[digidog]

In short:

I purchased several homes (7) from 2003-2006 as rental homes all in my name. I have lost close to 25k this year due to fixups, bad renters and renters losing there jobs and the 4 month process to evict. I have used up all my savings, during the past 4yrs totaling around $60k.

4 months ago I had enough and did not see a way out, so I put them all up for short sale and stopped paying. I have only had offers on three of them for around 20% of the balance due, and the bank has not made a decision yet. I am expecting an offer on 2 other ones soon. I don't know how long I have before they go into foreclosure. The total for all the mortgages is around $650k and they are probably worth $200k.

On My primary home I owe $200k which is worth around $219k (verified) My payment is around $2k on a 15yr loan with 12yrs to go. I use this for my business also, it would be almost impossible to find a rental that would allow me to run my business out of the home. I run the business at night (with the help of my wife and sons) after my day job.

The good news is, I have a day job making $100k, and another business which NETS $100k. There is around $300k in my 401k and I am building my savings back up now that I am not paying for the rentals.

My Realtor said it would make it much easier if I was in bankruptcy to negotiate with the banks, which makes sense. I have consulted with an BK attorney, and I would probably be able to get out of everything for around $50-60k most of which I would have to borrow from my 401k, this would allow me to purchase my business equipment back and other assets I have.

I have NO other Debt, no CC, no car loans, nothing... and I own all my business equipment.

I am starting Dave Ramseys Program at my local Church Jan 10th, but I am guessing my situation will be quite unique.

At this point I don't know if I should wait it out and see if the houses short sale (or go into foreclosure) and then see if I can negotiate a settlement if and when they come after me (I am guessing they will since I am in a recourse state and I have income) this could take years, OR do I go into bankruptcy now and just be done with it.

in a tough spot... James

 

[mcsestretch]

I would go to DaveRamsey.com and contact one of Dave's recommended Real Estate ELPs. They may have some other advice for you about your situation.

Also, don't be afraid to call Dave during his radio program, especially if you have a unique situation like this. If you can get through he would be happy to help you.

I wish I could help more!

 

[Greebo]

In short:

I purchased several homes (7) from 2003-2006 as rental homes all in my name. I have lost close to 25k this year due to fixups, bad renters and renters losing there jobs and the 4 month process to evict. I have used up all my savings, during the past 4yrs totaling around $60k.

4 months ago I had enough and did not see a way out, so I put them all up for short sale and stopped paying.

First question - with your rather large income - CAN you afford to carry these properties? Are you able to keep the payments going and still make ends meet or would you keep losing ground?

Second question - how much would it take to make the properties profitable, if they can get profitable at all?

I ask because if you can, then you've stopped paying because you wanted to stop paying, not because you had to - and I have strong problems with that.

I have only had offers on three of them for around 20% of the balance due, and the bank has not made a decision yet. I am expecting an offer on 2 other ones soon. I don't know how long I have before they go into foreclosure. The total for all the mortgages is around $650k and they are probably worth $200k.

On My primary home I owe $200k which is worth around $219k (verified) My payment is around $2k on a 15yr loan with 12yrs to go. I use this for my business also, it would be almost impossible to find a rental that would allow me to run my business out of the home. I run the business at night (with the help of my wife and sons) after my day job.

The good news is, I have a day job making $100k, and another business which NETS $100k. There is around $300k in my 401k and I am building my savings back up now that I am not paying for the rentals.

My Realtor said it would make it much easier if I was in bankruptcy to negotiate with the banks, which makes sense. I have consulted with an BK attorney, and I would probably be able to get out of everything for around $50-60k most of which I would have to borrow from my 401k, this would allow me to purchase my business equipment back and other assets I have.

I have NO other Debt, no CC, no car loans, nothing... and I own all my business equipment.

I am starting Dave Ramseys Program at my local Church Jan 10th, but I am guessing my situation will be quite unique.

At this point I don't know if I should wait it out and see if the houses short sale (or go into foreclosure) and then see if I can negotiate a settlement if and when they come after me (I am guessing they will since I am in a recourse state and I have income) this could take years, OR do I go into bankruptcy now and just be done with it.

in a tough spot... James

You're making $200k a year. You owe maybe 3 times your income. You aren't bankrupt.

The bankruptcy attorney OF COURSE is going to advise you to go bankrupt. But what you really are is in a mess of your own making. Bankruptcy with a 200k income seems like a convenient way to skip out on your responsibilities rather than a way to save yourself when there's no other option.

Maybe I'm mistaken - but as you describe your situation thus far, that's the impression I'm getting.

And btw just so you know, I'm both a 6 figure income earner AND a rental property owner myself - so I'm not wholly unfamiliar with where you're coming from.

IF I were you, and I could make those payments and stay afloat, then I would do so. I wouldn't even try for a short sale - but I *WOULD* sell them if they're losing money, and pay back the difference after.

I absolutely would *NOT* borrow from the 401k. The only time you should touch THAT money is to AVOID bk or fc - NOT to enable it.

 

[forHISglory]

I agree with Greebo.

 

[digidog]

Greebo, thanks for your honest feedback.

First question - with your rather large income - CAN you afford to carry these properties? Are you able to keep the payments going and still make ends meet or would you keep losing ground?

- basically that is what I was doing since 2006, but this year with the tough Michigan economy rent has been going down, vacancies up and quality of tenants down, evictions take 4 months when they used to take 6 weeks. On a couple of months I brought in $4k on the rents, but other months they brought in -500 where I had to write a check to the management co (fix ups) plus pay the $6k mortgages. I had no more savings to dip into. So no I did not stop paying because I wanted to, there was just not enough left $ to do so, and not enough hours in the day to make more money.

Second question - how much would it take to make the properties profitable, if they can get profitable at all?

- Sure if I had an extra $400k I could pay down the rentals so they may be profitable, but I do not...

As an update, several of the houses have entered foreclosure, but bankruptcy is off the table for now, and I am going to see if I can work something out with the banks, possibly do a deed in lieu plus cash or a short sales plus some cash or promissory note.

 

[Greebo]

If there's no way to carry the payments, then in order of best to worst, your options are short sale, foreclosure and bankruptcy. All will hurt your credit but as you know, that's shot anyway by now - but short sales hurt the least.

Best of luck!

 

[cottageliving]

are you able to make payments on the rentals that have NOT entered foreclosure? while they may not be profitable to you right now, you may be able to keep them current while working on a short sale. Short sales do not require that a property go into foreclosure first. Your income should easily cover the remaining debts you had entered into.

Good luck - you can weather this storm. You need to look at your remaining rental properties as long term investments not short term money-makers at this point.