PANDA's Two Year Plan - What would you do if you were Panda?

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Buying RE in 2004 was okay. Buying in RE in 2006 was pretty bad. Selling is a good idea, but it's still difficult with this market. I think that if your income is good and your cash flow is adequate, just keep the properties for now. If your monthly rental loss is under $1,000, that'll be 12K a year, and 60K in 5 years. Hopefully, by then you can sell not at a loss. I'm assuming that you make good income and 12K a year would not bother you too much? The rule of thumb is to buy low and sell high. Right now, you'll be selling low while having bought high. I have an aunt who pays $1500 mortgage on a house she rents for $1200. Her loss is $300/month; $3600/year; $18K in 5 year. But $300 a month is not that significant to her so she's planning to keep that investment home for 10-20 years. Perhaps sell it when she retires. You're not a distressed homeowner, are you?
 
reading this thread and being a smidge under 30 I kinda feel bad throwing all my money away when I was younger. I never had CC debt and I paid off my student loans immediately. but having so much extra income made me do crazy trips and buy stupid cars - oh well. if its any consolation i made most of my money after 2005 when the housing bubble started to burst. I always wondered what would have happened if i was making my salary back in 2001 when i was a fresh grad. I would probably have a 3,500 sq ft home now.

Panda- what you have accomplished requires a lot of discipline and i should commend you on that.
 
hs_teacher said:
Buying RE in 2004 was okay. Buying in RE in 2006 was pretty bad. Selling is a good idea, but it's still difficult with this market. I think that if your income is good and your cash flow is adequate, just keep the properties for now. If your monthly rental loss is under $1,000, that'll be 12K a year, and 60K in 5 years. Hopefully, by then you can sell not at a loss. I'm assuming that you make good income and 12K a year would not bother you too much? The rule of thumb is to buy low and sell high. Right now, you'll be selling low while having bought high. I have an aunt who pays $1500 mortgage on a house she rents for $1200. Her loss is $300/month; $3600/year; $18K in 5 year. But $300 a month is not that significant to her so she's planning to keep that investment home for 10-20 years. Perhaps sell it when she retires. You're not a distressed homeowner, are you?
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HS_teacher

No, I am not a distressed homeowner, my current mortage on my Atlanta home is $1513 a month and with tax and insurance my carrying cost is $2130. i am collecting rent at $3000 a month so i am cash flow positive by $870 a month. I know that it was stupid move buying in 2006, but man I have thank god and count my blessings that I did not buy in Portola Springs or Woodbury in 2006. Had I done that, I probably lost the entire $200k equity by now and under water on my mortgage. Yeah, I am planning on keeping my Atlanta home until I can pull out the same $200k I put into the home as down payment.

It seems like selling my chicago home while i am still in the positive equity territory is probably the best option right now. I am sort of in the same situation as IPO as he is trying to pull $200k positive equity out of his West Irvine house while at the same time I am trying to pull $100k positive equity out of my chicago house. Probably within two years, if we both don't sell our homes, IPO and I will probably both be in the zero positive equity territory, assuming chicago goes down 10% a year and Irvine goes down 20% a year.
 
PANDA said:
my current mortage on my Atlanta home is $1513 a month and with tax and insurance my carrying cost is $2130. i am collecting rent at $3000 a month so i am cash flow positive by $870 a month.
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When was the last time you were in the house? Why is someone paying $3000 to rent when market rents are $2000?

My initial thought is they want you leaving them alone...
 
You don't seem to be hurting for cash. I would get a HELOC on the Chicago home (you can get it for prime minus .25 that's 4.75%) pay the mortgage with that and the collected rent. Wait 1-2 years. Buy the Irvine home. Wait another year for the property values to rebound. Then sell the Chicago home. You probably need the tax write-off (that would pay for the property taxes), and if you use the Chicago home as a primary residence, you can get the capital gain exemption (that would pay for most of the interest).

Also, I wouldn't get emotionally attached to Irvine. I've made a few bad financial decisions thinking with my heart, and not my head.
 
ERPguy said:
You don't seem to be hurting for cash. I would get a HELOC on the Chicago home (you can get it for prime minus .25 that's 4.75%) pay the mortgage with that and the collected rent. Wait 1-2 years. Buy the Irvine home. Wait another year for the property values to rebound. Then sell the Chicago home. You probably need the tax write-off (that would pay for the property taxes), and if you use the Chicago home as a primary residence, you can get the capital gain exemption (that would pay for most of the interest).

Also, I wouldn't get emotionally attached to Irvine. I've made a few bad financial decisions thinking with my heart, and not my head.
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I really appreciate it ERP. This is the type of advice i was looking for. This was an option that I did not consider before. I've been offered $2300 rent before by two tenants for my Chicago home. So renting it out is not a problem. To have both homes unsold and buying a third home at Irvine with all the cash i have, puts me in a very uncomfortable position which I want to avoid. Your advice is definitely viable and sound. I really hope that the Chicago real estate market will rebound by 2009.

Thanks again ERP.

Panda
 
First, I would stop referring to myself in the third person. Second, I would buy gold or a lottery ticket!
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I actually think it's funny when he refers to himself in the third person. It's what makes Panda "Panda." :cheese:
 
Makes me wonder if he refers to himself in the 3rd person all the time or just on IHB. "Bob is going to the grocery store after work today. Oh yes he is!"

Calgal, you are right - it's part of Panda's charm. Like his fondness for excessive use of CAPITALS in his Topic Titles.
 
"Jimmy thinks Panda is interesting."

"Jimmy wants to know why Panda has so many threads."

"Jimmy likes Elaine."

"Jimmy wants to know if Elaine will go out with him"
 
gwailo168 said:
"Jimmy thinks Panda is interesting."

"Jimmy wants to know why Panda has so many threads."

"Jimmy likes Elaine."

"Jimmy wants to know if Elaine will go out with him"
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UH... OKAAYAAEEE???? Someone's been smokin too much weed. Dude, I think there is some screws loose in your head.
 
The post was in response to something NewToOC said...

It's a joke from SEINFELD

Back on topic, glad to hear that you are making quite a living doing something that your thorogly enjoy
 
Panda,

I've been pondering your situation. Given your business, I'm assuming you have a good tax person. If you don't you need one. The second thing is have you worked out a plan with a fee only financial advisor? You probably should. Your original post, which I'm glad you overwrote, identified how much you are actually saving on top of retirement savings annual. Which is quite impressive.

There's no getting around it, your business is generating substanial cash flow. Given such, the tax implications of moving to California and maintaining other properties raises the question of selling the Georgia place and replacing it with a nice little 'primary' residence in Texas or Washington for tax impacts. You could do something in Austin where you rent it to grad-students during the year and live there a couple weeks, to shelter your income. Granted with the business, you can make a lot of income virtually vaporize, still IL has a 3% rate and you'll be paying nearly 9.3% in California.

My 2nd question on the Georgia place was in regards to the potential above market rent, why is the tenant paying it? Or did I misunderstand and market rents are that high and owning is cheaper than by in that area? I'd find that surprising since Atlanta had CA comparable bubble. Unless you know the person well that is there, an absentee landlord and tenant with above market rates is a bad combo.
 
No_Such_Reality said:
Panda,

I've been pondering your situation. Given your business, I'm assuming you have a good tax person. If you don't you need one. The second thing is have you worked out a plan with a fee only financial advisor? You probably should. Your original post, which I'm glad you overwrote, identified how much you are actually saving on top of retirement savings annual. Which is quite impressive.

There's no getting around it, your business is generating substanial cash flow. Given such, the tax implications of moving to California and maintaining other properties raises the question of selling the Georgia place and replacing it with a nice little 'primary' residence in Texas or Washington for tax impacts. You could do something in Austin where you rent it to grad-students during the year and live there a couple weeks, to shelter your income. Granted with the business, you can make a lot of income virtually vaporize, still IL has a 3% rate and you'll be paying nearly 9.3% in California.

My 2nd question on the Georgia place was in regards to the potential above market rent, why is the tenant paying it? Or did I misunderstand and market rents are that high and owning is cheaper than by in that area? I'd find that surprising since Atlanta had CA comparable bubble. Unless you know the person well that is there, an absentee landlord and tenant with above market rates is a bad combo.
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NSR,

My CPA is here in Chicago, however once I move to Irvine I plan to look for a new one. If you have anyone good in mind, please let me know. I've used financial advisors before in my early 20s and many gave me the wrong advice looking back now. I have always done my own research, and looked to financial/investment books and mentors when making my investment decisions. I am also study very closely to see which sectors Warren Buffet is investing in. When it comes to equity investments, he is my hero. I prefer to manage my own assets and investments.

I've been contemplating my options with the Georgia home. Managing an out-of-state rental property has its own challenges as you can't touch/feel/ and see the condition of your home. I am very lucky with an excellent tenant who has always paid in time and he has been my tenant for almost 2 years now. Ideally I would like to sell my Atlanta home to my tenant and with the equity from my Georgia home, buy my second home in Irvine where I can rent it out. My lawyer recommended to me to buy my primary home in Irvine in a living trust and if I decide to sell my Atlanta home and buy a second property in Irvine or Aliso Viejo to purchase it as an LLC for maximum asset protection. Ideally I prefer to have all of my real estate holding in Orange County, CA than one home in Texas and another in Georgia so that I can manage them better.

To your second question, the market was very hot in Atlanta in 2006. When I found my tenant, $3000 - $3200 was the going market rate. For example, there is one house in my neighborhood where the asking rent is $2300 because the home owner is moving back to Korea and he deperately needs to cover his mortgage payments. So to answer your question, if you are not deperate, you are still able to collect $3000 rent for the same house, however it is just more difficult now than two years ago. I bought my Atlanta SFR in June 2006 for $550,000 and prices have reduced to $539,900 so Panda is drinking a little cool aid myself. Again, I really hope that Atlanta market does rebound by next year.

Atlanta did not have bubble that OC and LA did. Real Estate prices only rose 4-5% while LA and OC was going up 20% a year. Currently with 20% down, your rent will cover your mortgage, with a little cash left over.

I hope that this answered all of your questions.

Panda
 
Panda departing Chicago for Irvine

bye-bye-pandas-AmySol.jpg
 
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