What are my options with my investment property?

General Real Estate Investing
1

I have an investment property which I have baught in the peak and it went down a lot in its value. I have a $1000 monthly negative cash flow from this property. I can handle it as long as I am employed. I am worried what if I loose my job. Can somebody help me with your ideas to get rid of this property. Thanks,

2

How much did you buy it for and how much can you sell it for? If you could sell it for $10,000 less than you paid for it, and you wait a year for prices to turn around you have to add that lost $12,000 to it also so it is then $22,000 negative. Negative cash flow is always bad and does not get better. It is like a sucking chest wound. Sell it now take the hit now and chalk it up to luck.

3

How can your property cost you $1000.mo. simply by going down in value? What type of property is it? What is the financial situation ( income & expenses). Did the property cashflow when you bought it?

4

Sounds to me like two separte issues…it is hard to sell alligators, too!

Keith

5

I baught the property with negative cash flow about three years back as a longer term investment. But getting nervous by the current real estate situation. It was a very dumb thing I have done and I have bunch of issues with it:

  1. I can’t benefit from the depreciation because of my income limit. Does anybody have any suggestions so that I can get some tax benefit from the depreciation?

  2. My arm rate will be coming to an end and my monthly payment will furhter increase soon. Any good lenders or loan programs that can help me with refinacing?

  3. Worst case situation if I have to sell the property any suggestions to sell it quickly?

Thanks,

6

SBP,

It does not make sense to refinance the property if you plan to sell anytime soon. It will just cut into your equity. Have you tried marketing it as owner-financed?

I’m shocked that you are not concerned about losing $1000 per month. That should be your number one concern.

7

This is why you have to invest for positive cashfkow first. Is there any way you can improve and raise the rents? If not, you may be forced to sell and take your lumps. A knowledgable investor won’t touch this a ten foot pole with this negative cashflow. Refinancing won’t cure the $1000/ mo. bleeding. I see basically 2 choices,

                1. Sell for what you can get for it.
                2. Hold on until the rents can be raised and therefore, raising the value.

I suggest you sell it and not buy any more properties until you can accurately calculate the numbers and get a positive cashflow.

8

If it is a duplex or triplex I would put it on the market and market it towards people who would want to live in one unit and rent the others. These people are typically not looking to make a profit on the building but are more concerned with lowering their own living expenses.

Option 2. Is this loan recourse or non-recourse. If the loan in your business name and if so did you personally guarantee it? If it’s non-recourse you could tell the bank you need to renegotiate better terms or you’ll lose the property, they can’t come after you anyways and trust me they don’t want this property either.

Do you have any equity at all in the property? This would probably help narrow our suggestions.

9

Always invest in something that CASHFLOWS. You can’t call yourself an investor if you don’t. Idiot is more like it. Playing the equity and appreciation game was always come back to bite… and HARD. Get it on the market, get what you can out of it and chalk it up as a learning experience. You cannot invest in real estate like it is a roulette table because if you choose red you often time will end up BLACK & blue.

10

Idiot is a bit harsh Brokovich. We’ve all made mistakes here and there.

11

I’ve never rolled the dice on a property hoping that it would appreciate faster than I was losing money. Think about that concept for a moment and rethink my idiot comment.

12

I am betting that you bought this negative cash flow property believing that you would get a tax benefit from the net loss from your rental operation each year.

If you already have a $12K annual negative cash flow, adding the depreciation expense to your rental loss just increases your net passive loss. You say that you can’t use the $25K net passive loss allowance because of the income limitations.

In this case, the “tax benefit” from the net passive loss (not just the depreciation expense) is not lost. Your passive loss is suspended for the tax year and carried forward to the next tax year. Suspended passive losses that can’t be used to offset rental income are added to your adjusted cost basis when the property is sold – making your taxable profit on the sale that much smaller.

So, even though you can’t use the net passive loss allowance now to reduce your current taxable income, you will get the tax benefit of the accrued loss in a future year when your other ordinary income is lower or whenever the property is sold regardless of your income.

13

What an expensive seminar…

14

SBP,

The majority of rental properties in the United States are purchased by mom-and-pop type newbies who will rapidly fail. That’s good news because it means that there is a market for your property. Therefore, I would suggest marketing your property to these uninformed newbies.

Look at all the financial aspects of the property (cap rate, IRR, Cash on cash return with a big downpayment, etc.). These silly nonsense numbers can make a loser property look good to a newbie. Look at the posts we see on this forum. How many times have you seen a post like “this property has a cap rate of 8.2, what do you think?” Market to newbies at your local REIA; with a newspaper ad; and on the internet. There are millions of gullible newbies out there and all you need to do is find one.

Good Luck,

Mike

15

I couldn’t agree more. How about an ad with the headline “Calling All Investors!!”

16

Someone makes a bad investment and your advice is to have him screw some new guy. You must be a lawyer or a realtor - aka scumbag.

17

Let’s rethink the Forum rules instead:

Rule #1 - No Profanity or Name Calling - if you disagree, that’s fine, but do so in a professional manner. This includes private messages and emails.

Let’s not degrade to name calling…OK?

Keith
Moderator

18

ropaint,

I don’t mind being called a scumbag, but a lawyer - c’mon, that’s just plain mean!!!

Someone makes a bad investment and your advice is to have him screw some new guy. You must be a lawyer or a realtor - aka scumbag.

My advice is not to have him “screw” anyone and certainly not to say anything that isn’t true. My advice is to market the property to newbies. Contrary to the popular socialist mentality, adults in this country are responsible for their actions. They are NOT VICTIMS. There is a CONTINUOUS stream of newbies in this country who want to get rich quick but are not willing to do the work to actually be rich. Marketing to them is not unethical or immoral.

Good Luck,

Mike

19

You must be a lawyer

Talk about my mother,insult my wife’s cooking but dont call me a lawyer…

20

Scumbag eh? You’ll run into plenty of them in this buisness. If you think marketing to a certain group of people makes you a scumbag, wait till you run into a real one.