In 10/2002 I was outbid on a house in an affluent community. The winning bidder bought it for $425k and was a board housewife who thought buying real estate and renting it was the way to finance her kid’s college education in 14 years. After 6 years of renting, she is now deeply in the red and she doesn’t even realize it.
The rental income never fully covered the mortgage, insurance, property tax, maintenance expense, vacancy, remodel, rental broker’s commission among other items. The current market value is about $466k and she is lucky if she can even get that since the market is declining. After a 4% broker’s commission, she will net $449k earning a $24k profit. According to my calculations she easily has paid out over $1,000/mo. over 6 years in (deficit) expenses or $72,000. Net net a total of a $48,000 LOSS. I recently tried to buy the property from her. She says she doesn’t want to sell and is insistent the market will come back.
When you hear stuff like this you know the market will never come back for year sand years. It will take 15 years to get back to any high water mark again.
When your housewife comes up with ideas like this you know it is the top of the market!!!!!!
I agree. Prices will drop more. Probably back down to her 10/2002 purchase price of $425,000. However, she will still insist it is worth more. Then, when she has to sell to put her kid through college in X years, she will realize there is no eqity. Meantime, I am living my life all these years to buy the house.
These speculators need to go. Let people who need to live in houses buy them.
Interesting story. Agreed, numerous home owners are in denial regarding the true values of their homes. What is remembered is what house in the neighborhood sold for the highest price. What is forgotten is the numerous costs of maintaining the property. Negative cash flow on a rental? Bad decision.
The dream the real estate industry dumped on the public is the lie that was backed by the banking industry. Too bad more people didn't watch the play/movie, "Glengary Glen Ross" with great acting! Talk about the bare truth.