It’s a tough real estate market nowadays in this horrible economic situation we have found ourselves in. Home prices have plunged throughout the country and are still falling in places. For those who bought when the market was overvalued a few years ago, times are especially tough. Mortgages were given to any Tom, Dick or Harry and they had ridiculous terms which left those mortgage holders in a bad way.

I live in California, where the prices of homes five years ago was way above the assessed value and people routinely had buyers with fat checkbooks knocking down their door to get into homes. Unfortunately, I had just moved to Los Angeles, and I needed a place to live. Going with the conventional wisdom of buying is better than renting, I bought property.

I bought a place way beyond my means. Why? Because I was able to get a mortgage which I never thought I could. So, I got into a house that cost too much with an interest-only mortgage that I could barely afford. I was building no equity and, when we had our second child and my wife decided to stay home, giving up her full-time salary, we were set up for disaster. We couldn’t pay our bills and, when things broke, we were stuck with home space heaters to keep us warm and deteriorating furniture to sit on.

As everyone knew it would, the housing market took a dive and prices dropped along with the economy’s deflation. Our condo was worth much less than what we paid, although our mortgage was still the same amount. We couldn’t survive in our current situation and we couldn’t make money selling our house if anyone even agreed to buy it. So, after filing bankruptcy we attempted a short sale.

We are currently doing much better renting a home. I hate that we went through what we did but, had we not, we may not have learned some valuable lessons.

I would buy an income property, something that I could put a renter in that would cover my mortgage. I would buy a slight fixer-upper and spruce it up with some cheap home decor accents and maybe a coat of paint. But, most importantly, I would buy something below my price range, taking the renter into consideration and get a mortgage that earned equity and had a good rate either fixed or with a long arm.

This way, I would not have to worry about covering mortgage every month. Plus, my home would have real value and, I could hang on to it long enough to make it a truly valuable resale property, no matter the market conditions.

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