need to get out or fix bad deal HELP

Hello All

I am looking for help or ideas on a property I own
have had if just over a year and realize deal was not good
retail purchase made before I started reading this forum and before I joined local REIA

just over an hour from where I live

How do I make the most of it or get out
what do others do with bad investment

Here are the numbers
yearly Income = 168000
yearly mortgage payment =12900
what others numbers do I need here
I didn’t figure in any vacancy rate
and repairs are needed
:help :help :help :banghead :flush

Any creative ideas at all ? :banghead :help

From what you just said, unless your property is super crappy and needs severe maintenance, you should be turning a huge profit. My guess is your numbers are wrong. You said your yearly gross income is $168000, and your yearly mortgage payment is $12900 (aka $1075 per month)… that leaves you with $155100 for maintenance/vacancy/expenses.

I’m guessing you had a typo in your numbers…and you’re barely breaking even, or encountering a loss with the property. In that case I would liquidate it ASAP using any method you can and hope you break even. You probably will take a loss if you bought badly though.

Like the previous poster mentioned, you might want to liquidate as soon as possible or if you have the resources, rent it out to section 8.Very risky but at least 80% of rent is paid, you can of course use this to cut your losses until you find a buyer.

yes it was a typo and yes barely breaking even
guess I should find a agent or try FSBO ASAP
even though it’s a horrible time of year

Thanks just need to figure a way to cut my loses

If I found myself in a house that would not cash flow, but it would at least cover the note or not quite, I would look at the total enterprise. I would use the cash flow from my other properties cover the difference and hold it until I have enough equity to sell. I would not write a check to get rid of a property.

For me the key is 4. If I have 4 properties and one goes empty, the other 3 will pay their notes and the empty one. That is what I call the total enterprise.

Thanks Bluemoon

actaully that was my other thought
get some more property since now I have a clue
and make sure it’s cash flowing good , just that this is my first :banghead

in Hindsight,
what is the best or better formula to use to come to maximum offer on rental unit

I would hang in there

Like someone else said, don;t right a check to sell it.

If you can hang in there a year or two you can more than likely raise rents some.

historically the market always comes back -

you don’t actually loose money until you sell


I disagree with the others. It is usually better (cheaper) to take your loss and move on. What you have is a property that is bleeding cash each and every month. With a typical 30 year mortgage, VERY little is going to the principal in the early years, so the idea that you can keep the property until you can sell it at a profit is not valid. All the time you’re holding it, you’re bleeding cash and most areas of the country are in a real estate downturn that could last for years. In addition, renters are very hard on rentals, so if you hold it, you will probably need to rehab it before you can sell it.

It certainly doesn’t make sense to buy more properties, just to have them be dragged down by the negative cash flow from this alligator.

If you can hang in there a year or two you can more than likely raise rents some.

WHY? Why should be able to raise rents in a year or two? There are literally millions of home loans in distress and in foreclosure. These properties will be flooding the market over the next few years. Many of these distressed owners are failed flippers who will desperately try to rent their property before they finally bite the dust. At any rate, there could easily be a glut of rentals on the market and rents could DECREASE instead of increase. In addition, rents MUST increase just to keep up with inflation, which is also on the rise. So, in my opinion, counting on higher rents is a fools play. If it doesn’t cash flow now, it’s probably not going to cash flow in 2 years.

historically the market always comes back -

That’s true, but historically it takes 8-10 years for prices to reach their pre-bust, inflation adjusted highs. So, that could easily take until 2016 or 2018. Furthermore, the recent real estate speculation boom was by far the largest in history, which would imply that the bust will be the largest in history.

you don't actually loose money until you sell

Unfortunately, that is not true. He is bleeding cash every month.

I would sell it now, before the value drops any farther.


And if you want to sell that apartment complex for $30k - email me first, not Propertymanager. He’s already gotten a deal like that. LOL!!!

I’ve read many of your post unfortunately after this purchase was made
How would you suggest I do this while minimizing my loses

I am over the 50% rule but not actually into my pocket just yet either but I do understand it’s only a matter of time

while I can appreciate humor something about your reply
is 1 not funny and 2 doesn’t speak to my question but
Thanks just the same :smile

Urban Investor,

There isn’t always an easy fix to things. If you’re upside down on the property, you’ll have to bring cash to the closing table to get rid of this thing. If you haven’t lost any money yet, then you could try to hang on, but with the numbers you posted, you should be bleeding cash big time. You also need to consider your local market. If it is headed down, then you’re getting farther behind the longer you wait.

Unfortunately, there is not an easy answer that anyone can give you. Can you afford to hold this thing for several years? Can you afford to bring money to the closing table to sell it?


it’s not bleeding yet

mortgage 1075.00
rents :1400.00

every few months water ,trash etc
no major repair really done so far
guess if I had to choose it would be money at the ,since over time tenants can be a headache
plus vacancies which I haven’t had yet

Guess best thing is to see if I can get a bite by placing it on market
Thanks for your information .

I know it isn’t easy but the glass has to be always half full just my outlook
I’ll be picking up a copy of your book and when I get out of this , I will know !
I’m just trying to minimize the pain from the alligator’s bite .

Thanks again

bluemoon, I agree with you. i bought two 4-units and two 6-units at the same time. The quads support themselves, no problem. Now, with the pair of 6-units, one is vacant, but the other pays out enough to pay the mortgage on both until the building is fully rehabbed. After that, it becomes pure profit.

I have no advice I am new but have questions.

You stated that it’s not bleeding, so what makes it a “bad” deal?

How much is your tax/insurance/water/trash/etc per month?

What is your ROI (i.e. how much did you put down)?

What method (I don’t know what it is called, but the “numerical workings of THIS IS A GOOD PROP”) did you used?

I tried to buy a house, was told it had to be rehabbed and with an estimate of the new loan amount. I would had been profitting about $3 per month. It would had been my first house, but I still have to buy eventually. (just not THAT place, even though I liked it)

Sorry I can’t help.


Urban, where are you located? is this a single family or multi-family?

You’re not really hurting yet, but if you have a major repair or a vacancy come up… Currently, you’re not making money, but you aren’t dying, either. You do have a few more options other than a fire sale. They may not be optimal, but they could help stem the tide:

  1. Buy a home warranty. This could protect you from a major bill (like an a/c, plumbing, roof leak not due to age).
  2. Buy down the rate to get a lower note (more monthly spread) if you can.

of course, both of these are “throw more money at it” solutions, and not “do it right up front” solutions. some people make money by putting money into projects. it probably matters where you are, though.

as propertymanager states, more houses are coming on the market which could push prices down. in certain areas, like ohio, where mike is, i bet this is the case for home sales and rentals… or you could be where i am - houston - where more houses are coming on the market, but more people are coming, too. everyone needs a place to live, and they can’t all buy homes. there are a bunch of empty foreclosures AND rents are up.

if the place doesn’t have a lot of deferred maintenance, you may be able to get by. i have a place with worse cashflow numbers, but i raised rents this month at renewal time, and when the 6 month lease ends in may, the rent will go up again (considerably if the current renter moves out). i’m not trying to sell it today (but it’s always available to be sold, of course!)

listen to propertymanager and listen bluemoon06 - know your area and what works in your area. the 50% rule is a great guideline for buying the revenue producing assets that people will call their homes, but clearing $325 a month over PITI is not dire if you can manage the downside risk.

If it is just barely breaking even, you can hang on until spring.

Winter is the very worst time to try to sell real estate, and if you list now, the listing will be stale before the buyers come out of hybernation.

Unless the property is in a war zone, it shouldn’t be too hard to sell a building that is breaking even. Not every investor has talked to Mike.

While you are waiting for spring, you can be dolling the place up.