Help,
I purchased a rental property 3 years ago. I got an equity line of credit last year to refiance my second loan and do repairs. My current renter just informed me she is moving out this weekend. My monthly payments are about 1500 with everything. I had it rented for 1330. I live in another and state and can not take care of the property. The renter has destroyed the property and the AC is broke and needs replacing. I do not have the money to keep the home or repair it. I owe 168000. I had 3 agents evaluate my home and each thinks to sell it I would need to list it for 160000. With all the fees involved in sellling it I would only get about 150000. That makes a difference of 18000. I do not have the 18000. The homes in this area have completly decreased in value. Most home are staying on the market for over 120days.
What can I do. I dont want to ruin my credit, but I cant afford this rental property. Please someone help! What can I do to get out of this property FAST! Even if I rented it again I could probally only get 1000per month and that is if I repair the home. The home is in Tampa FL.
Selling fast means selling cheap. Lease option or owner finance, but you’ll have to make repairs first. If that doesn’t work, look for the we buy houses people, they may be able to negotiate a short sale with the bank.
Banks are getting desperate now due to increased foreclosures. They don’t want property back. Give them a call and see if you can’t renegotiate the terms until the market improves.
If I do a short sale on my property and the bank agreed to taking less does it hurt my credit? Also do I have to make payments on the amount of money that they do not receive from the sale?
Thanks
If the lender agrees to a short sale, then (by default) they agree to accept less than the full balance due in full satisfaction of your loan.
No, they won’t make you pay the difference. If they did, then it would not be a short sale. The lender will give you a 1099 for the amount of the debt that was cancelled. This amount will be taxable income to you at your ordinary income tax rate.
and, for other readers, the lesson here is…?
The 1099 reporting may be negotiable, but there is nothing you can do about the hit to your credit score unless you pay off the note in full.
Next time, buy local. If you have never rented property before, buy a duplex and live in one half to learn how to deal with tenants. I see this kind of post many times a day on another board I frequent. Newbies invest without thinking through the investment. RE is not a passive. Buy a mutual fund if you want to invest money and forget about it. RE is active and you must know every part of it well to ensure your success.
I wish I could go back in time and not by this home. At the time of the purchase I did live in FL. I called the bank and they said I could do a short sale but I would have to set up financing and pay what they did not get thru the sale.
I am screwed. I cant think of anything to get out of this house. I cant even rent it for near what I owe a month. Anyone have any other ideas to get me out of this home. I had one of those investors say they could only give me 100,000 today. What should I do?
Hi TampaKay,
I feel you. I had a similar story to yours, mine is in TX and it is 4plex, sometime vacants, most of the time tenants tearing off stuff costing me 1000’s of $. It was a loss from day one. I took the loss for almost 5 years until I couldn’t anymore. I sold it to an investor $20,000 below the FMV in order to save my excellent FICO score.
You have 2 options, whichever one you pick will cost you. Either take a hit on your credit by letting the bank take it back or short sale by coming up with money from your pocket. I know it is a painful experience but such is life.
I saw mine as big lesson, I have been learning all I can so that my next move will be profitable. Learn from this and get serious education before getting back to the game.
Peace out
Sorry about this…
We will be seeing this 100 fold in the next 2 years from investors,this is the tip of the iceberg
i would contact a rehabber and work out a deal where he get all of the profits if possible (i doubt it but there may be an eager handyman who would want to live there) …make some calls to some handymen or place an ad…
or eat it now because you’ll be eating much more later…
best option: SAVE YOUR FICO SCORE-----mess that up with foreclosure you’ll be waiting a few years to clean that up…maybe sooner with a credit repair lawyerS…I LOVE THEM!!
i would borrow from my IRA or some relative (get a new 18K loan if u still have good credit)…sell it at cost or even a bit below below cost…those monthly payments add up every month…
looks like the bank will take it back eventually…
p.s. for the good news,flip some local props in some lower income areas,make that 18k back in no time…theres many deals out there
my 2 cents
Robert A. Doncaster, Jr.
Import/Export Entrepreneur & Investor
*** DO YOUR HOMEWORK ***
Chicago Illinois USA
& sometimes Salzburg, Austria
I believe that you should work this out. I would not recommend short sale, forclosure or bankruptcy.
You bought this place. You agreed to make the payments on this place.
Whatever it costs to fix the AC (I've had air conditioners fixed for under $200.00) you should do it.
You should be able to rent this place for something, even if it is lower than you would like.
Asking agents to evaluate this property is like asking used car salesmen to evaluate your trade in.
Fly to Florida.
Evaluate the property find a good property manager (if you can't handle it yourself) and rent it out.
Get a second job.
BLEED. Let the property lose money every month until you get a chance to sell it. I know it's easy for me to tolerate your suffering, but I believe that this is where we separate the wheat from the chaff. Do you have what it takes to keep your agreements? Do you have what it takes to be a real estate investor?
Do you realize how many people on this site wish they could own investment real estate? You own it and now all you want to do is get rid of it.
I believe that trustworthiness is THE most important part of this business.
From a technical standpoint, you have a few options.
Lease option to buy is a technique used by many investors to maximize rental income from suboptimal properties. You could offer this property as a lease option to buy, and getting $1300-$1500 for rent, when market rent is $1000 is plausable. You can use the option to buy as leverage, and see if you can find a fix and flip contractor as a lease option to buy resident.
When agents offer to sell your home, they are also calculating their commission. For a lease option to buy you bypass all real estate agent commissions and save the $9,600 you would be shelling out on agent's commissions.
You could also save a substantial sum of money by offering this property as For Sale By Owner (FSBO). You immediately save $4,800, and possibly save the full $9,600.
Of course, if you save this kind of scratch, you could afford to pay a new agent a smaller commission, or a real estate lawyer a sum of money to help you execute the sale of the property.
I hope that I can help you...
A short sale occurs when the bank agrees to accept less than what they are owed as payment in full.
Since the bank wants to be paid in full, then it is not a short sale. The bank is just letting you do an installment sale – some now when you sell, the rest later out of your pocket.