Bottom Line Up Front:
I have to choose to either refinance my first investment property next month or let it go.
I owe about $158k and the appraisal came in lower than the time before at $163k.
I have to refinance at 25% LTV and with all costs I need about $43k to bring to closing.
There is a 2-year balloon payment due to the builder/seller in August for the remaining $158k.
I’m calculating a 6-9% COC return depending on a few variables.
My biggest question is that I’m unsure what will happen if I don’t refinance and let it go and use that money to get much better returns.
Will I be foreclosed on?
Will it affect my credit?
Will I get sued?
Any advice or direction would be much appreciated.
It sounds like…if I’m reading the info correctly…that you bought an investment house from a builder, so the builder is carrying the note…
If you let it go, he will have to foreclose on you, and it will show as a FC on your record, assuming it’s in your name, and he has the ability to report to the repositories, which, he may not.
I’d start communicating with the builder about doing a Deed in Lieu, or maybe you getting a tenant in there for him and he takes the note back, or doing a lease option on the house to someone. Just get creative on trying to help the builder get something done with the house.
I’m with pilot–solve that problem, don’t pass it on to the builder. Get an extension of the note, write a new note, make a deal with the builder so that he doesn’t have to foreclose.
You don’t want a foreclosure on your record. All of us who have been buying and selling real estate for years have a story of the one or two that we lost money on. It’s how we learned.
Now it’s up to you to solve the problem. Can you sell the house to someone else? Get out from under and move on?
Yes. I have been told he is a real stickler for debt and greedy with every penny.
I have it rented right now and it’s CF neutral. I can afford to refinance. I have spoken with a few people and I think the best thing to do would be to just refi and learn a lesson…
Thanks a lot for your input. I really appreciate it.