Group,
I find myself in a precarious situation and am looking for some advice. We own 35 units and over the last 6 months our cash-flow has been pretty weak. Moore’s law has hit us pretty hard with some slow- or no-paying tenants, utility abuses and maintenance issues, not to mention some unexpected family expenses.
We are currently $32,000 behind on our loan payments and it’s getting pretty serious. We have a portfolio of $1.2 Million with $100,000 +/- in equity. Being behind on loan payments of course makes it hard to go to a bank to get an equity loan.
We have the problem properties on the market at fire sale prices and have tightened our budgets to the max but I just won’t be able to cash-flow out of this mess and time is running out on me.
I could really use some help on this one. Is there anyone that might loan against our properties in this situation. I know the terms will be painful and I’m prepared for that.
Thanks in advance,
Rick in WV/OH
Rich,
That’s going to be tough becasue your LTV is in the 90% range… maybe see if there is someone local to you to lend private money or take an equity position for some cash relief.
Local paper, craigslist, backpage…
Have you tried owner financing or lease purchases? I don’t want to be a downer but it will be difficult for you to find anyone who is going to buy in because you have so little equity. Are you still running in the negative every month or are all the units currently rented and paying on time. If so you may be able to work out payment plans with the banks. If not, figure out which properties are the most valuable with tenants that pay on time and try to save those. You don’t have to lose all of the properties. You obviously understand the road you are heading down so start preparing for it now. Hope this helps.
Have you spoken with someone about Loan Modification?
Jason,
You’ve been gone a long time.
I’ve been brokering Commercial Loans, Construction Loans, Traveling and Dealing with people who need to get out of foreclosure. :biggrin
rtorick,
The very last thing you appear to need right now is another loan, especially at bad terms. Rental properties will almost NEVER cash flow at 92% of market value, when you consider the real world operating expenses.
It also appears that you are compounding the problem by allowing slow-paying and non-paying tenants. If a tenant doesn’t pay in full and on time, EVICT THEM! You’re not running a charity, you’re running a business. Obviously, you simply can not afford non-paying tenants. You should be starting the evictions the day after the rent is due. In addition, it is a VERY poor idea to own rentals when you must pay the utilities, as the tenants will abuse them (which can be quite costly when energy prices are rapidly rising).
Even if you could obtain a loan, how could you pay it back if these properties aren’t cash flowing properly?
I think the only answer is to talk to the bank and see if they will modify the loans. Would they allow you to pay interest only and lower the interest rate for some period of time? Will they do a forebearance? Will the simply write off part of your principal and lower your interest rate so that they don’t have to foreclose? Would they accept a deed in lieu of foreclosure and simply take the properties off your hands?
Good Luck,
Mike