Getting out of a Vacation Property

[Driley]

Folks,

   I'm sort of in a fix here, last summer while on vacation in Orlando my wife and I fell in love with a resort community and dropped a $7500.00 deposit on a 492K vacation house to be rented year around.   Long story short - we bought on emotion and not intelligence.  I've been tracking the market down there and there's hundreds of houses on the market for rent - just like the ones we're buying.  There's no profit to be made here, the plan was to have it pay for itself.  I'm running out of time, they want to close by the end of February.   My out here is to get a letter from a friend who's a mortgage broker that states I'm not qualified for the loan and get my deposit back.  I know investors are making money in Orlando - I'd love to get some advice on how I can make this thing work for me.  HELP.

Driley

[christopher w]

Driley,

Chances are they are not going to refund your money with a simple letter from your broker. They probably have a lender in place in Florida that they will refer you to as their backup plan. Other than outright losing the $7500.00 which might not be the worst thing because your payment on this home is going to be between $3500-4500 per month including taxes and insurance unless you do some sort of option arm which will lower the payment considerably, but roll back interest onto your loan. You stand to lose a lot of money in the long run by closing on this house especially with no exit strategy in place. I would read through your paperwork and look for some loophole to exercise otherwise kiss the $7500 goodbye and chalk it up to experience. In addition to all of the houses for rent in Orlando are all of the timeshares, and vacation ownership companies (Marriott and Starwood are two that come to mind off the top of my head) you will be competing with as well.

[Sean_L]

Did you put a financing contingency in the contract? If so you may be alright.  For $7500, it can't hurt to talk to a lawyer in FL.

[Driley]

Thanks for the feedback  - I will be consulting a lawyer.

Driley

[TMCG]

yes consult an attorney.

however, are you positively sure that you won't be able to rent it at all?  i mean you're basically saying that there's no way, you're going to lose your shirt on it...is this ENTIRELY ACCURATE.

reason i'm asking is because sometimes when you make a decision like this, you start to doubt yourself right into a corner and before you know it, you're not seeing the entire picture, your brain shuts down and you give up.

don't give up.

see what the numbers read.  if the vacancy is 20% - find out how much you'll be losing per month and figure out a way to get your place rented.

how much will it rent for?  how much more can you put down on the property?  

what are the vacation rents down there?

who do you know that likes orlando? friends, co workers, who ever.

don't just panic and give up.  

"never never never never never never give up!"
Winston Churchill's eight words for success.

think it over rationally, rather than emotionally.  look at the ENTIRE PICTURE.  then make decisions.

[propertymanager]

I agree with Tom, look at the numbers.  If the numbers say that you will make money, keep it.  If the numbers say that you will lose money, then cancel the contract and give up the $7,500.  You are not a victim.  You signed the contract and unless the contract says that you can change your mind for any reason, then simply take the loss.  Why do something dishonest and pretend that you can't get a loan?  Do the honest thing and take your loss. .

Mike

[TMCG]

exactly - honesty is your best policy.

you'll realize that many times, when you allow your emotions to dictate your decisions - you'll try and use lies or disceptions to drive your actions.

the funny thing is, it's the emotions that are the ultimate deceiver.

look at the situation with logical frame of mind.  there's got to be a way to make it work.  if you EXHAUST all your outs and you're satisfied your quest for the truth - then take the loss (only after you've had an attorney look at the contract and see if you can get out of it)  

look at all your options - be honest with the sellers - maybe, just maybe at the end of the road, they'll have something else - that better suits your needs and they can direct you to other investments - see what you can do.

but avoid the self-fulfilling prophecy of your emotions - really look at all  your options.  i mean it's in Orlando - that is a very popular vacation getaway for many couples and families.  check it out, do you DUE DILIGENCE.

just don't give up.

[Rich_in_CT]

What about wholesaling it?

[Sean_L]

I think Honesty is the best policy. But all of you have to understand it's easy to say that when it's not your $7,500 dollars. I believe that everyone of you would do everything in your power to minimize your loss...ie get out of the deal... And none of this take it like a man garbage...

[propertymanager]

Sean,

I completely disagree.  There are many, many people who conduct themselves with honesty and integrity.  When I give my word, I stick to it.  I don't try to weasel out of agreements that I make.

Mike

[Rich_in_CT]

I say sell it to someone else for what you paid.  As long as the person buying it thinks it is a good deal for what they are paying and what they are getting everyone wins.  Obviously don't con them and tell them they can become an instant thousandaire renting it out, if they are looking for a place of their own they might just be happy at the price you paid.

[christopher w]

According to the Orlando Tourism Bureau it is the #1 vacation spot in the world. There are definitely people out there visiting Orlando, and needing a place to stay. You say you have done some research and that their are tons of houses for rent, but have you tried contacting a service that will market your home to tourists? If you are getting a decent amount for a weeks rental you should only need to have it rented for a few days a month to help cover a significant amount of your payment. That coupled with the tax write-off may go a long way towards making this work out for you. Talk to your broker and let him know that cash flow is your most important goal in this tranaction. Also, since this is a construction to perm loan the property should have appreciated during construction. Make sure that you use a lender that allows you to use the appreciated value when calculating your LTV. This will help you get a better rate if you decide to move forward with the transaction.  

[kdhastedt]

...according to the Grand Junction Chamber of Commerce, we are!  Of course the Orlando Bureau of Tourism says that..."We're Number 6" sounds silly on the ads!

LOL...the rest of your note is good advice, though!

Keith

[christopher w]

Lol. I guess your right. It sounded good to me though. We bought a vacation ownership package for a property in Orlando. What is interesting is that we get phone calls every so often from companies who sub-lease our weeks from us, and rent them out to vacationers. That is why I have to believe there is a bigger rental market down there than Driley is aware of.

On a different note... Keith you are in Grand Junction, Colorado? Man I bet that is beautiful.

[Digger18]

Several options come to mind here;

1) Try flipping the contract.  Try talking to people in your local REI club who could go by and take a look if interested.
2) I'm assuming that since your closing was so long that this was  new construction - if so, you should be building at less than current market value, that is my biggest selling point to buyers that I build custom homes for.  Again, if that is the case you may be able to sell it for what you are going to be into it for and it may still be less than retail value for a buyer.

Either could be a win/ win.

Good luck