Advice requested on what to do with troublesome property (all numbers included)
Hello All, I had posted this a while ago, but now I wanted to put all of the numbers out there and see if I could generate any creative solutions to my real estate problem. I'm not trying to sell the property on this post, so hopefully it doesn't get flagged for that reason, I just wanted to be completely transparent about the whole situation so anyone willing to offer some advice would know what I'm dealing with. Sorry it's so long, but I wanted to be thorough. Thanks in advance!
So here's the deal with my current real estate conundrum. I have a townhouse in Western Massachusetts (Lanesboro), that was originally my primary residence but when I left the area in 2008 I couldn't sell it so I began renting it out. It's a unique property for the area with lake access but also on a busy road. When I purchased the town house in 2006, I got what I thought was a good deal at $169,500 at 6.5% interest only for 15 years with a balloon mortgage after that and a PMI of $66. The house appraised fro $201,000 and I thought I'd stay in in for a few years, and then sell it. My mentality was, the house will appreciate faster in those 3-5 years than I could pay down the mortgage with a P&I payment, and I'll cash out at between $180k-$190k and make a few bucks... WRONG!
Fast forward to today, I still have a $153,000 mortgage on the town house (Interest only), it's valued at around $163,000 (according to Zillow and other resources I've found) but there's a similar unit on sale for $169,000 in the complex that hasn't sold. I've had it rented since 2009 at $1,200 a month (minus a 10% manager fee), which covers the mortgage payment of $1,080 but doesn't cover the $268 association fee. The tenant pays for electricity. I've depreciated it each year straight line so the book value is down in $140's.
My tenant is moving out the end of June and I'm going to try and sell. But the market is still pretty soft in the area, and I need around $165,000 in order to break even (5% commissions, closing and lawyer fees, plus paying off the 1st mortgage).
I've tried and failed to refinance the property on multiple occasions, even through the HARP 2 program, but everyone keeps coming back with, "you don't have a 75/25 LTV ratio, so we won't touch it". I got one bank to agree to a refinance, that wouldn't save me any money (payments would be the same) but I would pay down some principle. But it would cost $4,000-$5,000 in closing costs and still have a PMI payment. But that fell through because there's an issue with the way the original title was keyed into some system on the Fanny Mae end, and they couldn't find the exact address that's written on the title in the system and Fanny won't change it to match the title, therefore, I can't get an approval for the refinance. It's a matter of the property being the 5th unit in the 3rd building of the complex and being written on the title as 305, but that not showing up in the Fanny Mae system.
Anyway, I've given up trying to refinance it, my tenant is leaving and I'm not sure I could re-rent it at the current rate, and basically the best case scenario is I sell it a loss (between $8,000 -$20,000 is my best estimate). The HOA won't allow weekly rentals or Air BnB style stuff which is a shame because I could rent the heck out of it for the summer and winter (it's near both lakes, mountains, Tanglewood, and a ski resort). Plus I'd have to pay the depreciation recovery tax as well (although I'm not too worried about that). I don't want to short sell it because that'll hurt my credit and ultimately other real estate endeavors including a new house I'd like to buy in the near future.
So there you have it... That's pretty much the story. I'm painting and cleaning it beginning of July and plan on putting it on the market for $159,000 plus a bunch of incentives like paying the rest of the year's association dues to try and entice someone to come in and take it off my hands. If I can get anywhere in the $150's I'm still coming to the table with about $10 grand, but that's doable for me and totally worth it. Anything lower than that... well I'd like to avoid if at all possible, but I don't think I will be able to. I'm also moving to Vermont, so I'll be about 2 hours away from the property, so marketing and selling myself doesn't really make much sense.
That's everything! Any ideas would certainly be helpful!