Married with this apartment for another 4 years?

[jlprato]

Hello

My wife and I did buy an apartment with 0 down (first mistake) and with a mortgage for 5 years (2nd mistake) for my main residence. Everything was good until we decide to grow as a family. We need a new bigger place to live. But when I call the lender to ask, with the actual price of my property a porting up was no possible and if I decide to do anything else I have to pay almost $16.000 as penalty fee. So I`m married with this apartment for another 4 years.

If I rent the this unit, I will have negative cash flow due to the high purchase price and the 0 down.
I ask, If I buy another property as main residence, is the first one an investment property with negative cash flow?
Can I have some tax deduction over investment property with negative cash flow? or any other thing?

I`m just looking for solutions to my issue, any help?

Regards

Jorge

 

[GaryMcGowan]

QUOTE (jlprato @ Aug 23 2009, 11:51 PM) Hello

My wife and I did buy an apartment with 0 down (first mistake) and with a mortgage for 5 years (2nd mistake) for my main residence. Everything was good until we decide to grow as a family. We need a new bigger place to live. But when I call the lender to ask, with the actual price of my property a porting up was no possible and if I decide to do anything else I have to pay almost $16.000 as penalty fee. So I`m married with this apartment for another 4 years.

If I rent the this unit, I will have negative cash flow due to the high purchase price and the 0 down.
I ask, If I buy another property as main residence, is the first one an investment property with negative cash flow?
Can I have some tax deduction over investment property with negative cash flow? or any other thing?

I`m just looking for solutions to my issue, any help?

Regards

Jorge
Where is this property? Different provinces have different options. Is this property in a area where prices are moving up, down or flat? What is your current rate?
If you buy another property and rent this one, yes this will become an investment property with some tax deductions. But how long could you afford to keep losing money on it every month? There are many added costs to having tenants - vacancy, maintenance, damage, non-paying tenants and so on.
Would you be able to qualify for another mortgage on another property? If so it would probably have to be an 80% or lower LTV. Which means more money down which would of helped your current situation.(if you had 20% down there would be some equity to the property).

 

[invst4profit]

How does the $16,000 compare to the cost of having negative cash flow for the remainder of the mortgage term.
Keep in mind when calculating negative cash flow there are many more expenses on a income property beyond the mortgage payment. You will need to include such expenses as taxes, insurance, maintenance upkeep, vacancies, eviction, utilities when vacant, advertising etc. Although many may seem small or possibly unlikely to accrue they all add up and may range anywhere from 35% up to 50% or more of monthly income depending on the type of unit and unforeseen circumstances.

 

[jlprato]

Yes, this property is located in Edmonton, AB

 

[bizaro86]

Depending on your bank/mortgage, you may be able to get someone to assume your mortgage and have the bank qualify them, so you`re not still on the mortgage. That way someone who might not have a large downpayment could get into a place, and you could get out of your pre-payment penalty. Could be a win-win.

Another option that might be good for this situation would be a rent-to-own.

Michael

 

[vandriani]

Not knowing your current family dynamics and the specifics of your current residence:

I would ask yourself if you really need to move now?

Secondly, if you can hold off the move for a year or two, you may have more options within your mortgage and your payout may be lower.

Also in a year or 2 you should gain some appreciation and paydown your mortgage some, which may push the property into a neutral or positive cashflow position.

 

[Thomas Beyer]

QUOTE (jlprato @ Aug 23 2009, 09:51 PM) ... We need a new bigger place to live. But when I call the lender to ask, with the actual price of my property a porting up was no possible and if I decide to do anything else I have to pay almost $16.000 as penalty fee. So I'm married with this apartment for another 4 years.



..


Jorge:



quite a few options:

a) do nothing .. stay where you are and make due .. most places can be made more spacious with creative furniture !! Have you gone to IKEA lately ? They show amazing strategies for entire apartments between 250 and 600 sq ft .. huge options !



b) sell and have the buyer assume the mortgage. Many REIN members or other investors would love to assume a big mortgage. Be aware of the risk .. as you could be on the hook for the mortgage if the buyer defaults. Then you have the cash to buy a new place



c) sell (at a loss) .. and rent for a year or so



d) wait .. as each month mortgage goes down, equity up and payout penalty down, too ! re-evaluate in a year as prices may be higher.



e) do a lease-to-own



related post here:





Are you too levered ?

http://myreinspace.com/public_forums1/Real_Estate_Discussion/62-10823-When_are_you_too_levered_.html

 

[MONEY]

QUOTE (thomasbeyer2000 @ Aug 24 2009, 12:32 PM) Jorge:quite a few options:
a) do nothing .. stay where you are and make due .. most places can be made more spacious with creative furniture !! Have you gone to IKEA lately ? They show amazing strategies for entire apartments between 250 and 600 sq ft .. huge options !

b) sell and have the buyer assume the mortgage. Many REIN members or other investors would love to assume a big mortgage. Be aware of the risk .. as you could be on the hook for the mortgage if the buyer defaults. Then you have the cash to buy a new place

c) sell (at a loss) .. and rent for a year or so

d) wait .. as each month mortgage goes down, equity up and payout penalty down, too ! re-evaluate in a year as prices may be higher.

e) do a lease-to-own
f) Find a passive investor to pay the monthly negative cash-flow from renting the unit. Then give the investor the `tax deductions` & a percentage of the equity upon a future date sale.