This is our most disappointing property. We bought this home in 2005 at the height of the market in San Diego County, which was extremely inflated. I had already bought and sold my first property ever, a 3/2 in Las Vegas. I bought the Las Vegas house for 147,700 in November of 2003 and sold it just after I bought this house in 2005 and made a 3 figure profit. I couldn’t believe how easy this real estate stuff was and I bought this home without doing my homework. Far too much naivety on my part. We bought the house for 429900 in 2005 and three years later, in 2008 after the market crash, it was worth 195000. The HAP program was available for me to unload the house, just like the St. Marks house we bought, but I refused to let the government bail me out. I am responsible for my own actions and will not let them bail me out because I made a speculative decision in a volatile area. We bought the home on a no-money down loan, 80/20, 5/1 ARM. What that means is we got two loans at the same time. One was for 80% of the purchase price and was on a 5 year ARM. After the first five years, the interest rate starts adjusting based on current rates. Fortunately rates have stayed low so it hasn’t been too much of a problem. The other 20% of the original mortgage was issued as a Home Equity Line of Credit. That HELOC is a fixed rate. Both loans were interest only, which meant we didn’t pay any principal for the first ten years. That worked out to our advantage because we PCS’d in 2007 and have had tenants in it ever since. In 2015 we started paying principal because the initial ten year period was up and that has drastically affected my bottom line. We now take a hefty loss on this property each month, but as soon as we are back to even money, I plan to sell the property and lick my wounds….
Financial Breakdown
Monthly PITI: 2400**
Property Management: 125
HOA: 235
Maintenance: (120) 5%
Vacancy (120) 5% ( of note, this house has never been vacant…)
Monthly Rent: 2000
Cash Flow: -600
**That PITI includes a huge chunk of principal every month which is allowing me to bring the principal down very quickly. Although a loss each month on this property stinks, I will soon be able to sell it. This is a lesson that reminds me every day of running the numbers, and if they don’t work they don’t work. You never gamble on appreciation. The numbers are the numbers, period. Tough lesson, but I am far smarter because of it.**
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