This inspiring 2 bedroom 1 bath home will put your green
Someone is trying to unload this property really quickly. At the current price, they are taking a $57,000 hit without the 6 percent commission. This was a flip gone bad as you can see from the pricing action:
Price Reduced: 07/09/07 -- $537,000 to $450,000
With the first price, someone felt that they would be able to get out of this market with no skin. Let us run the initial calculation ($537,000 - $32,220 = $504,780). The $32,220 is 6 percent if you are wondering. In fact, you can almost derive from these numbers that the person went with a zero down mortgage. How can you arrive at this conclusion? The sales cost minus the commission cost bares an uncanny resemblance to the purchase price in March of this year. This is a new trend. Unfortunate buyers that came to the party too late and are trying to hand off the home to another would be flipper. But guess what? The game is over. Keep in mind you were still able to get your hands on a fantastic supercharged wonderland exotic mortgage in March of this year. In fact, Countrywide was ramping up its subprime outfit and even talking about 50 year mortgages as late as May of this year. Now they are saying "no subprime for you!" How quick things change. You may say, “I feel sorry for this buyer.” Here is the poetic justice, these buyers can hand the keys over just in time for the bailout forgiveness and face no tax consequences. The only ding they will have is a foreclosure on their credit history but after the next few years, having a foreclosure will be in like having a divorce. The stigma is gone when a large part of society has faced a similar circumstance.
So how low can this place go? Well considering that this place would rent for $1,500 tops, it is still a bit on the expensive side. But hey, your $450,000 mortgage just got a boost in the interest rate of .5 percent. That is if the market responds to the injected liquidity and the LIBOR acts accordingly. But even if it does, this place would not make sense as an investment. Let us run the numbers as a prospective investor. Currently for investment properties if you have good credit, you can get a mortgage with 5 percent down for approximately 7 percent. So let us assume that we buy this place for 5 percent down with a 7 percent 30 year note:
5 percent = $22,500
PITI = $3,312 (30 year fixed at 7 percent for investment property).
The monthly payment will be $3,312 and we are receiving in rents $1,500. That means we are negative cash-flowing by a whopping $1,812 a month. And appreciation is gone for at least a few years. The only benefit is in tax relief but this is equivalent to spending $1 and getting 2 quarters back. If you desperately need tax relief why not buy a cash-flowing property out of state? This property has an intrinsic value of $225,000 to $275,000 tops from an investor standpoint (and this is being extremely generous because of the city). Only at that price point would rental market growth, market stagnation, and the headache of being a landlord make any financial sense. As you can see, 100 percent of investors are going to rule this place out. You can’t flip properties as the pricing trend is down.
Today we salute you
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