Waterbury, VT · Member since 2014 · 8 posts · 1 vote
Hello all. I've got a rental property that has caused me some headaches over the years and I'd like to brainstorm some ways to change the situation I'm in. To make a long story short here are the details: I purchased an attached 2 story townhouse in Western Massachusetts where I was working and living in 2006. At the time I got it for a deal about $30k under what it appraised for. Then I moved out of the area in 2008 right before the market crashed. Crash happens and I'm lucky enough to rent it out in 2009 (but rent doesn't cover costs) and have been renting it out at a loss ever since. Rent is set as high as the market will take (if I raise it more my tenant will walk) and I've talked with several banks about refinancing, but that's a no go since they only will look at a refi of 75%. The property is probably at roughly what I paid for it back in 2006 and still rented, I don't know exactly how much because there are no comps in the area that have really sold. I'm negatively geared both before and after taxes. I've got a horrible interest rate and mortgage that no one will go near, and I don't have $40k to put into the house to get me down enough to refinance it. It's classified as an investment property now, so even though it was eligible for HARP refinance, no bank will touch it since it's an "investment property" now.There's a similar unit on the market that isn't selling, so I'm looking for all options that don't include selling (obviously if I could I would). Thoughts anyone?
San Antonio, TX · Member since 2009 · 3k+ posts · 1k+ votes
12y
You may want to talk to a few real estate agents who specialize in this area and get some expert opinions. When selling, sometimes it's all about hiring the right person for the job. Through experience, I've learned this lesson. Hope this helps, good luck!
There's the "head-in-the-sand" solution to just look the other way and ignore it for another year in the hopes it will turn itself around. But I think you've been waiting a while already.
One way to do it, could be to interview realtors in your market. Tell them about your property, tell them you're thinking of selling but you're not sure. Resist the urge to list the property with a realtor and put it on MLS. Just ask realtors to keep your place in mind as a pocket listing. The reason I say go with a pocket listing is your saying that there is another house on the market that is similar that isn't selling. Once you put a property on MLS and the house doesn't sell quickly, it looks like the house that won't sell and people start thinking there's something wrong with it. Or they don't want to buy it because no one else wants to (market herd mentality). Putting it out there as a pocket listing may mean a sale takes a long time (but would it have been shorter if it was on MLS?) but you may generate more interest. The moment you seem desperate to sell, the market can turn on you. If you appear nonchalant, the market suddenly becomes more interested.
Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
12y
I've done harp refinances up to 150% loan to value if current market, in fact my last one was about 135%. (Underwater.
If the loan was done without mortgage insurance initially and was originated prior to may 30th 2009 it might have a chance to refi.
Waterbury, VT · Member since 2014 · 8 posts · 1 vote
12y
Wow thanks for the replies everyone! @Albert Bui I did actually have to get mortgage insurance on the property initially, what financial institutions do you use to refinance because everyone I've contacted would only finance up to 75% in the property before they'll even consider it (that's both large and small banks).
@Account Closed That's a really interesting idea about the pocket listing. I do have a realtor that I work with but perhaps I can interview others to see if they have other suggestions or ideas.
Not that I have a lot of equity in the house, but would you think I could do some form of owner financing if I found an interested party, or lease to own kind of deal? Anyone have any experience in that area?
Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
12y
if your loan is harp qualified you can go higher the 75% is probably because you're trying to cash out because harp is only for regular rate term refinances.
If it's classified as a cash out you can only go up to 75% on a non owner single unit.
Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
12y
also a lot of harp loans could not be done when you had mi initially but some lenders can do them it's because legal risks on part of the MI company. What is your current loan balance and the value of comparable sold properties?
Property Manager · Atlanta, GA · Member since 2014 · 7 posts · 0 votes
12y
Great post and topic question, Chris.
What does the area have to offer? I was thinking is it possible to market to a renter that may have a real need to live in the area for work or any other project. For example sometimes, I encounter corporate renters that need an all-inclusive (utilities, furniture, etc.) set-up. Is this a possibility for the area? Maybe you could market it, that way or even make it a furnished vacation rental.
Investor/Accountant/Builder · Meno, OK · Member since 2014 · 1k+ posts · 918 votes
12y
define a horrible interest rate? What is the rate? How long a mortgage?
How much negative cash flow do you have?
Keep plodding ahead. The renter is paying for your property. You may be paying some as well, but the tenant pays most. Have the idea that you are investing your share in a long term asset. You are not really losing anything. You are investing.
Waterbury, VT · Member since 2014 · 8 posts · 1 vote
11y
Resurrecting this post! Sorry it's been such a long time since I posted here. Here's the details on the investment property. Sorry it's so long!!! Thanks to @Albert Bui@Wendy Noble for previously posting here!
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 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 **** out of it for the summer and winter (it's near both lakes, 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.
That's everything! Any ideas would certainly be helpful!