hold onto it? or take a loss? (Real Estate)

[Bobby1986]

Hi everyone, I'm hoping I can get some real estate tips or advice from some real estate experts on this forum, heres an introduction about me and my situation so you guys can get an idea of where I currently stand;

I just turned 21 in September and I recently purchased a house last year in November of 2006 with 2 of my close family friends in a new and rapidly developing city called Mountian House in California which is in between two already-developed cities, Livermore and Tracy. The house we purchased is a 2,481 sq ft house on a 6,162 sq ft lot which was appraised at $677,650.00 and we recieved a $130,000.00 incentive that we used toward the housing cost which brought the purchasing price down to $547,650.00 and eventually we closed escrow at $565,137.68 with $0 down on January 4th 2007. We are currently on a 30 year, 7 year fixed/1 year ARM with intrest only at 6.5%, so our payment per month is about $3600.00 and the house is being rented out for $1900.00 a month which brings it to $570.00 out of pocket per person, split 3 ways.

Ok, heres the problem, when we purchased the house, we had absolutley no knowledge about investing in real estate, our intentions for purchasing the house was to sit on it and hope for capital gains and reselling for profit, but we are young and stupid, we had no back up plan for things like, if the real estate market was to fall, which it is now, it was kinda of buying on impulse. So I want to know what would be the best thing for us to do? We all make about $50k a year so its not hurting us to keep up with the payments and we all still live at home with our parents so our debt is at a minimum. So do you think we should just hang on to it for a couple more years and hope for the best? or should we just take a lost and sell it now and invest in something else? The average listed selling price in the area is between $460-$500k for a similar property size.

Hope you guys can help me out, thanks in advance guys! oh yea HAPPY THANKSGIVING as well everyone!

[Nigami Enterprise]

Real estate is a long term investment, hold onto it for a minimum of 5 years and see what happens.

[EthanK]

I agree, if the $500 isn't killing you then hold on to, you will be very glad in the future when you did...

[ltressel]

Bobby,

There's no sense in selling the house now. Hold on to the property and wait until the dust settles. If none of you are hurting for money, you have nothing to worry about. In the meantime, you guys have interest payments on the loan that you can split the deductions during income tax filing.

Because it's a rental, anything that you spend on the house i.e. insurance, water bills, sewer, repairs are all tax deductions. Another upside, as long as you are all paying the mortgage on time-you are also strengthening your credits.

When your mortgage resets, you've bought enough time to refinance the house. At that point-you wouldn't have any problems doing so. Seven years later, you might have gotten the value back, earned some equity, and have a better chance of exiting the property.

LT

[Bobby1986]

Thanks for the input everybody, yea, I figured holding on to the property is probably my best bet, I guess I just needed confirmation from others, Thanks again!

[consumertreehouse]

If you do it, hold onto it. Real Estate always turns around and the value of the house will go back up. I own several properties as well as a few timberland investments and all real estates investments, be it SFR, Multi-Family, Timberland, etc.. are long term. At least in my family, we keep everything that we buy, regardless of the real estate market.

Just make sure in the future you know what you are doing and have done your homework.

Good Luck

[plainjane]

I agree with everyone...hold onto it.

[engine101]

Real estate investment like any business is all about timing. But the sophistication is in anticipating the curve. How ever for real estate investments are bound to give you profits in the long run. The prices can only go down temporarily. There is no long term down for real estate prices. That way real estate is different from all other business. As long as people need a place to sleep, the demand is always there. But there is a difference in price and value and that can make the difference from an investment point of view.

[manzanar101]

I am an investor myself in California, and I'd probably try to rent it out to some GOOD (really screen them hard) tenants if you can find some.

It all depends on your long term strategy though to make a decision. Most likely though, your best bet is to hold on if you can sustain the market fluctuations.

[Bobby1986]

I thought I would just update you guys on my situation and thanks again for everyones input, after reading everyones comments, encouraging me to hold onto it, it pushed me to get a tenant into the house, I finally found a small family willing to rent, credit/background check came back clean as a whistle, and we're signing the lease contract next week! I hope everything goes well from here, and again, I want to thank everybody on the forum.

[BusinessAdviser]

I think this thread is dead to the original poster, but I'll throw in my simple answer regardless:

Hold onto it.

[youngmarketplace]

Here's some good advice. I know its already too late. Always research before you buy. What you are having to pay money out of your pocket and not making any monthly amount? Buy for cash flow. Estimates are that certain parts of the California real estate market are going to be hit with -30% in home values in the next year. So yes its possible that in 10 years after the bubble completely hits the fan you might walk away. The next thing is that you might not be able to sell the property for what you wanted to sell it for anyhow if you try to sell it now. Then again after taxes if i had spent $550,000 i could have bought several properties pulling in a net after tax cash value of $45,000 per year after taxes? Which one sounds better here?

Good luck.