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Not to be the drag of the party, but hang on tight.....you could very well lose more value on that condo. The #1 method of financing condo sales is FHA financing and as of December 8, 2010, over 90% of all FHA condo approvals expire. In addition to the condo project requiring recertification, FHA for the first time is limiting their exposure or the percentage of FHA loans in any one project. As of January 1, 2010, FHA will not finance more than 30% of the units in any one project.
This past month I've been speaking to various realtor and mortgage banker groups and have been calling HUD on a regular basis. Just when I think I have my questions answered, more questions come up. The criteria still evolves daily. Condos are typically purchased by first time buyers. A high percentage of first time buyers utilize FHA financing. But the bottom line, when you can't finance something, the value drops. I think this will eventually work itself out, but you need to be prepared to hang onto that unit for a while.
Not to be the drag of the party, but hang on tight.....you could very well lose more value on that condo. The #1 method of financing condo sales is FHA financing and as of December 8, 2010, over 90% of all FHA condo approvals expire. In addition to the condo project requiring recertification, FHA for the first time is limiting their exposure or the percentage of FHA loans in any one project. As of January 1, 2010, FHA will not finance more than 30% of the units in any one project.
This past month I've been speaking to various realtor and mortgage banker groups and have been calling HUD on a regular basis. Just when I think I have my questions answered, more questions come up. The criteria still evolves daily. Condos are typically purchased by first time buyers. A high percentage of first time buyers utilize FHA financing. But the bottom line, when you can't finance something, the value drops. I think this will eventually work itself out, but you need to be prepared to hang onto that unit for a while.
If a condo complex has lost its FHA approval, the condo owner can still refi but would have to do a streamline without appraisal.
We are in the exact same scenario as you and we have considered renting our condo out because we found a house we love and want to buy. I would suggest looking into a property management company. From what I have found they seem pretty affordable if you do your research. I found one company that only charges 5% a month of your gross rent. The only other charge is to place tenants. They charge one months worth of rent to find and place a tenant, which seems fair to me. And if your tenant stays a couple of years that seems more then fair. They also do all the work. They screen potential tenants, get deposits, get rent checks from them, send you the rent payments and everything. You obviously have to pay for the upkeep of your condo (repairs etc..) but they also should have companies that outsource all that work for you and they will just send you a bill. If you can afford the 5% out of your rent a month and the tenant placement maybe consider it...
I will look into that. Did you end up using a property management?
How much can you rent the condo for? How much is your mortgage? Will the rent cover the mortgage? Will there be a shortfall. I would not rent it out if you have a short fall.
Quote:
Originally Posted by VictorBurek
As the OP stated, if they sell they would need to bring about $30,000 to close and sell it. Even if they have a short fall of $500 a month between what they pay and what they rent.. i think paying $500 a month is better than sinking $30,000 today.
We can rent for $1400-1500 a month. This is what the neighboring unit(s) renting, and the apartments complex a few blocks away rent for $1600-1800 for a 2bdrms/2bath. I may rent for $1200 to get a quick tenant, and the unit has the amenities that the tenant(s) are looking for such washer/dryer in the unit, garage parking, central AC, balcony, and bus stop right in front.
Our mortgage payment is about $1450 including properties tax escrow. The condo fee is about $200 on top of that.
Like VictorBurek said, $500 is easily swallowed than chugging down $30K. But by giving up $30K, we will be free...
Not to be the drag of the party, but hang on tight.....you could very well lose more value on that condo. The #1 method of financing condo sales is FHA financing and as of December 8, 2010, over 90% of all FHA condo approvals expire. In addition to the condo project requiring recertification, FHA for the first time is limiting their exposure or the percentage of FHA loans in any one project. As of January 1, 2010, FHA will not finance more than 30% of the units in any one project.
This past month I've been speaking to various realtor and mortgage banker groups and have been calling HUD on a regular basis. Just when I think I have my questions answered, more questions come up. The criteria still evolves daily. Condos are typically purchased by first time buyers. A high percentage of first time buyers utilize FHA financing. But the bottom line, when you can't finance something, the value drops. I think this will eventually work itself out, but you need to be prepared to hang onto that unit for a while.
It sounds like all odds are not in my favor. There were 3 units sold the past 3 months. Now, there's currently 4 unit listed. I'll monitor the listing to see how long they stay on the market. It looks like we're climbing a very high elevation.
If a condo complex has lost its FHA approval, the condo owner can still refi but would have to do a streamline without appraisal.
I was trying to do just that this past summer. They could streamline the refinance without the appraisal, but that was where it ended. They wanted to rip us off with 6.5% interest. Granted we have 7/1 ARM on 30-year mortgage with 4.25% and it was due to adjust this past September. They had this tactics to scare people off like saying...your adjust rate may be doubled your current rate. I said even if our rate gets adjusted, it will still be less than your 6.5% that you're offering us (assuming max 2% cap). We let the ARM adjusted, 3.80% is great, at least until next September.
The tough part of a FHA streamline without appraisal is nothing can be rolled into the new loan except the 1% upfront fee FHA charges. The home owner would have to bring to close the closing costs and the money to set up a new escrow account. If the homeownere doesnt have cash on hand they can do a no cost loan, those rates are about 4.50% today, and they can call current lender and have them reduce the payoff by the balance of their current escrow account which should allow enough room to roll in new escrow account into new loan.
No one has pointed out that by doing this you are starting a business.
You will be in the landlord business.
As you have already stated, it is guaranteed to be a money-losing business.
Renting out a condo is gambling that you are renting it out at the
exact bottom of the market. If the value of the condo - at any time
during the renting process goes down - you have already lost the bet.
If you think condo prices are going to go up in the next few years,
then buy a security on the stock market that will benefit from that
and save yourself the heartache of going into a business that you
know nothing about ( this applies to most people thinking about this ).
People do this with stock, and housing. They think there is some sort
of "magic" to "breaking even." That is why most people are terrible
investors and get caught up in bubbles after it is too late.
Even if you "break even" you STILL lost money because $200,000
next year is not worth as much as $200,000 was last year.
People sit on crappy investments - waiting to "break even rather
than to switch to something better that, at least, has a chance to go up.
I sold a house in the Phoenix area 2007 that was losing value monthly.
I was advised to "rent it out" when it was probably worth $350k.
I sold it for $320k - down about $200k from the peak.
It has recently sold again for $250k.
People that think prices are coming back any time soon are deluded.
Housing will start going up - really going up when the last person renting
( waiting for the prices to go up ) gives up and sells **and** when the
last foreclosure is performed and the property is sold. Like ALL bear markets,
it will happen unexpectedly when the public has finally given up on the idea.
Last edited by mortimer; 10-25-2010 at 01:38 PM..
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I said even if our rate gets adjusted, it will still be less than your 6.5% that you're offering us (assuming max 2% cap). We let the ARM adjusted, 3.80% is great, at least until next September.
