DEAR BOB: I feel like we made all the first-time-investor mistakes. A year ago, we bought a house in a new neighborhood one hour away from our current home. We were offered no mortgage payments for six months, but then we had to sell or refinance. When we tried to sell or rent the house, we learned the builder sold all 20 houses to other investors who were doing the same thing. We sold the house for $90,000 less than our purchase price, and will have to come up with $33,000 cash to close the sale. Our monthly payments of $3,000 are way above the rental market of about $1,750 per month, plus a $100 monthly homeowner’s fee. Is there any way out of this nightmare? –Zaneta M.

DEAR ZANETA: After reading, and re-reading, your e-mail, I can’t figure out why you would buy such a rental house an hour away from your residence under those very unfavorable purchase terms requiring you to sell or refinance within just six months.

Purchase Bob Bruss reports online.

I don’t understand how the house could lose $90,000 in market value in just six months and why you have to come up with $33,000 cash to close the sale to your buyer. Obviously, you grossly overpaid for the house.

The only good news is, because you purchased the house as an investment, you can claim a capital loss tax deduction. Please consult your tax adviser and a sharp real estate attorney for more details.

INSTALLMENT SALE MORTGAGE IS SMART FOR PROPERTY SELLER

DEAR BOB: I plan to sell my free-and-clear income property. I want to carry back a large first mortgage for five years to defer the capital gain tax. How can I prevent the buyer from paying off the loan prior to the fifth year? –Richard S.

DEAR RICHARD: Depending on state law where the rental property is located, you can include a stiff mortgage prepayment penalty.

However, if you and the buyer agree on a reasonable interest rate, such as 6 percent in today’s market, chances of your buyer paying off your installment sale mortgage early are very small. A local real estate attorney can advise you on exact mortgage terms to discourage early prepayment.

THE BEST BOOK ABOUT INVESTING IN RENTAL HOUSES

DEAR BOB: Not too long ago, you wrote your personal preference is to buy single-family rental houses rather than apartment buildings as investments. Are there any good books about investing in rental houses? –Dena W.

DEAR DENA: The best book on investing in rental houses is “Building Wealth One House at a Time” by John W. Schaub (McGraw-Hill, New York, 2005). It is available in stock or by special order at local bookstores, public libraries, and www.amazon.com.

The new Robert Bruss special report, “How to Earn Your First Profit When Buying Your Home or Investment Property Right,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF delivery at www.bobbruss.com. Questions for this column are welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center
).

***

What’s your opinion? Send your Letter to the Editor to opinion@inman.com.

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×