What would you do? (Real Estate Question)

[nickagneta]

Most mortgage lenders will try to lock you into owning the property at least two years before being able to refinance. At least when I bought in 2004 that's the way it was.

Ok, fair enough. I'm sure that's true in a lot of cases but in the grand scheme of things what's 2 years really? And who's to say your going to have that same ability once the market goes up? (i.e. purchasing a house that you'll own 20% of after 2 years.)

Don't forget that towns do property value re-evaluations usually every ten years. Watch out for buying a house that might have a high tax evaluated price and find out that in the next year or so the area could be re-evaluated at lower prices to your detriment. Just another thing to think about before purchasing. Also, get an idea of what the local property taxes have been doing and where they may go. As public funding for assistance to cities and towns decrease and public services get cut to a minimum, real estate taxes might need to be raised to keep the city or town afloat in these tough times.

Just saying you would hate to buy something and come to find that within a year they re-evaluate property values for taxation purposes to find out that your house is now worth $75000 less than what you thought it was worth and then find out that although the property is worth less, you will be paying more in taxes because they are increasing the tax rate by $5-$8 per thousand.

Tough times right now for cities and towns and you need to have a good feel for what the local political and fiscal landscape is at.

I think ultimately, if you want to buy now and get approved for a loan you are going to have to go get pre-approved for an amount and then go shopping for whatever that amount will bring you rather than the at the price you are currently looking at.

You might find better value for the dollar and investment for your dollar closer to the city. In Everett, Malden, Medford, Revere and Somerville might yield you a two family fixer-upper that is more in your ability to get approved for and yet in ten years could see huge growth in value. Just another thought.

[Chris]

If you're assuming your wife will get a new job soon, why not wait?  What difference will a few months make?  Plus, it'll insure that you wont end up paying  a mortgage on only your income should she have difficulty finding something new that suits her (added bonus: she wont feel pressured to take something she isn't thrilled about).

When considering financial commitments that project beyond a year, best to get your ducks in a row first.  Just one man's opinion...

Why  I don't want to wait: The market is at the bottom right now.

Oh my goodness.   

I mean this with all do respect, but I strongly recommend you think long and hard and research before you act.  What do you base your market analysis on?  I follow the markets real estate and otherwise as closely as the celtics, the nba or other hobies and I can assure you... the market is at bottom right now has been the mantra since the spring of 2006.  My humble opinion is that you are 100% false on your market analysis.  I'm also very conscerned for you and your families future when I read that you are looking into buying a 300k home on a 45k salary.  This is 100% impossible.  Even with your wifes income it is financial suicide, and your wife's income is not reliable, obviously.  I'm not passing judgment, my wife also has undocumented income. She runs a legal in home daycare, but clients come and go, I don't count on that cash for my mortgage. 

Your plan is reckless, and it is not uncommon.  Frankly, this line of thinking and decision making is why we are in this crisis.  Banks may share the blame, depending on your political views.  The bank handed me the rope to hang myself with in the spring of 2007.  I chose to purchase a home for 88k less than what I was approved for.  Like so many reckless Americans I had the cash in hand (figuratively speaking), I had the wife demanding 4 bedrooms, granite counter tops, acres of land, the best school systems money can buy, picket fences etc etc etc. 

I had the discipline to resist the temptation to act irresponsibly.  Now I have a mortgage I can comfortably afford. 

Most importantly though Jsaad, unlike so many other Americans, I still have my home.  What good would that granite counter top and 4th bedroom been if I had no wife and kids to share it with?  It is the mans responsibility to be the captain and guide the ship,  if the ship sinks into financial ruin, you could be the only one left on board brotha. 

I mean this with the utmost respect, I just want you to have some perspective and a healthy dose of caution for the path ahead.

best of luck. 

oh and one more thing, I could write a 30 page thesis on why this market is NOT at the bottom.  Your patience will be rewarded I can assure you!  I have the means to upgrade considerably right now.  I increased my salary a year ago by 45% and I have flawless credit, I remain in my humble home to this day.  There is no rush brotha.

If I'm wrong about the market continuing down i can certainly assure you that it will not spike dramatically anyway.  You won't miss anything.  It will be a u shaped reconvery or a slight annual increase at best. 

but i'm telling you, for a gazzillion reasons this market is not done it's decline. 

Great post.  TP.

[JSD]

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[JSD]

Nut from Nh, you are missing a lot of what my game-plan is. Explain to me what about my plan is reckless and I'll explain to you (by citing within this thread) my reasonable line of thinking.

[nickagneta]

If you're assuming your wife will get a new job soon, why not wait?  What difference will a few months make?  Plus, it'll insure that you wont end up paying  a mortgage on only your income should she have difficulty finding something new that suits her (added bonus: she wont feel pressured to take something she isn't thrilled about).

When considering financial commitments that project beyond a year, best to get your ducks in a row first.  Just one man's opinion...

Why  I don't want to wait: The market is at the bottom right now.

Oh my goodness.   

I mean this with all do respect, but I strongly recommend you think long and hard and research before you act.  What do you base your market analysis on?  I follow the markets real estate and otherwise as closely as the celtics, the nba or other hobies and I can assure you... the market is at bottom right now has been the mantra since the spring of 2006.  My humble opinion is that you are 100% false on your market analysis.  I'm also very conscerned for you and your families future when I read that you are looking into buying a 300k home on a 45k salary.  This is 100% impossible.  Even with your wifes income it is financial suicide, and your wife's income is not reliable, obviously.  I'm not passing judgment, my wife also has undocumented income. She runs a legal in home daycare, but clients come and go, I don't count on that cash for my mortgage. 

Your plan is reckless, and it is not uncommon.  Frankly, this line of thinking and decision making is why we are in this crisis.  Banks may share the blame, depending on your political views.  The bank handed me the rope to hang myself with in the spring of 2007.  I chose to purchase a home for 88k less than what I was approved for.  Like so many reckless Americans I had the cash in hand (figuratively speaking), I had the wife demanding 4 bedrooms, granite counter tops, acres of land, the best school systems money can buy, picket fences etc etc etc. 

I had the discipline to resist the temptation to act irresponsibly.  Now I have a mortgage I can comfortably afford. 

Most importantly though Jsaad, unlike so many other Americans, I still have my home.  What good would that granite counter top and 4th bedroom been if I had no wife and kids to share it with?  It is the mans responsibility to be the captain and guide the ship,  if the ship sinks into financial ruin, you could be the only one left on board brotha. 

I mean this with the utmost respect, I just want you to have some perspective and a healthy dose of caution for the path ahead.

best of luck. 

oh and one more thing, I could write a 30 page thesis on why this market is NOT at the bottom.  Your patience will be rewarded I can assure you!  I have the means to upgrade considerably right now.  I increased my salary a year ago by 45% and I have flawless credit, I remain in my humble home to this day.  There is no rush brotha.

If I'm wrong about the market continuing down i can certainly assure you that it will not spike dramatically anyway.  You won't miss anything.  It will be a u shaped reconvery or a slight annual increase at best. 

but i'm telling you, for a gazzillion reasons this market is not done it's decline. 

He's concerned, as I am. I think he's 100% correct as I have stated in my previous posts. This market is still dropping and will be. You aren't making enough to get approved for the loan you want never mind being able to afford it given the info we have. If you must buy now, think less expensive and in an area where it will be more affordable long term.

I'm giving Nut from nh a TP.

[JSD]

I have lived within my means my entire life and am very careful with my financial decisions. I found this line:

Your plan is reckless, and it is not uncommon.  Frankly, this line of thinking and decision making is why we are in this crisis.

Extremely insulting.

[Eeyore III]

My six words of advice.... BE PATIENT....BE FRUGAL......KEEP SAVING. My first home purchase many years ago was a struggle to come up with the downpayment. It finally happened and I immediately got laid off with a pregnant wife. It al worked out and I was glad I waited and that we did not overextend ourselves with a house we could not afford during the lean times. I would not partner up with anybody (keep your freedom).

My basic rule (besides an inital mortgage) is pay cash for everything you buy (unless an absolute emergency). Use your credit cards ONLY if you pay them off every month.

Flash forward for me. I am 100% debt free and have been for many years. I have a nest egg of cash that has already been taxed and completely free of any stock market flucuations whatsoever. I am 51 and I could retire today if I wanted to. I lived in that first house for 18 years and paid the mortgage off early. While I was frugal, hard working and created a successful business (and very lucky!!!) I still enjoyed life with my wife and daughter despite not buying everything we wanted.

So just be patient,frugal and keep saving. But remember without your health and your friends and family you will be a poor man no matter the size of your checking account or the size of your house. I am struggling to recoup from a serious disease and stay alive and my house won't help me do that, nor will my nest egg...just count your blessings you have been given and "stay the course". It's the journey and not the destination. Hope this helps. Peace   

Wow, this sounds as if I wrote it myself--except for paragraph 3, and the part about the serious illness (unless serious mental illness counts).  May the Mandate of Heaven be in your favor, cousin Po.  

[Eeyore III]

If you're assuming your wife will get a new job soon, why not wait?  What difference will a few months make?  Plus, it'll insure that you wont end up paying  a mortgage on only your income should she have difficulty finding something new that suits her (added bonus: she wont feel pressured to take something she isn't thrilled about).

When considering financial commitments that project beyond a year, best to get your ducks in a row first.  Just one man's opinion...

I'd genuinely be interested in your analysis of why the market is still tanking.  And any opinion you may offer with respect to Burlington, VT will be rewarded with a prompt TP.

Why  I don't want to wait: The market is at the bottom right now.

Oh my goodness.   

I mean this with all do respect, but I strongly recommend you think long and hard and research before you act.  What do you base your market analysis on?  I follow the markets real estate and otherwise as closely as the celtics, the nba or other hobies and I can assure you... the market is at bottom right now has been the mantra since the spring of 2006.  My humble opinion is that you are 100% false on your market analysis.  I'm also very conscerned for you and your families future when I read that you are looking into buying a 300k home on a 45k salary.  This is 100% impossible.  Even with your wifes income it is financial suicide, and your wife's income is not reliable, obviously.  I'm not passing judgment, my wife also has undocumented income. She runs a legal in home daycare, but clients come and go, I don't count on that cash for my mortgage. 

Your plan is reckless, and it is not uncommon.  Frankly, this line of thinking and decision making is why we are in this crisis.  Banks may share the blame, depending on your political views.  The bank handed me the rope to hang myself with in the spring of 2007.  I chose to purchase a home for 88k less than what I was approved for.  Like so many reckless Americans I had the cash in hand (figuratively speaking), I had the wife demanding 4 bedrooms, granite counter tops, acres of land, the best school systems money can buy, picket fences etc etc etc. 

I had the discipline to resist the temptation to act irresponsibly.  Now I have a mortgage I can comfortably afford. 

Most importantly though Jsaad, unlike so many other Americans, I still have my home.  What good would that granite counter top and 4th bedroom been if I had no wife and kids to share it with?  It is the mans responsibility to be the captain and guide the ship,  if the ship sinks into financial ruin, you could be the only one left on board brotha. 

I mean this with the utmost respect, I just want you to have some perspective and a healthy dose of caution for the path ahead.

best of luck. 

oh and one more thing, I could write a 30 page thesis on why this market is NOT at the bottom.  Your patience will be rewarded I can assure you!  I have the means to upgrade considerably right now.  I increased my salary a year ago by 45% and I have flawless credit, I remain in my humble home to this day.  There is no rush brotha.

If I'm wrong about the market continuing down i can certainly assure you that it will not spike dramatically anyway.  You won't miss anything.  It will be a u shaped reconvery or a slight annual increase at best. 

but i'm telling you, for a gazzillion reasons this market is not done it's decline. 

A TP if you articulate some of your gazillion reasons, particularly insofar as they are applicable to the Burlington, VT market.  Actually, TP anyway.

[ChampKind]

To be fair, Jsaad, I think the majority of the responses have all been in the same vein - be patient and save more.  Honestly, I don't think that you can work with the plan that you've currently got, since these situations have had a very low success rate in recent years.  Don't be offended, but I think you may have to reevaluate. 

[the_Bird]

I have lived within my means my entire life and am very careful with my financial decisions. I found this line:

Your plan is reckless, and it is not uncommon.  Frankly, this line of thinking and decision making is why we are in this crisis.

Extremely insulting.

Well...  $2000 mortgage payments with $45k income and an unemployed wife (and a 10% unemployment rate) is, IMHO, reckless.  Not a lot has to go wrong (wife can't find a job, house needs a new roof, you get hurt/injured; do you have disability insurance?) for you to find yourself in bankruptcy.  What if you do what newlyweds do and end up preggo, either intentionally or not?  You've got no margin for error.

There's a reason that you can't find these loans; people who took out mortgages like this are defaulting left and right.  I believe you when you say that you're responsible, but **** happens, **** that's sometimes out of your control, and you aren't leaving yourself ANY wiggle room.

As to the housing market, it's all a big guess at this point.  Some things look better, there's been some improvement in the sales numbers, but there are SO MANY HOUSES on the market still that it's going to be a long, long time before we see any kind of sustained improvement (again, IMHO); also meaning that I wouldn't feel compelled to rush in.  

[JSD]

I have lived within my means my entire life and am very careful with my financial decisions. I found this line:

Your plan is reckless, and it is not uncommon.  Frankly, this line of thinking and decision making is why we are in this crisis.

Extremely insulting.

Well...  $2000 mortgage payments with $45k income and an unemployed wife (and a 10% unemployment rate) is, IMHO, reckless.  Not a lot has to go wrong (wife can't find a job, house needs a new roof, you get hurt/injured; do you have disability insurance?) for you to find yourself in bankruptcy.  What if you do what newlyweds do and end up preggo, either intentionally or not?  You've got no margin for error.

There's a reason that you can't find these loans; people who took out mortgages like this are defaulting left and right.  I believe you when you say that you're responsible, but **** happens, **** that's sometimes out of your control, and you aren't leaving yourself ANY wiggle room.

As to the housing market, it's all a big guess at this point.  Some things look better, there's been some improvement in the sales numbers, but there are SO MANY HOUSES on the market still that it's going to be a long, long time before we see any kind of sustained improvement (again, IMHO); also meaning that I wouldn't feel compelled to rush in.  

 

I'm not implying that my income along with my wife's unemployment check will bring in a $300,000 house. My OP very clearly states that I'm interested in bringing in a partner and investing in a house the will help pay for itself (multi-unit).

Selective reading is driving me nuts right now.

[JSD]

So this is "reckless"?

2 people with a $100,000 annual income (combined) paying for a $300,000 multi-unit house bought in this economy? I beg to differ.

The real question I had is with the partnership. I know I can't do it by myself (or just with my wife)


I never implied I could. 

[the_Bird]

Well...  explain this partnership deal.  A friend making half of the payments, purely as an investment?  A friend that would make half of the payments and live in the other unit?  A friend that would just be on the loan because they have income, but wouldn't either actually MAKE any payments or have any stake in future capital gains?  

Can't really consider it if you haven't explained it...  it's been very nebulous

EDIT: To expand on this, assuming the friend will be buying half the house and living in the other unit, how confident are you in their ability to continue making payments?  If they lose their job or just walk  (you did say their credit was crap), you'll be hung out to dry.  Seems like a lot of ways to lose a friendship.

[JSD]

Well...  explain this partnership deal.  A friend making half of the payments, purely as an investment?  A friend that would make half of the payments and live in the other unit?  A friend that would just be on the loan because they have income, but wouldn't either actually MAKE any payments or have any stake in future capital gains?  

Can't really consider it if you haven't explained it...  it's been very nebulous

EDIT: To expand on this, assuming the friend will be buying half the house and living in the other unit, how confident are you in their ability to continue making payments?  If they lose their job or just walk  (you did say their credit was crap), you'll be hung out to dry.  Seems like a lot of ways to lose a friendship.

Yes, I would just need the added income verification. My partner (brother) would then sit back and enjoy the equity built from the investment.

If I can find a two unit house I already have the 2nd unit rented out for $900-$1000

A $300,000 two unit mortgage + monthly taxes = Roughly $2000/ month - 900 = $1100/monthly payment

Which is only $200 more a week than my condo cost me. It's definitely doable I just need to find a solid duplex and get pre-approved (for that price range anyway).

[Chris]

So this is "reckless"?

2 people with a $100,000 annual income (combined) paying for a $300,000 multi-unit house bought in this economy? I beg to differ.

The real question I had is with the partnership. I know I can't do it by myself (or just with my wife)


I never implied I could. 

If you had put it that way from the beginning, then it does not sound wreckless, but your OP did not make any of this clear at all.  All you said was that you wanted to buy a house you couldn't afford, and you were wondering if you should go into it with friends who make a ton of money, but have bad credit.

But to answer your question, I think it is a terrible idea to go into a partnership on an investment like that if they have bad credit.  They have bad credit for a reason, and it just means it would be very risky for you to be risking your investment on them having learned how to handle their money better.

And I would add, I think it is not worth it anyways.  I think going into a partnership like that is way too complicated, with too many ways for things to go wrong.  You are better off either buying something within your own means, or just waiting it out a little bit until you have saved up more money to buy what you really want.