Joe Schwarz is sick and tired of being a landlord.
“The property has pretty much been a nightmare since day one,” he said of a home he bought while a student at Arizona State University in 2007 near the height of the housing market in the Phoenix area. “I’ve wanted to be done with it for years but I couldn’t because of the second (mortgage) to be honest … A lot of people shy away from me because of the second.”
Schwarz said he purchased the property for $165,000, thinking he was getting instant equity given that other similar properties nearby were selling for as much as $199,000 at the time. The plan was to rent the property to cover the mortgage while watching the equity increase over time.
He purchased using some money he inherited along with a stated-income loan and a second mortgage to avoid paying private mortgage insurance (PMI).
“I had to go stated because I couldn’t qualify otherwise because I had a part-time job working at a bar while I was in college,” said Schwarz, who has since married and purchased another property where he and his wife live. “I was told if I do a second you don’t have to pay PMI.”
But about a year after Schwarz purchased the investment property, the housing market tanked and he saw the value of the property drop precipitously, falling as low as $65,000. Meanwhile the original plan for renting to a friend fell through, and although he ended up renting the property eventually, the rental income was barely enough to cover his mortgage payments, not to mention maintenance, vacancies and other costs that come with being a landlord.
“I’ve never really made any money on the property. In fact, it’s been a huge money pit for me,” he said, estimating he’s invested about $30,000 in the property that he never expects to see again.
see more at: http://www.inman.com/2015/03/30/second-mortgages-and-home-equity-lines-of-credit-threaten-housing-recovery/?hvid=1JGG2t
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