Everyone is banking on Appreciation?

8 Replies

I see a lot of people on the forum talking about appreciation and I know there is a thread on appreciation but I don't want my question to get lost in the mix. The question I have  is how is it everyone has equity and is gaining appreciation but I bought a house in 2009 that has depreciated and has me underwater. The house was appraised at 179k I bought it for 154 because the sellers mother owned the property and passed away, he had to get out of the mortgage. Is this just specific to the town I rent in? Is sicklerville, nj the only town in America with depreciating value?

I ran some comps of my development and the last 7 houses sold for an avg of $113k. 

Are you renting the house out or are you looking to flip it?  If you're renting it out, that is actually to your advantage. 

If you're flipping it, then I guess you're renting it...for now.

Rental values are primarily based on cash flow, with the equity important when you want to access it...such as sell it or refinance.  If your house goes down in value, so should your taxes, which would improve your cash flow without having to raise the rent.

Don't get me wrong, I don't hope my houses depreciate (mainly since I like to refi to get all my cash back out to use again), but there is a silver lining when it does go down.

Joe Villeneuve
REcapSystem
A2REIC

Thanks for the response @ Joe Villeneuve (how do you mention someone) ?

my house was reassessed and the taxes actually went up a small amount. I went to a hearing and lost. For now I am renting it out. Basically making little cash flow. I originally bought the house 5 years ago to live for a few years and sell. This was when everyone said "Now is the time to buy, it won't get any cheaper than it is now". There have been a rash of shortsales in my area but nothing alarming, definitely a decent quiet neighborhood with very little crime. The one negative with the house that I can control is the size of the bathroom and there are only 2 bedrooms. Would adding a bedroom and expanding the bathroom help raise the value of the house?

A 3 bed house is always a higher value than a 2...and would rent higher too, in most areas.  How much depends on the market you're in.  Is there an easy way that you can see to get that 3rd BR?  Sometimes you just rename a room, put a closet and a door on it (like a dining room) and you have a cheap rehab that gets you a big value boost.

What type/style of house is it?  Ranch, 2 story, 1 1/2 story, bungalow?

Joe Villeneuve
REcapSystem
A2REIC

I guess no one could have predicted the housing price crash that happened.  I don't usually bank on appreciation.  I look for something 2-3x times less expensive than the surrounding properties.  Usually these properties are either condemned or ugly.  I put about 5k-10k to make them nice again (new flooring, paint, necessary repairs).  Otherwise I will literally look for the cheapest house in the area which is usually in the 5-20k range, put about 5k into them and rent them for 700-900 range.

Originally posted by @Joe Villeneuve:

A 3 bed house is always a higher value than a 2...and would rent higher too, in most areas.  How much depends on the market you're in.  Is there an easy way that you can see to get that 3rd BR?  Sometimes you just rename a room, put a closet and a door on it (like a dining room) and you have a cheap rehab that gets you a big value boost.

What type/style of house is it?  Ranch, 2 story, 1 1/2 story, bungalow?

Joe Villeneuve
REcapSystem
A2REIC

 it's a 2 bedroom rancher that definitely has potential for a 3rd bedroom. All I would need is some creative thinking. It has an addition that has taken the place of the living room. My fear is sinking 5-10k in bathroom or bedroom and still being stuck. 

Look at the comp differences between 2 and 3 bed houses, for both for rents and for sales.  That will tell you if it's worth it or not.

Joe Villeneuve
REcapSystem
A2REIC

Originally posted by @Joe Villeneuve:

Look at the comp differences between 2 and 3 bed houses, for both for rents and for sales.  That will tell you if it's worth it or not.

Joe Villeneuve
REcapSystem
A2REIC

 Will do Thanks Joe. Do I need an agent to pull comps or can I do that myself?

You can go online if you want.

Joe Villeneuve
REcapSystem

A2REIC

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