04/26/2008Vegas foreclosure mess?
- I am going in escrow in two days on a second home that I will use as my primary residence. I bought our current, small,1200 sq/ft home 4 years ago during the "boom" and have a 200k mortgage. If I try to sell our current home I will lose about $30,000.
My family needs a bigger home as we now have two children and are feeling crampt. The new home is 2300 sq/ft in a better area that last sold in 2006 for 369k, we are picking it up for 215k and freddiemac is even paying closing cost.
We make about 95k/year and have 80k in the bank and will put down about 45k on the home and then rent out our current home. Realistically we can rent our current home out for $1,000/month and our mortgage is $1200.00.
I am scared to death to do this but everyone says this is the time to take chances. Am I insane to attempt this? Also, as I will losing $200.00 a month renting our current home out, will there be any tax savings that would offset this?
- Best Answer:First off, great idea. You will end up winning in the long run.
Next, yes, you're paying $200/month to keep the home. Look at it this way, you will be paying $200 per month to save $30,000. It would take you 150 months (12 1/2 years) to actually be in the hole on this deal, and I'm sure that somewhere in that period, you will be able to sell your first home for much more than what it's valued at now.
Your depreciation on that home should make up most of that difference, but it's a pittance compared to what you would pay otherwise.
Take the deal you're looking at and run with it. You'll probably end up making tons of cash on your new home in the future, too.
BTW, if you are able to sell your first home in the next 3 years for a profit, you will be able to do so without any tax penalty. The IRS says that the requirement for your principal residence is that you must have lived in it for 2 of the previous 5 years, and, if you sell within 3 years of moving out, you meet that criteria.
Good luck!
A later note to RK. Maybe you should consider reading the question before you answer someone. If you had, you'd have known that the question asker is buying a home that is a foreclosure, and he's doing it for about 40% below its last sale.
Next, you're saying that I'm giving tax advice on something without all of the information. I gave the proper information about how to sell a principal residence. If you don't believe me, or if you think that I left something out, please go to the IRS website and look it up yourself.
As for me giving advice without knowing all the information, like how much he/she is putting down on a home - that doesn't really matter. If the person can afford to qualify for the loan, and is comfortable with the payments on the home he/she is buying, then what's the difference? Hopefully he/she has gotten good advice from the lender on this.
Feel free to call me a snake oil salesman, but I'm not going to make a penny off of the person above. Also, if you'd read the mainstream newsmagazines, you'd realize that Las Vegas was recently rated as one of the best locations to "Buy Now" due to the lower purchase prices available and the growth of the economy there. Maybe you should do some research before you criticize others, especially when you don't have a clue as to what you're talking about.
And if you're such an expert about everything, why are your questions blocked and there is no information about yourself? Maybe you're unemployed and that's why you have so much time to sit on your butt and give everyone else your uneducated opinion.
Sorry about the venting, but I'm tired of these idiots who don't have a clue about real estate giving their advice. Just because they read it in the newspaper where they live doesn't mean that it exists. For example, Detroit's real estate market has zero bearing on mine.
- Answer:real estate prices are going to go down a lot further in the next few years. Unless you are buying and intend to live there 10 or 20 years now is not the time to become a landlord or investor
- Answer:You are being foolish by jeopardizing your family security this way. Bad times are coming. Get ready for it.
- Answer:Everyone says this is the time to take chances? It is they who are insane. Times are bleak right now and you are right to be "scared to death" about putting your savings in such jeopardy. And "Troublemaker" has a lot of nerve giving you "professional" advice without knowing essential facts such as how much money you put down on your current home. He naturally has the perspective of a snake oil salesman, and isn't doing you any favors with "tax tips" based on unknown future factors.
Don't do it. Back out of this deal now, or at least postpone the escrow until you have explored other options. Don't let anyone else pressure you into doing something that your gut tells you is a big mistake. Prices still have a long way to go down.
Have you thought of alternatives such as adding on to your present home? Renting a bigger place and renting out your present home? Buying a foreclosed property for much less than market price? Consult a financial adviser before you take this step.