Negative cash flow - when/how to get out?

Question

Matt Mason · Answer

@Nicholas N. , not sure where your property is, but values have risen sharply in almost all of SoCal.  In my primary residence neighborhood, values are now about at the peak in 2006 -  2007.

Nicholas N. · Answer

@Ellis San Jose Thanks, that's exactly how I feel.  The difference is about $1k/mo.  A short sale on the credit record might make traditional borrowing difficult, but it seems that it might not be much worse than having a monthly obligation like that.

@Jon Holdman Thank you too.  I'll look closely into the answers to those questions and do some serious math.  At this point, the lender refuses to even talk about a short sale until the property's listed, so I'll think about whether I want to go that route, while also considering some of the other options you suggested.

@Rob K Values in southern CA appear to be rising slowly now, but if they ever get to where they were 8 years ago, it doesn't look like it will be very soon.

nmn

Rob K. · Answer

Are you able to wait it out? Home values in most markets seem to be going up. Is that not the case with your market?

Jon Holdman · Answer

You'll never know if the lender will agree to a short unless you try.  Would have been easier if you were living there,but if the move was forced you'll have some leverage.

Otherwise its a math problem.  What are your losses each month?  Does that account for major event like significant tenant damage, a special assessement by the HOA or a lengthy eviction?  What would your losses be to sell?  Can you come up with the cash?  Might the lender let you give them a note for some or all of the shortage?  Which is more tolerable for you?  Do you have income and assets?  If this is a "strategic default", that is, you could pay but choose not to, lender may be less willing to go along with anything that results in less than a full payoff.

Yes, a short sale will affect your ability to do deals in the future.  Or, more specifically, to borrow money.

Ellis San Jose · Answer

stop the bleeding ASAP negotiate a short sale.

What are the gross rents vs your payment in the area?