Hi Everyone. I'm new here.
Unexpected landlord with under water property and negative cash flow. Cant refi. It will be short if I sell and negatively impact my credit (and owe taxes since its a rental). I'm bleeding cash each month and in debt due to this and being unemployed for a short spell a year ago.
I own my primary residence with about $40k equity, but my DTI ratio wont allow me to pull the cash out.
My DTI ratio is high due to the negative cash flow and mortgage on primary residence, not the unsecured debt.
Fico is about 750 and I have a job near six figures.
I recently came into $160k and want to invest in rentals.
You may be thinking 'This guy is nuts. He has no business buying another property in his situation'.
You might tell me to pay off the unsecured debt. I could, but it wont improve my DTI to enable a refi.
Also, once I pay off the unsecured debt, that money is gone forever. I'd rather use passive income to pay off the unsecured debt.
My wife wont let me sell our primary house either.
What to do?
Buy rentals all cash?
Find a partner with good income/DTI to overcome my DTI?
I'm looking for input.
You could wholesale or flip and then buy one property for cash when you generate enough profit do it again and again.
You could also partner on a value add property using private money or hard money. Those lenders won't be as hard on you as the regular ones for long term rental hold.
Maybe buy the time you go to refi a big value add apartment complex the market will have recovered some and you can dump the other property.
Hi Joel. Thank you for your input. I appreciate it.
The hard money lenders will let me flip. But, they want to see a partner for rentals.
I'm torn between using my own cash reserves to buy some rentals or flipping and then paying cash (slower).
Whaq ftt about the rental you have? Beds/baths, sq ft, rent, location, etc.
What potential does it have, in other words, can you bring up the rents with a rehab or chane of use? I wouldn't just write it off and say nothing can be done with it, unless it really is dead.
Are you familiar with transactional funding? You might pull 8k a month on the money each month if you can keep the money in play.
Maybe if the renter is willing, you could do a rent to own and unload the property in a couple years.
Bill & Prashant
Thank you for the suggestions.
The property is underwater. If I did a rent to own, I doubt the renter would agree to a higher price than what it would sale for today. Sales prices are coming back. In 2-3 years I should be able to sell it and recoup my down + fees & neg cash-flow.
I looked into seller finance on the rental. Since it has an existing mortgage I was told I would be committing mortgage fraud.
I am able to qualify for a refi @ 5yrs that would allow the property to cash-flow. However the cross collateralization between what it appraises at and what it actually appraises at is not worth the loss of the property, what I've incurred in negative cash-flow and down payment plus fees in 5yrs.
Oh, and the hit to my credit.
Tranactional funding? Are these short term loans to flippers?
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