 |
Upsidedown on Rentals |
| |
 |
Edith,
I am a 32 year old woman. I purchased 2 properties in Northern, Va. during the real estate boom. Property #1 in 2004 that I owe 232,000 on and Property#2 in 2005 that I owe 235,00 on.
I live in an apartment as my 2 properties are far from my job.
Now, neither of my properties are worth very much and I'm renting them at a lost each month. The mortgages are WAY to high to rent for what I owe each month.
Property #1 - 3 Bedroom 1.5 Ba townhouse. I'm about (40,000) in negative equity. I rent this one at a $400 per month lost including mortgage, taxes, and homeowner association fee. I have a 5.25 ARM that will reset in January 2009. It can go up one point per year up to 9%. Although it wouldn't go up come this January because rates are so low right now. But who knows how long that may last.
Property #2 - 1 Bedrm 1Ba. condo. I have about (75,000) in equity negative for that one. I rent this one at a $550 per month lost including mortgage, taxes, and homeowner association fee. have a 4.75 Interest only ARM that will reset in Aiugust 2010. I've paid a payment a year on it just to pay it down somewhat. The ARM can go up TWO point per year up to 10%. Although it may not go up Aug.2010 if rates are still low but it is to far out to really guess.
So, basically, I'm carrying about 1K per month on these properties. I'm now pregnant and starting a family. I feel like at least for Property #2 (1bedroom condo) it may be 15 years+ before I see that thing in positive equity. The townhouse may recover a little quicker. With them being ARMS its not breaking the bank. BUT if I were to do the streamline refinance option (they refinance to a fixed without appraisal) my payments would probably go up substantially making the 1K out of pocket per month more like 1500+ out of pocket per month.
So, I've been looking at the following options
Option #1 - Sell Property #2 at a lost. Carry Property #2 by renting it at a lost until it recovers. Then make a decision to keep it (renting it at a lost mind you) or sell it. But how does this work? Does the bank make me take out a personal loan to pay the difference between the owed vs. sale price? Will that really help my problems?
Option #2 - Buy another property since real estate is so cheap right now. Wait for it to go up, sell that one AND Property #2. Then the proceeds from the new property would hopefully take care of the loss on the property #2. No taking out personal loans to pay the loss on property #2. BUT what if the market doesn't come up fast enough and I'm stuck yet again with a bum property and worrying about getting renters and crap with a newborn.
Option #3 - Anything that you may suggest? I'm all out of options :-(
|
| |
| |
 |
I certainly wouldn't buy something more at this point. Beyond that, I dont' know enough about your whole financial situation to give you advice. As an investor, you must have your own CPA, and that might be a good person to consult now for advice.
I would say, though, that refinancing to a fixed rate might be a good idea right now. Rates will probably go up before too long. |
| |
|
Edith
Originally published on September 3, 2008 |
| |
| |
|
Back to Summary
|
< Previous | Next > |
| |
|
|
