Posted by dealmaker on August 03, 2005 at 23:41:36:
Colin, I guess living in Vegas you don’t know much about TX real estate. There is NO APPRECIATION to speak of. Pay down on the note, let’s say the loan is at 5.5%, on $102K he’ll pay down $2800 or so in two years. If his negative cash flow is ONLY $110/month it’ll wipe that out. Plus which when he gets his next property tax bill and his homestead exemption goes away, his property tax will likely increase by another $450/year.
It’s odd that two of us sitting in TX, one of us bleeding money can see the situation so clearly, but you offer him a different way of holding title as a panacea.
Overencumbered properties are only moneymakers if a “bigger fool” comes along. Trust me there are lots of fools in TX, but there are also THOUSANDS of $102K properties that WILL NOT cash flow, and changing the way of taking title will not change that fact.
In fact the glut of out of state investors who confuse CA (or NV, MI, NY, CT or FL) market prices with TX rental rates has led to an oversupply of rental units in some of our cities, and a corresponding drop in rents.
He’s already decided to bail, probably best to do so, despite the “expert advice from afar”.