California foreclosure deals are bittersweet for novice investors

Buzz up!By Nicole Williams
nwilliams@sacbee.com

http://www.sacbee.com/ourregion/story/2038862.html


Many Californians saw their dreams go up in smoke when the housing market burned up as a result of heavy job losses, bankruptcies and balloon mortgage payments, but others are rising from the ashes and forging new investment endeavors.

All the bathroom mirrors are missing, there’s dog urine in the air-conditioning unit and holes in the walls, but the foreclosed house Sacramento resident Sherie Coelho purchased for $115,000 just a few doors down from her own home is "a blessing and a gift," she said.

It was originally listed for $319,000, but because of its status as a former marijuana grow house, real estate agents couldn’t get rid of it, Coelho said.

So, backed with $30,000 she received from her late mother, Coelho just secured her first rental property and hopes she will be able to save for her retirement.

"Almost overnight I’ve become an investor, and it wasn’t necessarily intentional," she said.

Coelho isn’t the only one who bought a foreclosed home on her south Sacramento block – a neighbor did so earlier this month. But there’s something that makes Coelho different from most rental property investors in today’s market – she lost her home in 1997.

The foreclosure was one of the most painful periods in Coelho’s life, and it took three years to build back her credit.

"I felt like, ’Am I stupid? I’m an English teacher, I should know how to read these documents,’ " she said. "It was like I should have understood."

Coelho, who teaches at Cosumnes River College, said going through a foreclosure has made her "more conscious of the human factor of the rise and fall of the housing market."

For Citrus Heights resident Doug Boethin – who purchased his first rental property last year when foreclosures flooded the market – securing the investment he had wanted for years was bittersweet.

"It isn’t until you’re actually out there (looking for properties) that you see the anger of the people who lost their homes," he said. "To actually witness that, was something to be had."

More foreclosures means more people are looking for rentals, making property investment an attractive business.

But first-time landlords often underestimate the legal requirements, time commitment and ongoing expenses involved in running a rental property, according to the Rental Housing Association.

There could be problems for renters and landlords if the new owners don’t comply with laws and standards, including fair housing legislation and property maintenance, said Cory Koehler, RHA deputy director of government affairs.

Coelho and Boethin attended the RHA’s new investors educational event Saturday to get schooled on the ins and outs of property management.

Coelho is prepared to invest anywhere from $5,000 to $10,000 to repair the cosmetic damage in her rental and has learned through experience that having a financial cushion is essential when you own a property.

At first, a $1,000 mortgage each month seems like a small price to pay for your dream investment, she said. But after a few months, "The house eventually owns you."

But losing a home doesn’t mean all is lost, Coelho said. And she thinks she’s a great example of that. Her foreclosure taught her to buy within her means, and now she thinks she’ll have her rental property completely paid off in seven years.

"As far as a lesson learned," she said, "there is always hope."