BiggerPockets

Now its a year later & I have DEppreciation on 2 of them & negative cash flow on ALL of them although all 3 are rented!

I made the typical newbie mistakes of thinking prices would continue to rise & not checking what rents were 4 the area :crying: .
I bought what appeared 2 B distressed situations (a divorce, an illness & a job loss) so they all were under the market @ the time.
Put no money down but now am out of money for supplementation (about 54k).

All are newer properties (2001+) in a great neighborhood & not fixers. Monthly runs 3K each. Rents are $1,500, $1550 & $1,600.

Any solutions? Should I bail, ruin my credit etc. Should I get a job to continue to finance these monsters?

All help would be appreciated. Please let me know there is a way out. As a newbie of course, there was no exit strategy.

Please excuse the whining:violin:

Thank you

Ouch; I feel your pain REDreamer! Go with Ryan's advice.

Oh how I wish we could archive your post for all the (future) newbies who have all the answers and don't listen to us old guys.

all cash

I am actually dealing with this exact situation with someone else in my market. The investor has several nicer rentals but has been sucked dry by one of the bigger ones being vacant for an extended period of time. Now another one is vacant and the investor could make some money on selling it and stablize out but would prefer to keep it because its a good rental in a strong area.

In my opinion its better for both of you to stabilize yourself. Your on the edge and the choices you make today will influence the situation you will find yourself in tomorrow. Your options will only diminish as it gets tighter. Yeah maybe you could hold on and make it through if everything goes right, but what if everything doesn't go right.

It absolutely CAN get worse, and YES people go bankrupt in this business. Normally they don't actually file bankruptcy. They lose all their houses in foreclosure because they can't sell them for even what they have in them or they're just too stubborn to sell them. Then they spend the next 5 years repairing their credit.

There IS a time to cut your losses and move on.

Other deals will come, and you can be confident knowing that you will take action when they do come. If you will just survive through the low times then when you get back on your feet you can focus on taking the right actions. I would recommend that right now you do what you need to do to SURVIVE with the least amount of damage to your credit.

On a side note, it doesn't even seem like the properties were that good of rentals anyway, so why hold on to them?

The first sure sign that they're NOT good rentals is the following:

Monthly expense-$3K
Monthly rental income-$1500-$1600.

While I really feel for REDreamer, there's a reason they call it " due diligence" ! The thrill of calling yourself a " Real Estate Investor" wears off quickly when your monthly LOSS exceeds the AVERAGE Americna income.

" Taking action" doesn't mean just jumping into the pool without checking to see how deep the water is. I can find deals all day long in my area that will LOSE $100-$250 month. And that is " cash on cash" . When you factor in the " others" ; lost rent-including on turnovers, repairs, fix up, replacement etc, it's easy to have that number jump by $300-$400 month.

NEVER, NEVER NEVER, count on appreciation. Consider any that you get to be a bonus.

Sorry REDreamer to use you as an example of what not to do. I've been in a somewhat similar situation in the past, just not as many zeros on my mistakes.

all cash

Use the Property Analysis Tool on the left side of the forum. Its a really great tool, and its free.

If you do it, make sure you do it legally. I've seen people get in trouble either because they violated coding regulations or failed to get the appropriate type of occupancy permit to rent out that way. (I'm sure the rules vary by locality).

You know Mike we really don't appreciate you nOObs around here spouting out good advice. You got to work into it so us old timers don't look so bad. :D

And of course, I'm just kidding. I would like to think that all of us are always open to the thoughts of a well intentioned person, especially when they are absolutely right. Noob or not.

That's one thing I really like about this forum is that its a safe place to step out there and say what's on your mind. Yes, there are times when we're wrong and we look stupid, but hey at least they don't know where you live.

LOL

Plus if they give you too hard of a time, I'll come help beat them off of you. :superman:

Thank you for all of your input.

An update:
One property I am now evicting a dead beat tenant out of!!!

He has no incoming coming in on his commission job in which he was previously making plenty of money.

What was his job? Writing mortgages!!

Now I am not even getting his $1,600

ReDreamer,

You made a HUGE mistake; paid too much for these properties; and have learned an expensive lesson. There are a million other newbies out there who have chosen to learn their lesson the hard way also. In fact, the vast majority of newbies pay retail for their rentals and subsequently fail in a short period of time. There is always a " greater fool" who will buy your property. Your job is to find that person.

Just today, I received a call from a newbie trying to sell me his rental. He obviously paid way too much for the property, twice what I would pay. The call was actually a little humorous as the landlord told me that he had a tenant in the property that would probably stay 10 years! RIGHT, I believe that!!!

I would suggest joining your local REIA and calling those " We Buy Houses" ads in the newspapers. Also, write down the numbers from the bandit signs you see. Bandit signs are a sure sign of a newbie. Be sure to say the word " motivated" when you talk to people. Many newbies have heard that they should look for " motivated sellers" but have absolutely no idea what that means. If you say " motivated" , they'll think you're one.

Work hard at selling the properties and you may be able to solve your problem. Then study, study, study before you buy anything else.

Good Luck,

Mike

Bandit signs are those signs you see tacked on phone poles that say " We Buy Houses" , etc. They are almost always put up by newbies.

Mike