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What to do about investment properties?
By Tom | April 15, 2007
aCeRBic asked:
I own several rental properties and financed them with the notorious sub prime adjustables. All the interest rates have reset and are now approaching 12% from about 5-6% initially. I have tenants in all (one will leave next month). I am having trouble selling them and cannot refinance. I continue to pay out of my pocket just to be current. What solutions do I have?
Clarence
Topics: investment properties | 3 Comments »
April 18th, 2007 at 3:39 am
If you cannot sell them for what you owe on them, you are probably going to have to either pay them down until you CAN sell or try to work out short sales with your mortgage companies. If they will not work with you & you cannot keep current, you will likely end up having to let them foreclose & have to settle the deficits with them later (when they start threatening to sue you). Yipes! Sorry to hear about your predicament. Here is a website that has really helped me. This guy went through something very similar to what you are facing. Experience seems to have been a good teacher for him.
April 20th, 2007 at 4:05 am
This is a problem a lot of people find when getting into ARMS. Unfortunately, you only have a few solutions:
1) Refinance to a fixed rate loan
2) Sell the property
3) If possible, raise the rent to cover expenses
4) The one that is going to be vacant, consider doing that as a rent to own. It is possible to get a higher monthly cash flow from someone when they are expecting to buy the house within 12-24 months.
5) Bring in a partner who can give you a temporary cash infusion to get things solidified until you can do 1,2 or 3.
6) Check the provisions of your loan carefully. Also contact your lenders. Sometimes they will have a program allowing you to miss one payment each year, or maybe take a missed payment one time on a loan without penalty. That way you might schedule a few months in a row in which you are making fewer payments, and again this can give you time to work a long term solution out. So in August you make payments on proerties A,B,C,D and E but have a forgiven payment you don’t makeon F. In September you pay all except A, etc.
The only other options would be to declare bankruptcy or allow the property to go into foreclosure which are short term solutions with long term negative consequences.
Good luck.
April 22nd, 2007 at 10:43 am
if you’re in southern California, contact me and I’ll see if I can help. I help people in your shoes on a daily basis.
Basically you need to dump these properties or keep paying for it. Most of my clients who are in your shoes are slowly (or rapidly) depleting their savings. If you’re in the same boat, what will you do when you run out of money?
I can run the comps and see if you can get rid of any of them with no or little out of pocket expenses. If you owe more than what’s it worth, I can short sale it for you.
Regards