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Old 06-20-2010, 08:53 AM   #41
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Considering I've lost $30k in the stockmarket, its good to see someone pay the debt & rise again intact with good credit. Bravo.

I FIREd myself at start of 2010!
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Old 06-20-2010, 09:16 AM   #42
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Good for you Niko, and thank you for the update. It's good to know that there are honest people out there who do not walk away from their responsibilities just because they can. $30K is not a huge loss in the grand scheme of things and I'm sure it has been a lesson well learnt.

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Old 06-20-2010, 09:33 AM   #43
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Good for you for doing the right thing . I see too many people walking away and not learning a thing.
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Old 06-20-2010, 09:41 AM   #44
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Thanks for the update. All you lost was some dough, which based on your earning ability, integrity, and good decision making skills you should have no trouble replacing.
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Old 06-20-2010, 10:19 AM   #45
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Originally Posted by Niko View Post
I am mostly looking for advice on the practical side of things. Eg, what are the pros and cons of renting the property out in this situation? I've never been a landlord, so I'm curious to hear from other LLs who have been in a similar boat.
I was a loandlord for 25 years and hated it. Late rent, bad checks, damage, sub leasing, floods..... and as your finding out-a very illiquid investment. You gotta have the stomach for it. I didn't, and my rentals were local.

Makes for a great write off, but you have to recoup all the depreciation in the end and have a huge tax bill in one year. Why lose 300 dollars a month to get 100 back in taxes. That recipe sounded good when properties were going up. That money you're gonna lose every month would look better in your 401k. If you still like real estate as an investment do it in a REIT where you can sell with the press of a button.

You have to do what is best economically, but cutting the cord will bring the greatest psychological relief....if it's possible.

My feeling is real estate has more to fall and I would live the new American dream of RENTING after you relocate. If nothing else it will give you time to size up the local markets.

*All this from someone who lives in SoCal. Results may differ in your area. 8-)
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Old 06-20-2010, 11:37 AM   #46
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As someone else mentioned.... don't get sour on RE... it IS a down market... I bought our new house (new to us) at about $15K less than 'market'.. but had to sell my old house at about $15K less than market... so it was a wash IMO... but, I got a lot better house that will appreciate faster than the old one...

To me... a win...
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Old 06-20-2010, 11:58 AM   #47
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It’s great you got out with a small loss. You’ve had a taste of both sides of the fence, being a landlord and an owner. I much prefer being the landlord, even though it comes with headaches. I don’t find them so bad.
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Old 06-20-2010, 12:15 PM   #48
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Thanks for the update. You've had peace of mind for the year since you sold the house--losing the $$ I'm sure was painful, but you aren't losing sleep over it still being a burden to you.
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Old 06-20-2010, 02:08 PM   #49
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I'll second what earlier posters wrote about your loss being not the end of the world, although it hurt you quite a bit, particularly as you are still young and in the late 20s. But you will recover and will be fine.

If it is of any consolation, look at what is happening to my neighbor who is down the street from me. Having been in my house for 22 years, I am among the people who have been in this neighborhood the longest. My guess is about half of my neighbors are at least 50 year old, and empty nesters. We are happy where we are, hence do not care that much about the home price increase during the housing mania.

Indeed, there were very few houses in my neighborhood being changed hand during the last bubble. One of these rare transactions was the house I mentioned earlier. In 7/2005, public records show that this house changed hand at a price of greater than $500K. In the chart from Zillow as shown below, that transaction is marked with a $ sign. Look how the price estimate from Zillow continued to rise up after that, and then the dramatic decline from the top. At this point, the price has decreased by $200K from where my neighbor paid.

When the house was put on the market in 2005, all people in the neighborhood noticed and followed it. Remember that this is and has been a stable neighborhood with relatively little RE action. When the house got sold in a matter of weeks at a record price, we all shook our head in amazement.

Alas, last month, we saw a for-sale sign in the house front yard. It must be pretty sad for the homeowners, whom I still have not met. That house was the last bought in the neighborhood, and now is the first on the market.

As for me, my house, which is of a different floor plan but comparable in size, was paid off and is likely the place where I will die. So, how do I care about what Zillow says, except to satisfy my curiosity?

"Old age is the most unexpected of all things that can happen to a man" -- Leo Tolstoy
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Old 06-22-2010, 01:47 PM   #50
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Originally Posted by Niko View Post
I thought I'd update the group, nearly 2 years later, on how all of this played.

My wife and I decided to rent out our place for a while to see what the market did. We found renters who paid $1045 (near the upped end of my estimate) per month. They were good renters who stayed there from December 08 until April 09, when they decided to leave early. We negotiated an "early termination" fee that, frankly, both of us were happy with. They were happy because they wanted to buy another house, and I was happy because I wanted to sell the house that summer and the early fee let me put the house on the market before the summer rush while still covering my mortgage a while longer.

House hit the market, I believe, in late May 09. Had an accepted offer by mid June. Closed around mid July 09. All things considered, we got lucky with the sale process.

In the end, we had to bring $30k to the table to pay off the loans. Rather than walk away or seek a deed in lieu, as I proposed earlier, we paid it all. About 40% came from our emergency fund, 35% from my Roth IRA (penalty free distribution of prior contributions), and 25% from a 0% credit card offer, which I have since paid off. This hurt, but in retrospect I'm glad I chose this route rather than trying to walk away or pay less than I owed.

The whole experienced soured me greatly on real estate ownership, though I shoulder the blame on this one for financing 100% in 2006, at the height of the bubble. Lesson learned. If that's the most expensive lesson I learn in my life, then it's all down hill from here!
Niko, my hat goes off to you for the way you handled this. Thanks for taking responsibility for your situation and not dumping this debt onto the rest of us. It is refreshing to see someone take the high road for a change. Glad this worked out the way it did. All the best to you.
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Old 06-23-2010, 10:09 AM   #51
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Yes, Niko, on behalf of my bank index fund, I thank you for paying the debt you agreed to pay!
Retired in 2013 at age 33. Keeping busy reading, blogging, relaxing, gaming, and enjoying the outdoors with my wife and 3 kids (4, 10, and 11).
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Old 06-23-2010, 01:13 PM   #52
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There is honor among thieves.

Is there any honor among bankers these days? Especially investment bankers?
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Old 06-25-2010, 09:23 PM   #53
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Thanks everyone for your kind comments. I spent about a month moping over the lost money, but honestly I don't even think of it anymore. I've since moved abroad and am earning more now than I did before. I've replenished the lost retirement funds (and then some) and my ER fund is back. In the grand scheme of things, this will likely be no more than a blip -- if that -- in my grand ER scheme.

Walking away from the loan, however, would probably stay with me much longer. I know some people have no choice but to walk. But I did have a choice.

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Old 06-26-2010, 07:54 AM   #54
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Originally Posted by kcowan View Post
Is there any honor among bankers these days? Especially investment bankers?
There may be some, but good luck in finding them.
May we live in peace and harmony and be free from all human sufferings.
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Old 06-26-2010, 02:47 PM   #55
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"Is there any honor among bankers these days? Especially investment bankers?"

Doesn't matter - as Niko said, the $30k hit bothered him, but he's getting over it. Walking on a debt he could pay would have bothered him longer. I think he made a good "what price do you put on honor?" choice.
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Old 06-26-2010, 07:00 PM   #56
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Niko, you were very lucky to have only taken a $30K hit. Luckily, too, you are young and can recoup the loss. I think you made the right decision and you were also fortunate that the housing market had the first time home buyer stimulus going for it at the time. So congrats!

I don't see it as a question of honor though. It was a financial decision. I think it was the right one though, mostly because taking the $30K hit will taste better over the long term than a short sale or walkaway. Niko will be able to put this bad experience behind him.

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