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Archive for June, 2012

Another Need to Spend Some Money

June 28th, 2012 at 11:13 am

Remember how in the early spring I blogged about building a fence in the front yard for a play area for our boys? Well we've been using that fenced area. A lot. The fence connects to the our front door porch. The porch is about 80 years old. The constant use of the porch/fenced area has led to rapid deterioration of the porch. It is no longer safe. It needs to be replaced.

The bid for replacement is $4,500. I had $4K in my mind before we got the bid back, so it's close. We trust the contractor, so we're going with his bid.

He figures he can do the work the week after next, and it will take about 4 days. Until then, no fence for us.

Monthly Spending

June 25th, 2012 at 06:24 am

I went through monthly spending and categorized the totals. I came up with the following:

Amount spent on:

Housing - 22%
Other Needs - 35%
Wants - 12%
Savings - 10%
Debt Repayment (or largely past wants) - 20%

According to Disney Steve in the forums the benchmark is 50% Needs, 30% Wants, and 20% Savings. In those terms my breakdown would be:

57% Needs
32% Wants
10% Savings

My predicament

June 11th, 2012 at 02:02 pm

I've copied below something I just posted in the forums for those of you who don't frequent them.

I've posted about my situation from time to time, but I'll start with a brief refresher.

I took a job closer to where I grew up 4 1/2 years ago. We put our house on the market as we were moving. The value of the house has done nothing but drop since we moved. About a year after we moved we had an opportunity to move into my family's original farmstead home. We borrowed 70K from family members (30K from my aunt/uncle and 40K from DW's parents) to renovate the house. The original agreement was to pay back family after we sold our other home. Just during the last 4 months we have begun to pay them back slowly. $90/mo. to aunt/uncle and $120/mo. to in-laws. These are interest-free loans.

During this time we have had three different families rent our original house. At no time has rent matched our $1,026 monthly mortgage payment. The current renters expressed interest in buying the house when they moved in last July. We were going to rent the house for $800/mo., but we reached an agreement where we collected $900/mo., and the extra $100/mo. was their cost for us to take the house off the market for a year, to give them time to save/line up financing.

To no one's surprise, the renters are not in a position to buy the house. So, we reduced rent back to $800, and put the house on the market. We listed it for $69.9K, or 1/2 of what we bought it for in 2005. As far as I can tell, this price is reasonably close to market value. It's hard to tell because the market is so slow, There aren't really any comps. We owe $103K on the house. This will leave us in a short sale situation.

Here are my 4 options as I see them:

1. Continue renting the house at a loss until the market turns around, and we can sell the house for what we owe on it (that was our strategy up until now).

2. Continue paying the mortgage. Go the short sale route.

3. Quit paying the mortgage. See what happens first - foreclosure or the house sells as a short sale.

4. Get a commercial loan against the house we're living in. Set aside $30 - $35K to make up the difference between what we owe and what the house will sell for.

I'm honestly leaning very heavily toward option 3. Be done with it, and let the chips fall where they may. As I understand it, our credit will be trashed whether we go option 2 or 3.

My aunt has expressed her interest in helping us out. So, option 4 is possible. We would owe her a lot of money for a long time. I hate the idea of that, and hate the idea of not meeting our mortgage obligations.

We are working on getting a commercial mortgage on the house we're living in. The question will really be - should that money go to family, or be put on hold to shore up the difference when house 1 sells.

I've posted very recently about my other debts, but in case you are interested:

We owe about $7.4K in credit cards
We owe about $5.2K in a vehicle loan
Monthly net income is about $5.4K
Small $1.1K emergency fund

A new mortgage

June 11th, 2012 at 06:56 am

We went to the bank to begin the process of borrowing money against the house we live in. That would be what is currently listed as Mort. 2. What's currently listed is money we borrowed from family members to renovate the house we live in. Interest rates are low, and it's time we borrowed money from the bank, and get them most of that money back. With the real estate market, especially in Michigan, we won't be able to borrow all of the money. I'm figuring somewhere between 56 and 58K is all we'll be able to borrow. The house is probably valued at right around 70K.

The mortgage originator ran all three of our credit scores. I don't remember exactly what mine came in at, but they were all greater than 700, and less than 710 (I think). What I remember for sure is that they were all +700, and pretty close together.

DW's scores were in the 7 teens. Like 715 or so. 20 months ago, my score was 580. I'm quite satisfied with the improvement.

Dave Ramsey

June 7th, 2012 at 09:42 pm

DW texted me the other day to let me know that DR was on a station I don't normally listen to. I tuned in and listened a while. I hadn't listened to him in probably 5 years. It was nice to hear him again.

Signing the House Listing Today

June 6th, 2012 at 06:41 am

We're going to sign the house paperwork to get our house back on the market today. Our Realtor will FAX the pages to my office. They're not here yet, so I'm waiting.

We asked the Realtor to suggest a price that would hopefully lead to a sale by around September 1. As I mentioned yesterday, that's $20K less than our previous listing. We'll see where that goes. If we don't have a few serious lookers this month, we'll drop the price again.

If it's sold at list price, we'll have to go the short sale route. So, we'll probably end up getting Mort 2 financed through a bank prior to selling this house. In case you haven't been following my blog, or don't remember, Mort 2 is money we borrowed from family to renovate the house we're currently living in. The original agreement was that we would pay them back when house #1 sold. With the reality of a short sale, that changes things dramatically.

Door 1, 2, or 3?

June 5th, 2012 at 10:23 am

The next chapter in our continuing saga with our For Sale/Rental house.

Last July we rented our house out. The renters were interested in buying, but just "not yet". They figured they might be ready in a year. DW never believed them, and I wanted to. So, the deal we struck was to charge them an extra $100/mo. above our rental fee. Their "cost" for us taking the house off the market for them to save up a down payment, and line up financing.

We're getting near the end of the year, so we began a "where do we go now" conversation with them. When it became clear to me that they had no intention of buying the house, I gave them 3 options:

1. Let's negotiate a price, and you buy the house, as we had planned.

2. Pay monthly what we are paying for our mortgage, and we'll keep the house off the market for another year. That would be about $150 more than they are paying now.

3. Pay us the original rental fee ($100 less than what they had been paying), and we'll list the house for sale again. We'll need to give them 30 days notice to move out if/when the house sells.

Our rent check showed up in the mail yesterday. It was for $100 less than they have been paying. They chose door #3.

We're working on getting the house listed again. Hopefully by the end of this week.

It's nice, at least to know what direction we're heading.

Oh yeah, we dropped the price $20K from our previous listing.

Anybody need a house in beautiful N/W Michigan?

June Debt Update

June 4th, 2012 at 05:34 am

Here are the numbers for June.

June 2012 Debt
Mort 1 $102,768
Mort 2 $68,950
CC1 $2,470
CC2 $1,791
CC3 $771
CC4 $2,408
Van Loan $5,221

Difference from May debt: $1,517.

CC4 remains unchanged from previous update because I don't pay that at the first of the month.

I took a big whack out of CC1.

CC3 is melting away. Part of me wants to pay it off just to be done with it. But it's at a fairly low rate (5.23%) compared to CC1 at 8.9%. The math says wait, but the heart says pay it off.

The advantage to paying off CC3 is that it would (after it's paid off) increase monthly cash flow by $194, and if something happened (like lose a renter) that cash flow would come in handy.