| Do I have any options on underwater investment property? |
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Dan203
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Joined: 14 Oct 2011
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| Do I have any options on underwater investment property? |
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I own two rental properties that are significantly underwater. One is a small 1/bd condo that I paid $96K for 6 years ago and is now worth ~$40K. I owe about $70K on it. The other is a 3/bd town house that I paid $165K for around the same time and is now worth ~$65K. I owe about $122K on it. Neither one rents for what I pay out each month, so all in I'm taking a combined loss of about $10K a year on them both. When I first bought them they rented for more so I was taking a much smaller loss which I thought I could recover by selling them a few years down the road. But then the market crashed and that whole plan fell apart.
I've considered just walking away from one, or both, of them, but they are so far upside down that the deficiency would be massive and I live in a state were the bank can come after you for that. (Nevada)
I make a decent living and can afford the loss (just barely) but at this rate my personal retirement saving is going to be hindered for the next 10-15 years while I subsidize housing for the strangers paying me inadequate rent. 
Do I have any options here? Will banks consider rate modifications or term extensions to lower the monthly payment so that I can at least break even each month while I wait for the market to recover? (both have loans through BOA)
Or if I do decide to walk away what are the odds they will come after me for the deficiency? I do have some cash in the bank and a decent amount of equity in my primary residence, but my net worth is relatively low. If they do come after me is there any way I could just go bankrupt on just that debt without losing my primary home or the cash in the bank?
Any advice would be appreciated.
Thanks,
Dan
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Fri Oct 14, 2011 1:53 am |
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CrossCountry
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I am not a lawyer but curiously enough, the New York times just published an article that cover the negative aspects of refinancing.
If you refinance you will likely increase the amount of debt, even if you are able to lower your payments. I suggest you read the article: nytimes.com/2012/07/29/realestate/mortgages-refinancing-more-than-once.html
I imagine you must feel stressed and confused.
Good luck,
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Fri Aug 03, 2012 12:47 am |
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oldguy
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Location: arizona
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Can you explain your numbers further? If your combined payments are in the $1500/m range, you would have to be almost renting them for free to lose $10,000? And I dout that you give free rent. 
But, yeah, if you walk the lender will come after you - $90,000 isn't trivial. And if you use the bk courts, they will need to include your house and assets - they have the fiducuary responsibility to protect the people who put their savings in the bank, so they are obligated to do whatever possible to recover the money from you.
I would keep them - rent will increase - $1500/m for two units sounds low, even for LV, it should recover in just a few yrs. As for the values, that may take a bit longer, but undewater rentals aren't a problem as long as they are cash-flowing, you simply hang on to them until they get back above water.
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Fri Aug 03, 2012 1:42 am |
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trumankent
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You probably won't be looking to sell an investment property directly after purchasing it. Most people choose to rent out their property for a number of years and then waiting to see how the market turns.
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Fri Oct 19, 2012 4:42 am |
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jhon6
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Joined: 27 Oct 2012
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You want to know this information and then make your decision.
Is your loan a recourse loan or non-recourse loan?
What type of financing do you have on the property, interest only or amortizing?
Is your lender going to foreclosure by Judicial or Non-Judicial process?
Once you know these things your options become very clear. Good luck!
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Mon Oct 29, 2012 1:49 pm |
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Henryearhart
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Joined: 03 Nov 2012
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You may have purchased the property and will not try to sell it off right after you got it. The people who choose the property for giving in for rent are there to find out the market and then think of doing so.
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Sat Nov 03, 2012 4:06 am |
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