My situation years ago was somewhat similar, but different response and outcome different.
In 1979, I bought a little starter home in Eugene, Oregon for $48,500. Being in my early 20’s, I had managed to scrape together $2500 for down payment and took on an FHA loan of $45,750. My mortgage interest rate was 11.5%. Total monthly nut was $560 per month as property taxes & insurance were included.
I was in the logging industry at the time. Business was booming and the future looked great!
Fast forward to the early 1980’s recession. No one was building, and no one was buying our logs. Unemployment was running 18% in Eugene at that time, and our company went bankrupt.
So I moved to California to find work.
But then the question: What to do with the house?
I contacted my friendly real estate salesman who said he “might” be able to sell it for $37,500.
I was stuck. This was long before “just walk away” of the 2008 mortgage “crisis”. A walk away meant personal bankruptcy and I sure didn’t want that.
Problem was that I didn’t have the cash difference between my loan balance and net sales proceeds.
Fortunately I had a friend who offered to get the place rented and manage it for me.
The rent she set was $325 per month, which left a $235 negative cash flow in a “good” month with no other expenses. Doesn’t sound like much but it was 20% of my gross income at my new job.
Fast forward to 1998: I sold the Eugene, Oregon house for $102,500 to my renters. I had long since paid the loan off.
I IRC1031 exchanged the $99,000 proceeds (and another $10k) to two fourplexes and a single family house in Mesa, Az. Combined cost of the properties was $511,000.
In 2005 I “exchanged” the fourplexes in to three single family houses in Oregon. Cost of the replacement property was $589,000.
Today we own the three Oregon houses and the Mesa, Az. house.
All are mortgage free and supplement our retirement income. My primary purpose in writing this is counterpoint to the oft heard quote: “I sure wouldn’t want to be an absentee landlord”.
I disagree.
We have certainly had our share of nightmare tenants and I could tell some stories.
But we have been blessed in making good decisions with quality property managers, who are fairly compensated.
Therein lies the difference in my opinion.
Funny thing that businesses set up successful operations nationwide and even internationally but nobody says “oh I wouldn’t do that”.
Comments
My situation years ago was somewhat similar, but different response and outcome different. In 1979, I bought a little starter home in Eugene, Oregon for $48,500. Being in my early 20’s, I had managed to scrape together $2500 for down payment and took on an FHA loan of $45,750. My mortgage interest rate was 11.5%. Total monthly nut was $560 per month as property taxes & insurance were included. I was in the logging industry at the time. Business was booming and the future looked great! Fast forward to the early 1980’s recession. No one was building, and no one was buying our logs. Unemployment was running 18% in Eugene at that time, and our company went bankrupt. So I moved to California to find work. But then the question: What to do with the house? I contacted my friendly real estate salesman who said he “might” be able to sell it for $37,500. I was stuck. This was long before “just walk away” of the 2008 mortgage “crisis”. A walk away meant personal bankruptcy and I sure didn’t want that. Problem was that I didn’t have the cash difference between my loan balance and net sales proceeds. Fortunately I had a friend who offered to get the place rented and manage it for me. The rent she set was $325 per month, which left a $235 negative cash flow in a “good” month with no other expenses. Doesn’t sound like much but it was 20% of my gross income at my new job. Fast forward to 1998: I sold the Eugene, Oregon house for $102,500 to my renters. I had long since paid the loan off. I IRC1031 exchanged the $99,000 proceeds (and another $10k) to two fourplexes and a single family house in Mesa, Az. Combined cost of the properties was $511,000. In 2005 I “exchanged” the fourplexes in to three single family houses in Oregon. Cost of the replacement property was $589,000. Today we own the three Oregon houses and the Mesa, Az. house. All are mortgage free and supplement our retirement income. My primary purpose in writing this is counterpoint to the oft heard quote: “I sure wouldn’t want to be an absentee landlord”. I disagree. We have certainly had our share of nightmare tenants and I could tell some stories. But we have been blessed in making good decisions with quality property managers, who are fairly compensated. Therein lies the difference in my opinion. Funny thing that businesses set up successful operations nationwide and even internationally but nobody says “oh I wouldn’t do that”.
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Link to comment from May 10, 2023