In a pickle... Default on 5 properties, or hold out?

[Jeremy Henry]

Let's say you have 5 properties that - due to economic and job market conditions in the area - only command enough rent to barely cover mortgages, insurance, and taxes.   Nothing left over at all for maintenance, repairs, capital expenses, vacancies, etc.

Your personal budget is strapped.  You no longer have any extra cash flow to cover the next major incident for any of the properties.  The properties are already mortgaged up to the point where there is no equity available to cash-out with a refinance.

All 5 properties are currently rented, but you know it is only a matter of time before a tenant stops paying, or catches the kitchen on fire without renters insurance (that they let lapse), or any of a million other probable issues.

Is defaulting and continuing to collect rents until the banks foreclose a viable option?  Would destroying your credit destroy your life?  Or would freeing your cash be enough to counter the negative impact?

What do you do?  What can you do?

I guess the real question is:  At what point and to what extent is a strategic default (or multiple defaults) a viable option?

[Anthony Dooley]

Before I defaulted and went back on my word, I would downsize my car, pay off some personal debt to increase my cash flow, cut my lifestyle, sell stuff, etc. They are rented, so just save up the money for an emergency. Tenants without renter's insurance is not your problem. Insurance on the property is. I would get a second or third job before defaulting. That is just plain dishonorable.