000. It is bringing in $1600 a month in rent.

Pros:The property is similar to my current property and asking price is $85k below what I paid less than a year ago.
The house is in good condition. Same condition as my current house. The property is in a better location than my current home. The property is currently rented with existing leases. The property is about a 10 min walk from my current house.

Cons:
Although the unit is in good condition- It might need 5-10k for hidden fixes/non emergency stuff I would want to take care of. Wont know that till an inspection.

BB is not very handy and fixing stuff is not his forte. I will need to hire out for any fixing problems.

Having 2 more rental units increases our chances of getting sued. We have 2 rental properties now and knock on wood we are all good- but adding 2 more might mean I will need to start an LLC and there would be legal/financial/stress costs around that.

Having 2 more rental units kind of throws the "stay diversified" rule into chaos. I don't know how to measure what my diversification will equate too- I will have 5x as much real estate value as stocks/bonds...

I will be getting into further debt. I mean, it will be a mortgage- so that's good I know. But I will be taking on $95k of additional debt (assuming I put $20k down- around 18%). It seems kind of insane to be walking around $200k in debt (including my house mortgage) when I earn just over $30k a year.

I was not prepared or expecting to go in this direction. We bought our home less than 1 year ago. We have just barely started to get back on our feet recovering from the purchase of our home. We talk of buying another property- buying rentals as our way to financial freedom- but talk about it off in the future. I wouldn't even consider this if it wasn't such an insanely cheap deal.

Financially we are strapped-BB is "in the market" for a job- but not employed- don't know if he will even have a job in 2010. If he does get a job- it will be starting around $30k which would push us into such a good financial position we could afford this property easily. Right now my income covers our expenses but not much left for savings. The money for the down payment would come from my inheritance that has been earmarked for retirement.Currently the inheritance has $200k in stocks and bonds it could come from- but I worry that it wouldn't be the right thing to do.

I worry because we have already made so many big purchases in the past year. First we had the wedding about this time last year-then we bought our house and put in about $25k to "make it ours"(including a new 10k roof). I worry that if we buy this...we are just getting in the habit of buying big ticket items and maybe getting high off the excitement or something. I worry that we will spend ourselves broke if we are not doing a financially smart thing- but telling ourselves we are because we like spending money.

I worry because there are all those real estate investors declaring bankruptcy because they over-leveraged. Why would I be any different? If I lost the renters I would have to pay for the mortgage out of savings. Right now MY emergency savings would only cover a month or two- then I would have to go to those stocks and bonds. But that's because my savings is only cushy enough for our current situation- I could beef it up by scrimping more pretty easily in a few months to cover the possibility of needing to cover a 2nd mortgage.

What would this do for us in terms of our goals? We wanted to convert our current 2 unit property into a single family home within 5 years- eliminating the rent we earn off it. We also want to do some home renos in the $50k range when we convert the property. We wanted to have the 50k saved up to pay in cash. We wanted to be in a position to pay the mortgage ourselves (right now the renters upstairs are paying it.)

BB has 130,000 miles on his truck. We have not started saving for a new car for him yet. I guess a car is an insignificant expense when you are talking "$15k car or $115k rental property"...but a car is also a necessity and a rental property is not.

We also wanted to have a child within 5 years.

So will buying this property put us in line to accomplish those goals- or make us unable to achieve those goals?

I don't know- I don't think it is a good idea with BB unemployed. I keep thinking we shouldn't do this "now". If we could just wait till BB had a job and was working a few months...but then who knows what the real estate market will look like and if we will be kicking ourselves regarding missing this deal. No. I think we should wait, save up the 20% ourselves and then look around for a good deal. We might not get the best deal from waiting- but we will be using our own money to spend.

February numbers are a bit big

March 2nd, 2009 at 01:20 pm

New month- New habit forming time. No more blogging 3x in one month. Must. Blog. Regularly.

I did my monthly spending calculations for Feb and we fell off the wagon big time.

Income $3589
CA Rent $1150
Ebay $134
Baseball school $430
GA Rent prorated $1875
Store Rebates $239

Bills Total: $1679.00
HOA $500
Groceries $149
Gas $140
Electricity $0
Health Ins $0
Water $0
Internet/phone $100
Pest $650
Car Ins $76
Security alarm $64
Total $1679.00

Moving company Total: $1680.00

Home Improvement Total: $9497.00
Home depot/Lowes $1442
Home decor $1267
Wood Floors $938 (312 sq ft)
Plantation Shutters $1800 (8 windows)
Contractor labor $4050 (1 window, floors, pocket doors, spackling)



Fun Total: $850.00
dining out $217
Fast food $151
Video games & movies $57
Hair $41
Gym $30
Shipping $21
Fax $19
Gun $230
Clothes $84

We finished off the month spending $13,706.00. We incomeded $3589.00= $10,117.00 in DEBT.

Lucky for us we had the money in savings because we did not have to put down as large a down payment as we had been expecting, and our unit of the house is DONE! We took care of all the big projects for our unit (except the kitchen). So although we spent so much now, we can get back on the savings train and work on building the savings back up.

Mistakes in home buying

February 25th, 2009 at 02:55 pm

During the last 2 weeks I got really behind on recording my spending (but I saved about 70% of the receipts) and now I need to get back on track and feel overwhelmed. And shame.

We spent so much on fast food. We spent so much on things that we could have done without.

Its like buying the house gave us a "reason" to give in to our desire to spend. Not even buy things we have been wanting...just to buy because we could.

We purchased new flooring and bought 10 extra feet "just in case". Now we have an extra box of flooring under the house.

I wanted 1 outlet cover for 1 outlet and bought a whole packet. Now those are in storage.

I went a bit crazy buying paint. At first I bought 2 gallons of paint for a room- got home- hated the color. Went to the store bought 2 gallons of a different color- still didn't like the color. So I bought some samples. Went sample crazy- bought 6 samples @$4 each- then bought the paint I liked by the gallon. Well come to find out each room needs about 1/2 gallon (plaster takes less paint than sheetrock apparently). So I have gallons of unopened paint.

We bought a swiffer for the floor. We were told a different brand would work better and bought that one (it didn't). We still were not getting good results and paid $60 for a steam shark (swiffer with hot steam) and it works GREAT! but now have 2 swiffers hanging in the closet never to be used again.

Stuff like that makes me angry with myself.

Gamecock reporting in

February 23rd, 2009 at 02:03 pm

Okay, I've been MIA for about 2 weeks. You guys are not the only ones who noticed, my friends were neglected to. But the house is nearly done, and I'm lovin it!!

We took on many time consuming projects and when we were not doing that we were to tired to communicate to anyone but the dog.

And...in the interest of honesty...things were adding up. And not all 'needs' either. I didn't want to feel guilty about purchases because I waaannnttted them!

But the house feels like home now, and I'm including pictures.

One big learning lesson: Thank the heavens we purchased a duplex- we spent just over $9,000 renovating ONE FLOOR- no way could we have done both levels at once; financially, physically or mentally. We finished 'our unit' and when we outgrow the bottom floor and take over the top floor...we must do everything all over again. But thankfully that's a few years away.

I was concerned about cutting our living space in half when we moved- but 950 sq ft is nice. Not to bad to clean and no wasted space.

Now that things are quieter- I will be back to regular blogging.


our 'found' floor that no one would restore so we had to buy newFrown


our new wood floor for the 2 side rooms.


main living area floor...shined up nice.


living in a construction zone for 2 weeks- pushed me to the end of my patience at times.


Starting to paint.


Dining room


Entry way


living room


our bedroom

That's it for now, on to read ya'll's blogs!












Gamecock reporting in

February 11th, 2009 at 01:39 am

I'm checking in a bit. Things have been...different. But good different. BB and I have had lots of memorable experiences since my last post on Thursday.

WE CLOSED ON THE HOUSE!! It went so smoothly. Done in half an hour.

Then the memories began. We closed on one of the coldest days of the year. At 5pm. On a Friday. Me being an apartment girl didn't think that the electric and water would be off when we moved in. I thought we would just change it into our name.

Nope. no heat, no water. On a Friday night.

We bought candles, bundled up, slept on the floor and rationalized that the discomfort was worth it.

Over the weekend we actually reset our internal sleeping clocks. Up at 7am with the sun...getting sleepy about 6pm and in bed ("bed" or blankets on the floor) by 7pm. (It's so dark with only a few candles!)

But water, electric and cable all came on Monday (now dubbed "The Greatest Day Ever" by BB and me...modern conveniences...oh how did those cavemen and settlers survive without them??)

Anyways- everything is going well. The house is wonderful. We got right to work destroying it on day 1.

We have sanded the plaster walls of almost the whole downstairs unit.

We pulled up carpeting and ordered hardwood for the bedrooms (original hardwood ended up being to damaged to restore Frown.

Pruned the backyard.
Swept the front porch,

and talked talked talked about our future. That's all there is to do when you are sanding walls for hours and have no TV or radio to listen to.

AND! We met our upstairs tenants. 3 college boys, very cool. Somehow BB's job proceeded him and one boy had already looked up BB's stats online. They already said they want to stay in the unit for the rest of their college years (2 more years).

So a few observations...
1) I feel like I have been on a MAJOR SHOPPING SPREE! Oh my it's so fun to let loose and buy buy buy. Even unloading that huge down payment...just handing people money has become fun. It's been so long that I have been limiting my spending- now I am free to BUY! (BB and I are reviewing the numbers tomorrow to see just how much damage we have done.)
Since we did not have to put down as much $$ as we were originally planning..we did take 10k and put it away in savings for an emergency fund before going crazy at Home Depot.

We bought a starter house that will turn into a forever house! I think I have touched on it before- but it hit home for me this past weekend. The units are about 1000 sq ft each, and our bottom unit is a good fit for our 2 person family. But once we have one kid walking age...I think we will be bursting a bit (look at me planning for kids, not even planning to get preggo yet) and then we can go upstairs! Our sq footage will double and we wont have to move! I didn't plan on that bonus feature when buying a duplex- we were planning to move out and buy a SFH...but we love this one. I don't want to leave.

When we first moved in- it felt like a rental. Didn't feel like ours at all. It just felt like it was another baseball season and we have moved again, taking only bare essentials, setting up cable, power, all that. But as we started ruining the walls (that's what I think sanding does to the walls- BB assures me we are going to be pleased with the results), the place felt more like ours. By the end of the weekend...it felt so much like home. I never ever want to leave. I'm so attached. Even if it looks 10x worse right now than it did when we moved in.

I am very very afraid that we don't own the house. We closed. We handed over our money. But I keep imagining getting a letter in the mail or having a policeman knocking on the door telling us there was a mistake and we must vacate the property immediately because it's not really our house. Worse still, that the real owner is requesting we return the house in the condition it was when we moved in. :P

Anyways, I will get up some pictures soon! I am sorry I have not been reading ya'lls posts- we just got internet yesterday...but I was so thrilled to have WATER that I didn't even turn on the computer yesterday. (using bottled water to wash your hands and planning your errands based on what store has a bathroom is humbling!)

I think this whole week is going to be crazy as we demo the house and put it back together again. (not really but it feels that way) So next week I will be back to regularly catching up on WhiteS home purchase, Texe's dilemma to stay or move to CA, monkeymamas updates on tax changes, coanegigs(sp?) green kitchen countertop, DisneyS' ebay and survey updates, BA and Merch's stock strategies and everyone else's daily posts.

Final good news update

February 5th, 2009 at 10:21 pm

We're closing!! It's done! the seller signed papers today- we drive up to Savannah and sign tomorrow and get the KEYS!! It's done for sure. I think. We got the settlement statement and learned we got a CONVENTIONAL LOAN (No PMI!!) at 5.5% fixed 30yrs. Our closing costs are $7,900...slightly high I think but don't care at this point. Our taxes are $1,000 less than I anticipated they would be...and our monthly payment is $940.00 a month including taxes and insurance!

And we close tomorrow!!!

No rescheduling movers!! No more whining!

We set up the cable/internet guy to come out on Monday- so it may be a while before I'm back to report on the closing...but I am hoping it's all sunshine and daisies from here on out.

I am exhausted. But getting more and more excited.

update

February 5th, 2009 at 03:36 pm

Well, I'm still in total housing mess right now.

There has been no more talk of the foreclosure short sale issue- Mortgage people believe they resolved it/ seller stated his side= someone is lying but I don't think I will know the true story anytime soon.

My underwriter called me yesterday morning to tell me her part of the process is done, she's handing off the closing details to the closing attorney.

Closing attorney called me in the afternoon to tell me he is meeting the seller today to sign the documents, collect the keys, and he needs to set up a time/place to meet with me on Friday for me to sign everything.

YIPPEEE!! Closing is finally here! I set up movers. I filled out a change of address card. I gave my health insurance my new address. I set up a cable man to come out Monday morning ($70 month for TV & Internet).

Then last night Underwriter calls me in a panic. She called BB's last place of employment and does not understand how he only worked for them for 1 month.

I'm not panicked because that's true. He was traded late in the season, only played in TX for 1 month.

I don't know what Underwriter had in her notes or on the application but she thought he played for 1 team for the last 2 years. Maybe she misunderstood when I told her BB just signed a 2 yr contract with the team. Or that he's been a ball player for the last 7 years.

So underwriter is in a tizzy and wants me to email her immediately BB's places/names/addresses/phone numbers of employment for the last 2 years. I was able to get her the information in about 10 minutes (thank you internet).

So that went down around 5pm yesterday. Since then...silence. No phone calls, emails, nothing.

Raise a hand if you think I'm moving tomorrow. Anybody?

Guess it's time to cancel the movers AGAIN!

Foreclosure...no? yes? ...this is weird.

February 3rd, 2009 at 04:17 pm

So for those of you following my first home purchase saga...here is an odd twist I am trying to wrap my head around.

Yesterday the mortgage underwiter sends me an email saying: "I have great news, I have been working with the Attorney and the
Seller to save the house from foreclosure and we were sucessful. They have given us an extra 30 days. I also have approved
your loan."

Since BB and I were not buying a foreclosure I immediately called my Realtor who confirmed he had not heard about any foreclosure and this was news to him.

I called my mortgage broker who told me the property was in foreclose and due to foreclose TODAY (1 day before they 'saved' it). He told me that his attorney discovered this and was working all last week with the bank to stop the foreclosure because the property is in the process of a sale. The seller actually owes "quite a bit more money on the property than my purchase price and I am getting a spectacular deal." He and the attorney saved me from having my purchase contract be voided out and having to start the purchase process all over again and negotiating to buy the property from the bank. The bank was happy to hear there is a buyer for the property and extended the broker 30 days to get the property to the new buyer (me). There is no way my Realtor or I would know it was in the foreclosure process because it was a pre-foreclosure or short sale and that information does not need to be disclosed to the buyer.

So I call my Realtor who told me he asked the seller if the property is in foreclosure. The seller explained a story about a foreclosure mix-up. "It had to do with miscommunication last year when he got behind on payments -- he actually had everything caught up, but the bank didn't have the payments in the right account -- it was just a matter of getting the payments in the right place. He said this underwriter had nothing to do with "saving" it from foreclosure. He's a little pissed off and we really need to close this deal by Friday."

So that's the story. Really I guess if the house was in foreclosure or not it does not effect me. But someone is lying here.

Either the mortgage broker is trying to look like a hero after all his delays and outright deception on getting this deal closed in a timely manner- or the seller of the property is lying because he does not want to look like a bad businessman or deceptive seller.

Both sides have their merits. How can a property owner be receiving foreclosure notices from a bank and not get that information fixed immediately? Wouldn't his credit score be tanking, wouldn't he be getting hit with all kinds of overdue/non payment late fees month after month?...Wouldnt he be motivated to make sure his monthly mortgage payments were actually paying his mortgage?

And if it was indeed a short sale and he owes more on the property than I am purchasing it for...wouldn't the seller have had to go to the bank to ask if he can accept my offer? Wouldn't I have found out immediately it was a short sale because the negotiations would have dragged out while the bank interfered with our negotiations. Instead the seller and I reached an agreed price on the same day I made an offer.

But if it was not a foreclosure then how is it that the attorney spent several days working with the bank to stop the foreclosure- unless they were flat out lying to me? How can a person successfully work with a bank to stop a foreclosure if the problem is that the money was placed "in the wrong account" for a few months. Wouldn't the bank admit it's actually not a foreclosure but a banking error that they have corrected? What would be the broker's motivation for inventing a foreclosure story? To make me grateful to him and forget about all the inconveniences and unfulfilled promises he made me? Can/do brokers actually just invent entire stories to save face or hold onto a client?

If it was a banking error and not a foreclosure did they waste a week of my time doing nothing with my mortgage and are covering it up with this foreclosure story...or did they really spend a week working on a problem that did not exist but they believed did exist? I don't know which option makes their business practices look worse.

And finally...do you think the attorney is going to charge me for this? I am guessing yes. But I don't want to pay for services I never asked to have done, was not told were performed until after they were finished, and may or may not have been needed.

Can anyone offer any suggestions here? I feel like someone is lying and I don't know who to trust.

mortgage update

January 31st, 2009 at 08:50 pm

Still no mortgage. I'm kind of talked out on this subject but lets see if I can gather some energy.

We are still in Florida. All the boxes are stacked around us. BB has been unemployed for 2 weeks now. I have had ebay shut down for 3 weeks now. We spend our days checking our email for news, watching T.V. and complaining.

Our purchase contract had us closing by Jan 20th. After Jan 20th we were given 7 days extension. Now, as of 4 days ago- the seller is available to take any other incoming offers on the house.

I don't know when we are closing. I don't know why we have not closed.

As you guys remember we were denied a mortgage by the first guy. He told me this on the 14th.

Same day I find a new broker who PROMISED he could get it done by the 20th. "What would you say if I told you I could get this done by the 20th? Would you be happy?" were his exact words.

And he did work day and night on the mortgage. On the 19th he calls me to tell me he ordered an appraisal and the company cant get an appraisal done for a few days. We are now looking at a Friday the 23rd closing. "Well- our movers are coming on Friday the 23rd so that will complicate things but we'll make it work." -I think to myself.

On Wed the 21st I call concerned because I don't know who to make the down payment check to. I also need to know how this closing will play out with me living out of state. They tell me "We're still waiting on paperwork, we are not closing on the 23rd. I am aiming for a closing by the end of the month."

So I call the movers and reschedule for Friday the 30th. I'm very disappointed by now and BB and I spent the last week bored and annoyed at life.

The following Wed I call to get the specifics of when we are closing. I am told: "we are still waiting on the appraisal that was completed last Wed. It has not been faxed to us yet." I call the appraisal company. THEY are still WAITING on the appraisal order to be resubmitted to them so they can complete the appraisal. They said they have emailed mortgage company 2x for the order. So each company wasted 5 DAYS waiting around for the other company to do something. I called and got the glitch fixed in 1 day...but alas- it was to late to get a Friday 30th closing.

I called the movers AGAIN to reschedule and they told me to NOT reschedule, just call them a day or two before I need them.

On Friday the 30th I called the broker who promised me the world and acted really offended and ticked off when I told him I also had another bank working on the mortgage. He was so offended that I halted the banks efforts way back around the 22nd of January. I asked him when we were closing because our purchase contract had run out, the seller is really aggravated with us, we have rescheduled movers TWICE, and that if I was in a rental/lease situation then I would be living in a hotel right now. He tells me "this is the natural time line it takes to process the mortgage. You are not in danger of being denied but even if you were Donald Trump himself you cannot speed this up. It always takes 12-15 days to qualify and be approved for a mortgage."

WHY DID HE NOT TELL ME THIS BEFORE??!!

All along he kept acting like closing was just around the corner. The bank we were working with told me they could close by the 30th and I canceled their efforts because this broker promised he could do it by the 20th.(then the 23rd..then the 30th..now who knows.)

I am frustrated and so so over this. BB and I had so much enthusiasm to get to Georgia and refinish the floors..we wanted to spackle and paint the walls...take the popcorn off the ceiling- and now I'm so OVER moving. I just want to get there, unpack and return to a normal routine where furniture is in it's proper place, clothes are hung in the closet, and dishes are in cabinets.

I am also OVER having no income. BB and I planned for unemployment to last 1 month. We had enough in savings to cover repairs and living expenses for about 4-5 weeks before we would need an income to start coming in. Now we have been hanging around here in FL unemployed using up electricity, gas, utilities and not getting anything done. Come February we'll be paying hefty FL bills and setting up our GA bills (deposits and all that).

Oh and here is a kicker: When Mortgage guy said we could close on time on the 20th I was so grateful that I told him we will go to Atlanta (where he and coincidentally, the seller, is located) if that will make the process easier. He told us it's unnecessary as he will overnight paperwork to us in FL to sign and do it that way. Well on the 30th I call him and get that "natural process" speech and he sums up by saying; "and I think it will be best if you guys come up here to Atlanta to close so we can meet face to face." Atlanta is over 7 hrs from where we live in FL. It's 4 hrs from our new house in Savannah. It would use up about 13 hrs of our time to close in Atlanta and cost us over $150 in gas (2 cars). Its fine to close in Atlanta if he produced a miracle..but aint no miracle going on right now so why am I being inconvienced MORE? You know why?? Because BB plays baseball. It is so aggravating when people learn that BB is a ball player because suddenly they stop what they are doing to talk baseball with BB. Our vet spends more time discussing SEC baseball than he does explaining what he is doing to our dog. Our TV repairman did the same thing. The mortgage guy requested to talk to BB 1 time and the whole conversation was about different minor league teams mortgage guy knows about. No mortgage information at all. Mortgage guy just wants to pal around with a ball player and is disguising it as a necessary step in the mortgage process.

AAARRRRGGGG!!!! Ok, bitchfest over. I know it will all be worth it in the end.

House Update

January 22nd, 2009 at 03:40 pm

Mortgage update: things are going...alright.

New mortgage guy is on the ball and had me convinced up till last night we were closing on Friday (tomorrow).

Then he drops the bomb that he cant get the place appraised for 3-5 days.

So no closing tomorrow.

I suppose there is a higher reason for all this but when you have already attended goodbye dinner after goodbye dinner with friends, your husband has quit his job, you have movers lined up for Monday, ebay has been shut down for weeks in anticipation of moving and everything is packed and boxes are everywhere...I don't see any bright side to this.

Maybe Obama will increase the home buyers credit. That would be worth all this hurry up and waiting.

And its TOUGH to have $$ in the bank but you cant spend it! (Total selfish whine here) but it's hard to want to go out to eat but tell yourself you cant afford it when you have major money sitting in a savings account. I just wanna pay my down payment and get rid of this "rich" feeling already. It's a very intoxicating and powerful feeling to see the $$ sitting in the account day after day after day. (yes- I am paranoid of identity theft and obsessively check my account online to make sure the money is still there.)

One thing I have learned- closing costs are EXPENSIVE. It is EXPENSIVE to buy a house. I don't know how people can afford to regularly buy houses. I am wondering if people factor in their closing costs when they determine if they "made money" off their house.

Our good friend is in the process of buying a house right now as well and he is rolling the closing costs into the loan- not understanding that the 8k will cost him about 18k after 30 years- "he would rather save himself 8k now" was his line. So since he is not paying closing costs out of pocket he is really not concerned about their cost. We are paying them upfront and I am totally aghast at the prices. How are banks failing after they charged these prices and made such a profit during the market boom!?

BB and I are hoping this is our "forever house" because I never want to go through the mortgage process again, and I never want to pay closing costs again.

If we eventually turn this duplex back into the single family house it once was- it will be plenty big to raise a family and I think we will come out much much richer if we don't have to buy a SFH down the line.

mortgage update

January 16th, 2009 at 03:07 pm

I have not been posting the last few days. Yes I lurked and commented on a few posts..but no posting of my own.

I have been embarrassed and ashamed.

It's possibly premature to even discuss now but I think we are out of the woods.

BB and I were denied our mortgage 3 days ago. Our income does not meet the lenders formula.

It happened by accident- me finding this out. I was having a mounting feelings of "uh-oh" by the lack of communication with our broker and the increasing emails from my Realtor asking "what is going on?"

So I flat out asked my broker if we were in danger of being denied the loan and he responded "yes. Two underwriters have rejected it and I will be submitting it to a third tomorrow."

This was on Tuesday. Closing is next Tuesday. We have 5 business days to get it worked out after 3 weeks of doing nothing because my original broker was avoiding my emails and phone calls.

So jumping into overdrive I contacted a bank that had previously reluctantly told us they could probably approve us- and then I bitched to my sister about everything.

Lo and behold her coworkers husband used to be a broker in Atlanta and swore up and down that his former boss is the man for the job. I called old boss in Atlanta and left a voice mail. I got a call back that evening and after talking he says "You are the perfect candidate for an FHA loan. Nothing you say has alerted me that this will be a problem. I will call you in the morning and I think we can have you approved by the end of the week."

The guy is a smooth talker and it made me nervous- but he has held up to his end of the bargain so far. He devoted a whole day to creating my application- he calls me 2 or 3x a day with info or questions and told me I was "informally approved" 2 days ago. He called last night asking if I want to escrow the taxes and insurance...that sounds pretty far along.

So I did some research on my own for this FHA loan (federal govt standard loan for first time homeowners- for everyone not familiar).

Some pros and cons. Pro is the standards are less strict with income, you only need to put 5% down, closing costs are less, and we fit the criteria. I have since learned that banks don't really offer this loan because they don't make $ off it.

Con is it is more expensive than a bank loan. I found out that I will have to pay PMI for 30yrs...and will have to pay a MPI fee that is rolled into the loan (about 1.5% of the loan amount). And I thought "uh-oh. That doesn't sound cheap."

But beggars cant be choosers and so I sat down and got to work about calculating how to minimize the damage.

BB and I decided to put 40% down. It's a luxury that most people cant do but we are very lucky I had the extra money from an inheritance sitting in a MM fund not earning much interest. With 40% down we are cutting the PMI down 35% (originally the ATL broker wanted us to put down 5%.), and we are cutting the MPI charge down 35%. As well as our interest payments over the life of the loan.

A benefit of this FHA loan is that our closing costs will much lower because our broker is charging us 1 point of the loan amount (about 1%) and the other broker was estimating closing to be about 3k...and the bank (that we are also still working with...just in case) wants 7k for closing costs. So essentially us telling the broker we want to put down 40% rather than 5% means his commission is severely cut since he is making money off the loan amount.

We were worried he would fight us on this point, but he didn't. He just said he would need an extra day to rewrite the application to reflect the new down payment amount.

Now- if you are still reading this long ass blog you are wondering why we didnt just suggest to the ORIGINAL broker we would put 40% down and we could have averted this whole mess. Well- we never told the broker we would put down 40%.

We told him we would put down 50%.

yup. That's what we needed to get "approved" in that guys mind. I never mentioned in the blogs that I was preparing to put down 50% because I would either get comments like "If you have to put down 50% then you cant afford that house"...as well as in this present economy many many people are struggling and I guess I still see it as somewhat "showy" to say I am putting down 50% when others are struggling to save up 3%.
BTW- that 50% was us scraping the bottom of the barrel to create. We were going to be left with single dollars after closing and planned to live off credit cards till our next paychecks arrived within a few days. Wasn't a good plan- I didn't like it- but it was our only option.

ANYWAYS- imagine this mortgage brokers surprise when he is talking to me initially and I tell him we cant get approved for a mortgage with 50% to put down. He was like "do you have credit card debt?" "no." What about child support, car payment, do you have another mortgage, did you have a bankruptcy?"

Then I told him the 50% was going to be really tough for us and if he could get us a mortgage where we would need to put down 48 or 45% I would be GRATEFUL.

So he comes back at me the next day and is like "I got you a mortgage and you only have to put down 5%. How wonderful is that?" And I later tell him we want to put down 40%...imagine his surprise again.

Anyways, he told me he wants to see the official rejection letter when it comes in the mail because he cant figure out why we were denied in the first place.

So things are looking up. Now that I wrote this we will probably get rejected.

worried about stupid things

January 9th, 2009 at 03:13 pm

I was awake all night last night worrying about this impending home purchase.

My Realtor has been asking me if we are on schedule for a Jan 20th closing...and everyday I email my lender who replies that the application is still in "underwriting and maybe he will have an answer for me tomorrow."

Then, I don't know exactly how much we will need to put down or what our interest rate will be. Is that crazy? Talking to my lender before negotiations for the home started, we had several discussions about what down payment amount will probably get us approved...and settled on an amount he liked and sent us a pre-approval letter. When asked what interest rate we could get he emailed back "probably under 5.5%." So besides having no clue what the interest rate will be, meaning I cant predict my mortgage bill- I have started wondering if "underwriting" will come back and say they want MORE down than what was estimated.

Maybe it sounds irresponsible but BB and I have almost EXACTLY the amount of money needed for movers, the banks "estimated" closing costs, and the down payment. We will both get another paycheck in 1 week after closing to alleviate the burden of having basically zero balance in our account, but I am just freaking out that at the closing table they will give me a bill for a grand or two over what was expected.

And I keep wondering if we are paying too much for the house. Sounds silly- but in this down market where houses depreciate every month I now wonder if we couldnt have eeked a few grand out of the final price.

And I have had many items in storage for so long I was up all night trying to remember where the screws to my trundle bed are; "if I never find the screws to put it together will Lowes have screws to fit but look nice? Can screws be painted?" (my bed frame is white). "Do I even have any sheets to fit a twin bed? Maybe I should buy some now- but what color? What color will we paint the guest bedroom- does it matter what color because they are sheets?" "Do we bring our shower curtain and floor mat from here even though I think Maroon is too heavy a color for a bathroom? The floor mat is pretty worn out, but the shower curtain was very pricey and I remember all bath stuff being rather expensive-maybe bring it for the first week till we get our paychecks and then I can go to the store and get new stuff."....you see! I was worrying about insane things! I was up till after 4am! I cant go another night of that!

homeowners insurance

January 7th, 2009 at 05:43 pm

I have been getting the run around by Allstate about insuring our home only to find out yesterday that they wont insure duplexes.

That's too bad because when I added BB to my car insurance with Allstate it was only $10 a month extra! I was hoping for a great deal by adding homeowners insurance too.

Geico wont insure duplexes either.

I finally got a quote from "Foremost" (who?)for $700 to start the policy and then $290 a month for $223k coverage. I told them I did not pay $223k for the duplex but they need to add debri removal and cost of replacing the structure to the policy, and that is the coverage amount I need based on the location, material, and heating source. ...Does this sound expensive? I was assuming it would be about $100 a month. Our taxes will be about $250 a month...seems weird the insurance will cost more than the taxes because everyone always complains about the cost of taxes.

I have a call in to State farm...anywhere else I can try?

Accepted!! Inspection on Tuesday!

December 17th, 2008 at 09:51 pm

ummmm...I JUST BOUGHT A HOUSE!!!! I did!! They accepted!!! I own the pretty pretty teal house with a big front porch and lead glass windows!!

I just got the call! What do I do!? Do I tell my friends? Do I start running numbers? I am all alone cuz BB is at work and I feel like I should DO something!












Extra pics for Joan!! The fireplace!


Step 2 of phase 1..counter offering

December 17th, 2008 at 08:12 pm

So we sent in our offer this morning. It was for exactly 15% below asking price. They immediately countered with 3.5% below asking price and said it was their final offer, they don't want to counter and stuff.

To be fair, they did recently drop the price 7.5% before we even made our offer. And if we end the deal at their counter- they are only walking away from the place with a few thousand in their pocket after paying realtor fees because they purchased the place 4 years ago in an inflated market.

But I just countered anyways...1.5% less than their counter. I phrased it as "A done deal at xxx price"....so now I am keeping my fingers crossed!

Step 1 of Phase 1- making an offer

December 17th, 2008 at 12:59 pm

I am making an offer on the duplex today. I actually wanted to do all this yesterday but my realtor kind of took an entire day to write up an offer and send it to me to sign. So when everything opens in an hour I'll fax it back to him from my local printing store and wait for the news.

Everytime BB and I go to "the south" we get so irritated at how everything takes forever. People truly work on "southern time". We remind each other about "southern time" once we start bitching about the customer service- it takes us a good day to get on their time schedule.

Anyways- I am stuck in that flux of time where I am too frightened to tell any of my friends the news in case we don't get it-but wanting to allow myself to be excited and enjoy the process. Apparently I cant get very excited without a bunch of squealing and questions about decorating.

BB is terribly excited. He is so emotional/in love its all he thinks about and it's all he wants to talk about. Talking about it to me is fine if he wants to talk about prices, or taxes, or moving vans, or forwarding mail.

But no. He has never thought of such things. He is trying to figure out furniture placement. He has already told me he wants to move the kitchen wall to open it up and "it should only be a few thousand dollars." He is spending in his head all the money we will earn from our first time home buyers tax credit (if we get one- but he assumes we will). He is such a girl in this process.

I am not even getting into how he thinks we need a big screen TV. It's like a necessity to him. It's expected. Forget that we have 2 TVs, one 30 something inch he just got LAST YEAR for Christmas.

I have already created a defense plan against his spending though. Since I oversee the money- once he starts talking of going to best buy or hiring someone to move this wall that is perfectly fine where it is- I can just tell him that we don't have the money. I mean- we probably wont. But rather than argue about how I don't want another TV..I'm just sticking to an automated "we don't have the money to do that right now honey. Maybe in a few months or next year."

I am not allowing myself to think of such things and only think of everything in stages. We are almost completed with step 1- placing an offer. He asked why I am not all excited about decorating and such- but if I get the way he is- I think the process of getting the place will get messed up or we will end up making mistakes because we are both to emotional.

So I am allowing him to keep his head in the clouds while I oversee all this "stuff" to do first. It keeps me satisfied "that I have control" of everything; I have a big fear of being "taken advantage of", or screwed, by people. Plus I am a little happy/surprised that he respects,and believes in me enough to just hand me the power regarding this step and trust that I will do it all correctly and I will make this dream happen.

duplex update...sales price questions

December 16th, 2008 at 05:35 pm

I got the lease information. Top floor is in month 4 of a 12 month lease. Bottom floor is month to month and needs 30 days notice to vacate.

Now I am going back n forth with the lender to try and lock in a "primary residence" loan even though once we close I will have to give our bottom floor renter 30 days to get out. I don't think they are going to go in my favor- and that means we miss out on the $7500 first time buyer tax credit too (we can refinance to a primary residence loan 6 months after closing...we miss the July 1st deadline for the tax credit).

I am going to request that the current owner vacate the bottom floor unit by the time we move in...but with house sales falling through all the time I doubt the current owner will be agreeable to that.

Now...question is...what to pay?? Owner has property listed for $32,000 over what he paid for it in '04. He bought it as an investment property and lives 4 hrs away in another city. He has several investment properties for sale in the area. He did not put any improvements into the property at all. (Previous owner did all the work.)

If I get this place for what he paid for it in 2004...am I getting a good deal? Months ago (last year?...amazing what sticks in your head) Suze said that if you can capture 2005 housing prices- you are getting a good deal- but housing has since dropped lower.

I am a bit stuck because the current owner paid during the housing boom- and so although he might have paid an over inflated price- he wont want to take a loss on the property.

Any advice? Suggestions? I think we are going to make an offer today. (Ack!!) Where should we start? What is reasonable to expect to end up?

I need professional help..added Duplex pics!!

December 15th, 2008 at 08:31 pm

I might need the tax pros help here...and the landlords help...and well, all of your opinions!!

BB and I found a house (duplex) that we want to make an offer on. I LOVE LOVE LOVE it. I actually saw it last month when we went house hunting but BB talked me out of it and so I agreed to move on...but my heart never really moved on. So when we looked at it again this weekend, BB instantly fell in love too. (I have no idea why that happened - but he loves it now.)



Sooooo....the only drawback is...Both units are currently rented. We are investigating how long the lease is and if there is a kick out clause for change of ownership- but I am betting the place will be rented until this coming August.

So if we buy this place- we must buy it as an "Investment Property" in the mortgage paperwork which bumps our 5.5% interest rate to a 6.5% rate for 30yrs fixed.

Once the leases have ended and we can move in- we are told we can refinance it and call it a "primary residence" mortgage to get a better rate.

Questions:

1. First time home owners tax credit- will I get it if we buy an "investment property?"...If not, will I get it if we refinance into a primary residence? How about if we refinance in August and the tax credit is slated to end in July 09?

2. Fully rented, the units create $2,000 income. Going from a 5.5 to a 6.5% interest rate is $100 a month difference. Will it be worthwhile for us (me) to buy the property now and continue to live in FL but landlord in GA? I guess I need to run the numbers myself...but I am just thinking to myself "what if something breaks? What if there's a problem? Landlording from so far away...paying higher homeowners insurance (have not gotten quotes yet)...paying to live in FL...what $$ amount would make this a worthwhile venture?

3. Depreciation/improvements write offs...I will be able to deduct depreciation from the whole building now for the year...but how bout if we make major improvements while the property is still an "investment property"? BB and I would like to redo our kitchen and add a back porch on...should we do all that after the renter has moved out and before we refinance it into a primary residence? Or does improvements/depreciation cancel each other out?

4. Will we be able to refinance? We are putting over 40% down...but I have heard nothing but cries of "we cant refinance!!" coming from the media.

5. Is this a financially dumb move??

BB is just...pressuring me. Arguing with me. Arguing his point over and over again. He never ran any numbers, he did no research. I don't trust his input because I know it comes from emotion and not clarity. He says "you were ready to commit to 5.5%...whats $100 a month(at 6.5%) for 8 months when we are pulling in $2,000? Then we can refinance. We can save the extra income and put on that back porch you want." But I cant help but have ringing bells in my head screaming that this is a bad bad idea...is it??

I hit my goal!!

December 13th, 2008 at 05:05 pm

I hit $40,000 in savings today!! I made my goal!! Only took me 3 years! I never set a time limit on hitting the goal (because I never thought I would get there), but 13k a year is good in my book.

And honestly I cannot act like I did it all on my own. I did start out with a bounty of items that I inherited that needed to be sold on eBay.

The money ALL came from eBay...but it was blogging, other sources of income and discipline that kept me from raiding the eBay account time after time.

Anyways, I'm thrilled with hitting the goal, it's a bright spot in this housing thing.

Mortgages are complicated right now...we are primarily working with Bank #2 and we have a preapproval letter. We worked it down to a 5.5% interest rate, so yea that! The funny thing is, Bank #2 told us that if I moved to the city and got a job making $20,000 I just need to show them 2 paystubs and the preapproval would have been sooo much easier to get. Seems like kind of flimsy way of evaluating ability to make future payments...but once I knew how their game worked, I was able to fit my numbers into their formula and make it work. So we did work it all out without me having to move out of state, get a quick job and pay rent on an apartment just to get qualified.

So tomorrow we are driving up to GA to see if there is anything worth spending our 40k on.

We'll see. 3 duplexes went on the market yesterday for 30k less than the one we are hoping to buy...but they are not as nice either, but they are all in about the same location. So the housing market is still in a slight decline, good for us. It encourages me to be patient and wait for the place we want for the price we can afford.

That's it for today. I'm tired. Honestly, all this mortgage stuff has just worn me out.


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