Florida Sinkholes!

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dlux23_IHB

New member
Hello IHBers! I am a "newbie" and was referred to this site by my friend irvinesinglemom.

My question is about two sinkholes...I mean investment properties (both SFHs) my husband and I own in Cape Coral and Palm Bay, Florida. They are both FINALLY being rented as of a month ago, but at negative cash flow. For the last 6-8 months we have been covering both investment mortgages in addition to our current residence in Irvine. Early this year both properties were sitting on the market for sale or lease initially, but as home sale prices and rent were starting to drop after 4 months we focused on leasing as we were losing thousands each month. The properties are now leased for a one year term.



We are now taking a loss of approximately $1300/month. We broke even with the properties initially for the first few years. We had bought the homes the year before the hurricane season that was so bad that they ran out of alphabet named storms and moved into the Greek set...yeah so just wondering when or how to go about selling these suckers ASAP?



Any insight on the months, quarters and year ahead? I hear Florida is like ground zero for the housing market. ISM told me that holding out and hoping for a market turnaround would not be a good idea, and she suggested that I post my situation since you guys are much more knowledgeable and articulate about the financial details than she is (her words!).





Thanks for any feed back or insight... it would be so greatly appreciated!

dlux23



Year of purchases... 2004 for both

Amounts of down payments...10% down each

Amounts of mortgages...roughly 122K each, new construction

Amount remaining on mortgages...Same Intrest only

Type of mortgage and rate (ex. 30-year fixed at 6%)...Intrest only 5 year fixed, >6/<7% rates

We own current Irvine residence -purchased 1991 w/30 yr.fixed...Will figure remaining mortgage and post ASAP
 
I would start with our <a href="http://www.irvinehousingblog.com/analysis/">analysis section </a>so you fully understand how bad bad will get.





Then, I would dump these properties ASAP for whatever you can get for them. Do not wait until the leases run out as this will cost you tens of thousands of dollars.
 
<p>I'm from Florida.</p>

<p>Cape Coral is the ground zero of ground zero. There is no hope that you will get your money back for 10-15-20 years. And maybe never. There is nothing over there to support all the building. I have several clients who abandoned property over there. I've heard of a local builder who actually killed himself. Had a conversation with a local real estate attorney about 4-5 months ago who thought it was hopeless then. It's even more hopeless now.</p>

<p>I work in Hialeah/Miami, and got to Brevard County on weekends. (Merritt Island. Hub works for NASA) Palm Bay doesn't seem to be that bad, and I think will recover in a reasonable time. I'd let the one in Cape Coral go as utterly hopeless. Maybe you can arrange a short sale to your renter? I wouldn't spend a whole lot of time on it. If you just rented, you do owe some warning to your renter. Maybe give him/her free rent to pay for another move.</p>

<p>I'd hold on to the Palm Bay one. That area was growing rapidly and eventually the growth will resume.</p>
 
IR--he won't get anything for the Cape Coral property. I think there was a picture of a house posted a couple of days ago that either was sold for, or the asking price was $95,000. A reasonably nice newish house on a big lot.
 
I remember that property. That was Cape Coral? Wow! If they are already rolled back to 2002 prices there, some houses may end up getting bulldozed before it is all over.
 
<p>You'd think that - but probablly not.</p>

<p>I bought a home for lot value - demo costs. LESS than the lot value of an uncleared lot.</p>

<p>The reason? You have to pull permits to demo a house!</p>
 
This is the house in Cape Coral...





Did you see <a set="yes" linkindex="195" href="http://calculatedrisk.blogspot.com/2007/11/florida-reo-priced-below-2002-new-home.html">this one over at Calculated Risk</a>:





The asking price for this <a linkindex="196" href="http://www.leepa.org/Scripts/PropertyQuery.asp?FolioID=10074341">foreclosed property</a> in Florida is below the price the home sold for <em>new</em> in 2002. (hat tip John)





Here are the details:





Feb 15, 2002: $122,300 (New)





Mar 15, 2006: $259,600





Oct 23, 2007: Foreclosed.





Current <a>Asking Price</a>: $99,900





There are probably some special circumstances with this house, but ... yikes!





<img border="0" src="http://bp1.blogger.com/_pMscxxELHEg/R09CtFcE0RI/AAAAAAAABRo/OMyhsaFGW7A/s320/TaxMapImage.jpg" alt="Florida REO" style="margin: 2px; float: right;" /> According to the public tax records, the larger house on the <a href="http://www.leepa.org/Scripts/PropertyQuery.asp?FolioID=10074343#">2nd lot away</a> sold for $185,300 new in 2004, and for $370,000 in 2006.





This raises some interesting questions: How far have prices really fallen?





How will the neighbors react when they discover their homes are worth far less than they paid in recent years?





As OFHEO <a linkindex="197" href="http://calculatedrisk.blogspot.com/2007/11/house-prices-and-foreclosures.html">noted</a> today: Declines in home prices will increase the frequency with which homeowners find themselves with no equity and thus may be motivated to “walk away” from the property and the mortgage.No kidding - this has to be depressing for the neighbors. Note: I rarely mention Florida, but this is worth noting.
 
<em>You want articulate? RE prices suck and will continue to do so.





</em>OMG! That is exactly what the CEO Don Tomnitz of DR Horton said last year. The question is, did you steal it from him, or did he steal it from you?
 
<p>Ok, the bank is asking 99,9 not 95. I betcha the bank may let it go for the low 90s, upper 80s.</p>

<p>Cape Coral is like musical chairs in reverse. E very time the music stops, there are more chairs for the players to sit in, hence loads of vacant chairs.</p>

<p>The local banks are probably literally dying. Bet you'll see some bank busts over there very soon. I have no specialized knowledge, just logic.</p>
 
IHB Experts:



Here is my ugly situation.



Own 2 homes, one in Lehigh Acres and one in Port Charlotte. They were purchased for $225 and $250K respectively. I put 10% down on each and have 30 year mortgages on each. I would say that the first one is probably worth $160K and the second is worth about $180K in today's market.



It appears I have the following options (w/ my thoughts underneath):

1) Short Sale:

The problem I have here is that Im wondering if the bank would even accept a short sale? I have other rentals that I own, have an income of about $170K, and have about $200K in the bank.



2) Try and ride it out and hope for things to get better.

"Hope" is never a good strategy. Also, I am seriously having my doubts on whether either of these properties will ever recover to the levels that I purchased them at.



3) Foreclose

I am currently renting, so if I pursue this option, I need to make sure that i purchase first. Im looking in Irvine, but ideally would like to wait one year. However, the longer I wait, the more I lose on those FL properties. Also, I hate the thought of ruining my credit and also have an "ethical" issue w/ sticking the bank w/ my misguided investment.



They are both currently rented, but even with the rent I am losing $1,500 per month. That's freaking $18,000 per year. OMG!!!



Would love some of your opinions on what you think I should do.
 
Option 4) Recognize that investments can lose money and live with the consequences of your own decisions. Whether that involves option #2 or writing a check to cover the difference when you sell, it is the right thing to do.
 
<p>Wow land merchant, foreclosures up 1010% (ten times) in Cape Coral. Worst in country.</p>

<p>I'm not sure that the take that housing ownership will necessarily go down. If prices go down enough, less well off people will be able to buy. Ownership may actually go up.</p>
 
im with trooper. WALK! That is the right thing to do. Well maybe not the right thing in most people's views, but that is what is probably best for you from a financial perspective.
 
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