Posted on: 29th Sep, 2007 06:00 am
My wife and I bought a home in Florida last year for $220,000. It was a 100% mortgage(fixed rate) with PMI.
In July of this year we moved to Texas for my job. The plan was to rent the Florida house to help with the mortgage. I hired a realtor to assist and borrowed against my 401K to help in the few months it might take to find a renter. Ideally I would have liked to sell, but similar homes in my neighborhood are priced at $180,000 and they are not selling.
In a recent conversation with the realtor, he says that no-one has even looked at the house in 2 months! I even dropped the rent twice.
As the weeks draw on, my savings are dwindling, although I am still current with my mortgage payments. I called my lender for assistance, but they said there is nothing they can do unless I am in default.
Because my mortgage was 100% I paid for PMI - does this have any benefit to me or just the lender? What options do I have? I want to do the right thing, my wife and I have worked hard to build up a good credit rating and foreclosure would be a last resort. Any suggestions?
Thanks
Pete
In July of this year we moved to Texas for my job. The plan was to rent the Florida house to help with the mortgage. I hired a realtor to assist and borrowed against my 401K to help in the few months it might take to find a renter. Ideally I would have liked to sell, but similar homes in my neighborhood are priced at $180,000 and they are not selling.
In a recent conversation with the realtor, he says that no-one has even looked at the house in 2 months! I even dropped the rent twice.
As the weeks draw on, my savings are dwindling, although I am still current with my mortgage payments. I called my lender for assistance, but they said there is nothing they can do unless I am in default.
Because my mortgage was 100% I paid for PMI - does this have any benefit to me or just the lender? What options do I have? I want to do the right thing, my wife and I have worked hard to build up a good credit rating and foreclosure would be a last resort. Any suggestions?
Thanks
Pete
Unfortunately I don't have the magic answer for you. I do have a couple things to say though.
"In a recent conversation with the realtor, he says that no-one has even looked at the house in 2 months! I even dropped the rent twice.
"
1. It can be very difficult to be an out of state landlord. I definately recommend using a real estate agent as a management company as this will decrease your risk. However make sure they have managed property before and understand what it actually takes. You may consider working with a dedicated management company as there is a lot more to this than just collecting rent as you have found out already.
2. How are they marketing your rental. I would consider placing my own ad in the local newspapers. Real estate agents must be careful and their marketing usually doesn't get as many calls. This is because of the fact that they must disclose they are a real estate agent in all ads and communications with potential clients. If you place a "for rent" ad you will get more calls as most people prefer to call these directly. You can still use the agent to manage the property for you.
"Because my mortgage was 100% I paid for PMI - does this have any benefit to me or just the lender? What options do I have? I want to do the right thing, my wife and I have worked hard to build up a good credit rating and foreclosure would be a last resort. Any suggestions? "
Unfortunately the pmi is only for the lender unless you paid for an owners policy and it would have been very expensive.
Try to advertise the rental on your own. I know of many who have been succesful doing this in the past.
Also what others in your situation have done is this-
Say your payment is $1000 per month
You can rent the place for $800
Pay the difference of $200
This is sometimes worth it if the benefits outway the consequences. Bad credit can be costly in more ways that one. Some insurance and credit card companies will raise your rates if you have any negative items on your credit. So even though you could bounce back from foreclosure it may end up costing more than the $200 every month anyways.
Also values are probably not going to stay the way they are. In a few years they very well could jump back to where they were and more. Nobody knows for sure but you still might have something of value to you.
"In a recent conversation with the realtor, he says that no-one has even looked at the house in 2 months! I even dropped the rent twice.
"
1. It can be very difficult to be an out of state landlord. I definately recommend using a real estate agent as a management company as this will decrease your risk. However make sure they have managed property before and understand what it actually takes. You may consider working with a dedicated management company as there is a lot more to this than just collecting rent as you have found out already.
2. How are they marketing your rental. I would consider placing my own ad in the local newspapers. Real estate agents must be careful and their marketing usually doesn't get as many calls. This is because of the fact that they must disclose they are a real estate agent in all ads and communications with potential clients. If you place a "for rent" ad you will get more calls as most people prefer to call these directly. You can still use the agent to manage the property for you.
"Because my mortgage was 100% I paid for PMI - does this have any benefit to me or just the lender? What options do I have? I want to do the right thing, my wife and I have worked hard to build up a good credit rating and foreclosure would be a last resort. Any suggestions? "
Unfortunately the pmi is only for the lender unless you paid for an owners policy and it would have been very expensive.
Try to advertise the rental on your own. I know of many who have been succesful doing this in the past.
Also what others in your situation have done is this-
Say your payment is $1000 per month
You can rent the place for $800
Pay the difference of $200
This is sometimes worth it if the benefits outway the consequences. Bad credit can be costly in more ways that one. Some insurance and credit card companies will raise your rates if you have any negative items on your credit. So even though you could bounce back from foreclosure it may end up costing more than the $200 every month anyways.
Also values are probably not going to stay the way they are. In a few years they very well could jump back to where they were and more. Nobody knows for sure but you still might have something of value to you.
Thanks for livinginnky so detailed reply.
