Flipper In Trouble: “I Think About Walking Away”

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Underwater on three houses to the tune of $45,000 each, a house flipper named Jeff lets it all out in a website for San Diego real estate investors: he’s sick, he can’t sleep, he’s looking at a loss of $135,000, and he’s thinking about just walking away from the mess. One problem for Jeff: he’s been bragging about his investment savvy on the same website for months, and Southern California Real Estate Bubble Crash Blog has been keeping track of it all. The whole thing is worth reading, but here are the highlights. First came ‘Smart’ Jeff (smarter than Warren Buffett): ‘The government pays me to invest in RE. Isn’t America great! ... Debt juggling is just fine... The truth that all investors know is that there is risk to any investment, and that the highest risks are associated with the highest gains. Even Mr. Buffet knows this…’ Then, ‘Way Ahead’ Jeff: ‘I am not batting 1000. I didn’t really expect to, but admitting it anyway was hard. My three houses in Cape Coral are going to end up being HUGE mistakes…On the flip side, every other purchase I made that year was a good one. So not counting the Cape Coral homes I am WAY ahead. Anyway, am I happy I did it? You bet. I’ll be even happier in 20 years when I retire with 8 million in equity (assuming 6% appreciation). Now, ‘Walk Away’ Jeff: ‘Anyway, what should I do? ... I would just like to “walk away” from these homes but of course I am too embarrassed to do that (so far) and I suspect it is not an option anyway…I go round and round with what to do on these properties…at first I say hold until the market returns and keep borrowing on my HELOC, then I say no way that is too expensive, sell. But when I think about selling I think about the ~45k loss for each house! I will have to make payments on that ~135k loss for 30 years! So I think about ‘walking away,’ but then I think about the credit score hit I will take and how many years that will follow me – so I go back to the hold until the market turns solution. Around and around…I am dizzy thinking of it.’ Eesh. Comments? Use the comment button, but please, be nice.