rental house and financial issues

Hi all, I have been looking at other forums and this one-by far seems to be the better. I am in dire needs of some answers or assistance.
I bought a rental home and currently have it leased to January2008. This single family home is costing me roughly $400 out-of-pocket because the rent is $1500 and monthly mortgage is $1900. I am having extremely financial issues holding this property and wonder if I am best to not honor the lease for the upcoming 2008 and just do a short-sale. This house has nicle & dime me and its more my wife telling me to get rid of it. I agree with her as this has indeed been a thorn in our side.
I am so fed up with the property I was thinking of filing a Chapter 13 just to get rid of the house but I don’t wan to blemish the credit I have. However, I am so fed up and am willing to take the hit just to get rid of the rental property. Obviously by law I can not kick out the tenants until their lease is up, right? Then in January2008 I have the option of renewing the lease or not, right?
Basically I don’t want to be part of the group who are sitting in forclosures but this is not my primary house, so I really don’t care what the bank does.
Anyone ever stumble across this?
I have about 4 months left before I decide if I want to renew the lease but - I am about 99% sure I will not renew and hope I can just sell it, short sale it or forclose it. Like I said my wife is upset with the rental house and - well - the bank doesn’t have to sleep at night with her :help

Thanks all in advance!!
Take care! Terry

Terry, there are a few questions I would ask you is First,

  1. Does the property have any equity?
  2. Are you behind any payments?
  3. Have you tried to sale the property?

The banks will not short sale if your payments are current. If you start missing payments to force a foreclosure it will ruin your credit…

Bankruptcy will not help you get rid of this property. It can help you put a temporary stop to a foreclosure, and yes it will also hurt your credit…

If you have equity in the property you can list it for sale, you can sell to another investor or you can try to seller finance part of the sales price to someone sub prime credit.

Hope this helps


Al, thanks for the reply! Here are some answers to you questions:

  1. The property appraised May 2007 for $280,000 and I owe about $255,000.
  2. I am not behind on payments. Thankfully I have a fulltime job that has been keeping my head above water but again, I am getting frustrated being upside down.
  3. I put the property in the paper and actually got inquiries from CraigsList. I have NOT listed it on the MLS only because I still have renters in there. Basically the lease expires January 2008. Can this be listed with renters?? I did however give the option to the renters to purchase but they are acting as “tire kickers”. I presented the idea for them to buy twice and no response. I have a feeling once they find out I am not renewing the lease they might try to purchase (cross your fingers).

What really gets me is as of August 2007 the state of MN no longer accepts Stated Income so I can’t even think about doing a refi unless I put down 20%. I was told by a realtor that I could keep the renters and let their lease run out - then sell the property. In fact this realtor told me to just keep the monthly rent but not make payments to the bank forcing it to go to a short sale.
Like I said earlier, I just need to sell it and willing to give up the $25K in equity to the next buyer. Who ever buys it will need to raise the rent to equal their mortgage payment but be rest assured will have equity built up.
The gist of it is I am in a corner. If I keep it I will begin putting strain on my financial budget. If I file Chapter 13 –according to the attorney I will lose the investment house and of course have a black mark on my name for the next 10-15 years. If I short sale I will again be dinged on my credit but it will ONLY be for the investment house. The rest of the credit will not be in delinquent. And if it came to the entire credit being hit, or just the investment property credit being hit, I will take the latter.
Thanks again for time! I just want to get some feedback from others as I am sure I am not the only one going through this….

I can’t believe a realtor would advise you to stop making payments!
You need to do whatever you have to do to keep payments current, even if it means a second job. If you work on stated income, then your credit score becomes even more important to you.

It is now august, and your tenants lease is done in January. That is only 4-5 months, depending on the expiration date of the lease. You certainly can get out of this hole with your credit intact, but you will probably have to give up all the equity (and then some).
Get the property on the market now, you can certainly do this with tenants in place. Just disclose that it is leased until then. Let your tenants know that you will be putting the house on the market asap. If they really are interested, that will get them moving.
Try a flat fee MLS listing, or a discount broker if you aren’t getting enough hits with craigslist. The key is to start right now.

Thx Lori - I did contact the tenants for some violations I sent them in July. In fact my attorney sent the violations and when I went back I noticed one of the violations still remained - hence grounds for eviction per the lease.
I am thinking once they find out the eviction is prominant, they might decide to talk about writing a PA allowing them to purchase the house.
Can I ethically say to them to accept the eviction or buy the house? I am sure I could but morally is it right? They bought the house as a ‘Lease with Option to Buy’ so they might have thoughts of buying. If so, its a win-win but again, I don’t want to ask them if they plan to purchase, then evict them. I couldnt do it.
Like you said, I have only 4 months left so I might have to just ride out the lease until January then tell them I am not renewing.
What a mess! :banghead

BTW - do you or anyone know of any web sites that allow me to list the property for free (besides Craigslist). ANd better yet, get it on MLS?

Do a google search for “flat fee MLS” and whatever state you are in. That should give you some websites to list with the MLS. It will cost $400-500 normally, which will get you the MLS listing and probably some signage and a lockbox depending on the company.

thx Lori!