I have a property, that I am sure has potential for an experienced investor but I am not ready for it. The property is eating me alive and has made me cash poor.
I owe $122k I have two mortgages (80/20)…
I found a buyer and am willing to sell for way below appraised value (131k)
80k is what I am selling for and I have found a buyer. Should I contact my mortgage lender and see if they will allow me to carry the remaining balance? Is this something that is legal or possible?
Your lender is not going to release their liens on the property without getting paid off in full. This means your buyer brings $80k to the closing and you come out of pocket for the other $42k to satisfy the loans.
Hm…
Well I don’t see how that will be an option considering I don’t have 40k laying around and can’t pay my mortgage anymore. Is there no other option other than a foreclosure?
I would have to find a way to get a 40k loan.
Borrow the $40k.
What kind of loan would you suggest I try for?
Do you have access to a Credit union? The options get worse from here. You can borrow from your 401k or credit cards. Do you have any relatives that will lend you the $40k? Cash out your CDs.
Remember that debt problems are not financial problems, they are behavior problems. You need to act your wage. What I would do is keep the house and adjust my lifestyle to my level of expense and debt. Do you have anything you can sell car, boat? Get a second job. They aways need pizza delivery guys. You can eat rice & beans or beans & rice until you get some equity in that house. This means you have the house but not much life. If you sell the house and borrow the difference you will not have the house and still not much life.
So what exactly is happening here? Rehab gone bad? Personal residence? How much work needs to be done to it? What’s the ARV?
If you just need more time…you can ask the bank for a “forbearance”. I am sure they create the terms…but they usually give you 9 months of no payments. Of course if you have not found a buyer or another way out of your situation by the time the 9 months is up…you will owe all of the un-paid payments at once. The forbearance does not go on your credit report.
Is the house truly worth $131k? It would be ashamed to lose that equity and be burdened with the $42k out of pocket. Can you find a buyer that will pay retail? What about lease optioning the property to your current interested buyer, that would give you some breathing room and possibly take care of your cash flow problems for the short term? If the property will rent for sufficient funds just go out and find a tennant and you move into a cheap apartment?
Well,
Here are more details. I had an appraisal done in November of 2005 for $131,000, I bought the property for $124,000. I owe roughly 120k, the property itself is in bad shape; it seems every time I fix it up a tenant screws everything up. I have evicted several already; my latest batch I thought had great potential as their background checks came back ok. Since then they have ruined my floors, screwed up my plumbing and stolen windows (yes, windows). I am going through the eviction process right now but they keep messing the place up.
I recently took on a new job that requires about 60 hours per week and I travel a lot; often out of the country. I can’t babysit the property 24/7 and have spoken to 3 different property management companies who tell me they don’t want to manage it because it’s not worth the investment on their part (property is 3700sq ft/3 stories). The property is in a historic district and the houses near it are very nice; a house around the block sold for $240k. The house is 100 years old and I made a drastic mistake buying sight unseen but the inspector/appraisal had me thinking I was buying a potentialy good property.
The cash flows were nice on paper because the seller lied to me and made it look like a duplex; when I did the walkthrough the week before closing she made it look like a duplex, after I took over I found out she was renting individual rooms thus making it a boarding house which is a no no with the city. Now I am stuck renting as a duplex and am lucky to get $650/side because I have had such trash in that part of town.
Now, I am a terrible landlord and I brought most of this on myself; my career took off but I feel this house is preventing me from giving my 100%. I am TERRIFIED that I will get sued over something that happens at this property (I found out the idiots living there had a pitbull that tried to attack the neighbors). I am really frozen now; I keep pouring money into the place but I suck at management of it.
That is why I am desperate to sell it; my mortgage is $1200 out of pocket each month and in turn I am living paycheck to paycheck. NOT the situation I want to be in with a 2 year old son at home.
I may try and advertise in the paper for 100k, appraised for 130k. I have had it listed for 115k for at least 7 months and have not seen any interest (then again I am only advertising in the paper).
I need to look into short sales I guess, I also have not spoken with my lender yet. If I could somehow get a 40k loan to pay off on my own I would be happy to be rid of this property.
I also want to add, I have about $30,000 in my 401k does that give me any options?
GMT,
I would evict the scumbags. As soon as they are gone, I would put in a monitored alarm system. Then, fix the property as best you can, leave it vacant, and aggressively advertise it.
This is not a good deal from a rental standpoint (even at $100,000). Rents of $1,300 for a $100,000 rental are insufficient. However, the good news is that most small rental properties are purchased at or near retail by newbies who rapidly fail. Therefore, I would visit your local REIA and take fliers. Put ads in the local newspaper and penny saver. Put a sign out in front of the house. There are buyers out there for your property. Make it look nice and stress the illusion of positive cash flow WITHOUT LYING.
Your ad should say something like:
INVESTOR’S SPECIAL! Career Change Forces Immediate Sale. Duplex Rents for $1,300, Mortgage only $733! Call NOW! XXX-XXXX
Good Luck,
Mike