Sunday, August 17, 2008

Losing as a Landlord in Morristown

During the Great Housing Bubble some people were investing in properties, others were trying to buy homes, and a few were trying to do both at the same time. That is part of the two family property idea - live in one unit and rent the other - part investment, part home. If everything works out as hoped the owner ends with a hefty profit in the end. But things do not always work out as planned.

That is where today's landlord in Morristown comes in. Instead of winding up with a huge profit, everyone involved ends up with a giant loss - especially the home buyer. Well, of course assuming everything in the deal it legit - but we will save those issues for another day.

Here is the property (yes the realtor actually put this picture up) -

Here is the property info -
  • Multi-family Property
  • Status: Active
  • County: Morris
  • 2 total unit(s)
  • Year Built: 1900
  • Complex features: Unfinished Basement,Total Bedrooms: 6,Total Full Bath: 2
  • Type: Duplex-Side by Side
  • Parking space(s): 2
  • Heating features: Oil
  • Exterior features: 1 Car Width Driveway
  • Roofing: Asphalt Shingle
  • Unit 1 has 6 room(s)
  • Unit 1 has 3 bedroom(s)
  • Unit 1 has 1 bath(s)
  • Unit 1 features: Bedrooms, Dining Room, Kitchen, Living Room
  • Unit 2 has 6 room(s)
  • Unit 2 has 3 bedroom(s)
  • Unit 2 has 1 bath(s)
  • Unit 2 features: Bedrooms, Dining Room, Kitchen, Living Room
  • Approximately 0.18 acre(s)
  • Lot size is less than 1/2 acre
  • Utilities present: Electric Service
Here are the financials -
  • The property was purchased for $390,000 in January 2006.
  • The original mortgage was an ARM for $312,000 also in January 2006 with Commonwealth United Mortgage.
  • A Lis Pendens was filed October 2007.
  • The property is currently for sale with a realtor for $301,000.
This property was purchased with a huge down payment of $78,000 which was a whopping 20%. That is a fantastic down payment, almost unheard of during this time period.

Although the initial investment was there the owner decided to take out an ARM - perhaps signifying that monthly payments on a 30-year-fixed would be difficult. Well the ARM ended up being difficult as well. Since within 22 months of the purchase the homeowner was in the foreclosure process.

Now the owner is out their $78,000 and the lender is out $29,060 if the property actually sells for the full asking price. The total loss on the property will be at least $107,060.

Being a landlord can be hard - tenant issues, rental issues, etc, but losses of over $107,000 is even harder.

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