Time Is Running Out For Rental #1
Well, the potential renter never panned out and my rental is still empty. There have been some other people who looked at the place and, according to the property manager, the problem is with the trashy neighbors. Not only do they have a habit of throwing their trash into my yard, but apparently they don't keep their yard too tidy either. So, in an attempt to fill the place, I've lowered the asking rent back down to $750, which is what it was rented at before. I'm waiting two weeks. If it isn't rented by then, I'm also going to list it for sale. I really would hate to sell it because, even at $750 a month, it had some nice cashflow. But if no one will rent it, the cashflow isn't there.
Fear Mongering Comes To Mortgage Commercials
Mortgage companies must be hurting for business right now because I was shocked at a commercial I heard on the radio this morning. In an attempt to get people to refinance their mortgages, it used fear-mongering tactics that would have made the President proud.
The ad started off by saying that private mortgage insurance, or PMI, is required on all loans where the loan to value ratio is greater than 80%. That's true. However, the ad then went on to talk about the declining housing market and how homes may now have lost equity. Your loan, the ad warned, may now be above an 80% LTV! Don't be hit with an added PMI charge on your mortgage - refi now!
First of all, there is truth in the statement that the housing market has declined and equity may have been lost, thus pushing your LTV over 80%. But, and this is the deceptive part, I have NEVER heard of any lender that regularly appraises the houses their mortgages are based on to make sure they stay above 80% LTV! Never! If the loan is being paid on time, no one at the bank is going to ask for a new appraisal. The ONLY time a new appraisal will be obtained is if the house is sold or the loan refinanced. In short, PMI will not suddenly be added to a mortgage that does not already include it, despite what the ad implies.
When you stop to think about this ad, it doesn't even make sense. If a loan truly did rise above 80% LTV due to falling home values, and the current loan did not have PMI, then refinancing it would only serve to ADD PMI, no matter what, because a new appraisal would be obtained, thus verifying the higher LTV.
The ad started off by saying that private mortgage insurance, or PMI, is required on all loans where the loan to value ratio is greater than 80%. That's true. However, the ad then went on to talk about the declining housing market and how homes may now have lost equity. Your loan, the ad warned, may now be above an 80% LTV! Don't be hit with an added PMI charge on your mortgage - refi now!
First of all, there is truth in the statement that the housing market has declined and equity may have been lost, thus pushing your LTV over 80%. But, and this is the deceptive part, I have NEVER heard of any lender that regularly appraises the houses their mortgages are based on to make sure they stay above 80% LTV! Never! If the loan is being paid on time, no one at the bank is going to ask for a new appraisal. The ONLY time a new appraisal will be obtained is if the house is sold or the loan refinanced. In short, PMI will not suddenly be added to a mortgage that does not already include it, despite what the ad implies.
When you stop to think about this ad, it doesn't even make sense. If a loan truly did rise above 80% LTV due to falling home values, and the current loan did not have PMI, then refinancing it would only serve to ADD PMI, no matter what, because a new appraisal would be obtained, thus verifying the higher LTV.
Update On Multi-Unit #1
Time for an update on my potential multi-unit investment.
The short version: I don't think it's gonna happen.
The longer version: The buyers have not raised enough money to be able to buy the place. They were looking to get a mezzanine loan for about $500,000 and the lender they had lined up decided not to make the loan. They are looking for a new loan or additional investors to provide the additional capital.
Escrow was supposed to close at the end of February, but the sellers agreed to extend it. The seller is willing to work with us, but I imagine there is going to be a limit to their patience.
If the deal doesn't happen, the buyers will look for other investments that might be available for slightly less. The investor's funds are currently in an escrow account earning interest. Should this deal fall through, we can get our funds back or elect to take part in any other opportunity that might be found.
The short version: I don't think it's gonna happen.
The longer version: The buyers have not raised enough money to be able to buy the place. They were looking to get a mezzanine loan for about $500,000 and the lender they had lined up decided not to make the loan. They are looking for a new loan or additional investors to provide the additional capital.
Escrow was supposed to close at the end of February, but the sellers agreed to extend it. The seller is willing to work with us, but I imagine there is going to be a limit to their patience.
If the deal doesn't happen, the buyers will look for other investments that might be available for slightly less. The investor's funds are currently in an escrow account earning interest. Should this deal fall through, we can get our funds back or elect to take part in any other opportunity that might be found.
The Case For Foreclosures
I was pleasantly surprised to see an article titled The Case For Foreclosures on Slate.com the other day. Finally, someone was taking a critical look at the recent desire by Congress to "do something" about the wave of foreclosures sweeping the nation.
The article doesn't touch on one of my pet peeves, namely that capitalism, by definition, requires some businesses to fail, or in this case, some loans to default and go into foreclosure. Capitalism is sort of a Darwinian financial system where only the strong survive. Whenever Congress or someone else steps in to prop up an industry, they are subverting free-market capitalism.
The article does, however, rightly point out that someone's loss is someone else's gain. There will be many families who are now able to afford a house they otherwise couldn't, all because another families had to get kicked out. Saying this does not mean I have a lack of compassion. It's merely the facts of Financial Darwinism.
The article doesn't touch on one of my pet peeves, namely that capitalism, by definition, requires some businesses to fail, or in this case, some loans to default and go into foreclosure. Capitalism is sort of a Darwinian financial system where only the strong survive. Whenever Congress or someone else steps in to prop up an industry, they are subverting free-market capitalism.
The article does, however, rightly point out that someone's loss is someone else's gain. There will be many families who are now able to afford a house they otherwise couldn't, all because another families had to get kicked out. Saying this does not mean I have a lack of compassion. It's merely the facts of Financial Darwinism.
Tulsa Rental Still Not A Done Deal
I spoke with the owner of my property management company yesterday to get a status on the potential renter. Turns out, both the leasing agent and the potential tenant have the flu, so no paperwork has been signed yet...
