How to fund massive unexpected repair

New to Real Estate · WA · Member since 2021 · 17 posts · 5 votes

I had a sewer line collapse at my rental. The city came out and said it isn't city responsibility. Insurance came out and said it isn't covered. Plumbing company doesn't have a payment plan. All in they want $20k that I don't have. I've had this rental for 10 years and never had a massive repair like this. Do I have any other options that maybe I don't know about?

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Matthew Paul

Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes

Get other estimates . I have dug many a sewer line . Unless its a 15 ft or deeper dig or road repairs , thats a high price ( based on Maryland ) . Back 20 years ago doing new construction we could knock out 3 connections a day . At that number we could have retired after 2 years

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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
@Corbin Hibler
You can check with the city to see if they have programs where it gets rolled into the tax bill. Sometimes they do.
Do you have equity in the property ? Possibly take out an equity loan or get a private lender - but if you go that route you probably would need to sell to pay them back (or refinance the loan).
l.
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Corbin H.
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New to Real Estate · WA · Member since 2021 · 17 posts · 5 votes
2y
Greatly appreciate the response @Chris Seveney.

I would possibly be able to roll the repairs into the tax bill even if the city says they aren't at fault?
I have a little over $200k in equity on the property but can't seem to find a lender that is willing to lend on an investment property. Do you know where I may be able to find a potential lender?
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James Mc Ree
Rental Property Investor · Malvern, PA · Member since 2016 · 1k+ posts · 935 votes
2y
It's expensive, but this might be the time to tap those "get cash fast" offers from your credit cards. You might be able to get out of the immediate jam while you setup longer term financing to pay off the credit card bill.
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Corbin H.
OP
New to Real Estate · WA · Member since 2021 · 17 posts · 5 votes
2y
I appreciate it @James Mc Ree, I'm trying to make the most informed decision and stack options. I appreciate your advice.
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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
@Corbin Hibler
Some jurisdictions will allow repairs to be rolled in when its main sewer repairs - unlikely but you can ask.
Have you considered refinancing the first to get $ out - probably not ideal but an option
Last option is to sell the property.
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Matthew Paul
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
2y
Get other estimates . I have dug many a sewer line . Unless its a 15 ft or deeper dig or road repairs , thats a high price ( based on Maryland ) . Back 20 years ago doing new construction we could knock out 3 connections a day . At that number we could have retired after 2 years
6 Reply
Corbin H.
OP
New to Real Estate · WA · Member since 2021 · 17 posts · 5 votes
2y
@Chris Seveney - I'm cashflowing with the property at 3%. I would be -$600 a month if I refi to 7.7%. My tenants just renewed their year lease. I wouldn't be able to sell until their lease is up, correct?
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Corbin H.
OP
New to Real Estate · WA · Member since 2021 · 17 posts · 5 votes
2y
@Matthew Paul, I'm on hold for the weekend until I can get other quotes. Supposedly this break happens up to the connection to the city. It does require excavating an alley 8ft deep, hydrojet line, backfill and bed pipe, compaction test, etc. I've already paid $4k for their initial work. This $20k is in addition to them already digging up the line.
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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
2y
Get a second (and third) quote. Do you have a line of credit or one you can get set up? Even if you can't get it for your rental, get it for your primary residence and then pay it back as quickly as possible.
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Corbin H.
OP
New to Real Estate · WA · Member since 2021 · 17 posts · 5 votes
2y
@Theresa Harris - Thank you for your feedback. That seems to be our biggest hurdle at the moment. We just can't seem to find any lenders willing to do HELOCs or equity loans for the rental or our primary. I don't know what other resources are out there.
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Scott Mac
Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
2y
Ask your grandpa for the money.
Ask your father for the money.
Ask your sister for the money.
Make sure you have a schedule to pay it back and then make sure it gets paid back on time.
Good Luck!
2 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
2y
Quote from @Corbin H.:

I had a sewer line collapse at my rental. The city came out and said it isn't city responsibility. Insurance came out and said it isn't covered. Plumbing company doesn't have a payment plan. All in they want $20k that I don't have. I've had this rental for 10 years and never had a massive repair like this. Do I have any other options that maybe I don't know about?

You can also sell and inform this condition to the buyer that they have to fix the sewer. Have you try other plumber ? I checked for home for seller with condition to repair sewer , the contract sometimes they ask in the range of 6k-15k only. I don't know why yours are expensive.
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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
2y
1. I'm surprised you've owned this home for ten years and only have $200,000 in equity. Median price in Tacoma was around $150,000 in 2014. Today it's closer to $500,000 and you've paid on the mortgage for ten years.
2. I can't believe your cash flow is only 3% after 10 years of ownership in a market that has gone up every year. If you got a mortgage for $200,000 in 2015, your monthly payment is probably under $1000. An average 3bed/2bath should be renting for $3,000 or more today. That should leave you with $1,500 a month or more for cash flow.
3. Try other plumbers. I have recently replaced sewer lines for under $10,000 despite being in a small market.
4. Borrow the money from a relative and pay them interest. Get a short-term loan. Sell a bunch of stuff you don't need. Find a partner that will invest that amount for a payout when you sell.

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Dave KushPro Member
Frankfort, IL · Member since 2022 · 204 posts · 132 votes
2y
Definitely get a second opinion. I had the exact same issue, literally about a year ago, but on my personal residence. The second plumber came out and cleared the line and we never had a problem since. First company was just trying to make the cash.
if it definitely needs to be done, why not a heloc? If the other options fail, that allows you to keep the 3% and only pay the higher rate on the repair in the meantime.
1 Reply
Dave KushPro Member
Frankfort, IL · Member since 2022 · 204 posts · 132 votes
2y
Also, check out lightstream, similar. They close loans fast.
2 Reply
Victor Hong
Member since 2024 · 13 posts · 6 votes
2y
A good idea is to accrue a capital investment reserve from operating cashflows, for such events.
2 Reply
Victor Hong
Member since 2024 · 13 posts · 6 votes
2y
Quote from @Corbin H.:

Greatly appreciate the response @Chris Seveney.

I would possibly be able to roll the repairs into the tax bill even if the city says they aren't at fault?
I have a little over $200k in equity on the property but can't seem to find a lender that is willing to lend on an investment property. Do you know where I may be able to find a potential lender?
Can you default on an outstanding loan, and give the property to the lender? If so, the lender might then sell it back to you at a discount.
1 Reply
Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
2y
Do you trust this plumber? Unscrupulous plumbers often claim collapse when there is none. Always get 2nd opinion on collapsed drain pipe. In general I get a 2nd quote for over $3k and 3 quotes minimum for over $8k.

I assume at your equity, you have previously extracted money from this property Curious what you did with this money, but do not answer as none of my business. Hopefully it was something that is generating return.

Hopefully your 3% cash flow includes reserves for maintenance/cap ex. The fact that you do not have the reserves to handle this after 10 years is a clear indicator that your allocation to maintenance/cap ex is insufficient. You did not just buy this property. Plumbing, roofs, HVAC, hardscape are expensive. The smaller items add up. Every item has a lifespan and collecting maintenance/replacement costs should start as soon as an item is put into service.

There are lenders that will provide HELOC on rental properties but they are not extremely easy to find. If you want an outdated list, PM me. Finding a heloc on your primary should be very easy if you have the equity.
Other options private lender (family/friends), personal loan, cash advance on credit cards, place on credit card, sell something.
Good luck
1 Reply
Ryan YorkPro Member
Investor · Dothan, AL · Member since 2014 · 3 posts · 7 votes
2y
Ask your bank specifically for a "line of credit" against the house(s) you have. Don't use the phrase HELOC, as most banks won't do them on investments. You may end up with a 75%ish LTV LoC you can use to float this fix until cash flow can pay it down. This is far better than refinancing if you can pull it off. It will act as as 2nd against your primary note.
2 Reply
Victor Hong
Member since 2024 · 13 posts · 6 votes
2y
If the apartment toilets continue to flush OK, the sewer line may actually be clear and fine.
1 Reply
Account Closed
Real Estate Agent · Chattanooga, TN · Member since 2021 · 29 posts · 22 votes
2y
@Corbin H.

Sounds rough... maybe these tips will be useful!

Nonprofit Assistance

Research nonprofit organizations that offer financial assistance or grants for necessary home repairs. Local community organizations might also provide emergency funds.

Government Programs

Look into local government programs or grants designed to help property owners with essential infrastructure repairs. Some municipalities offer funds for emergency repairs.

Home Repair Loan Programs

Look into specific loans for home repairs offered by various lenders. These might have better terms than a general personal loan.

Negotiate with the Plumbing Company

Even if the plumbing company doesn’t initially offer a payment plan, try negotiating for a discount for cash payment or ask if they can provide any flexibility.

Good luck!
2 Reply
Victor Hong
Member since 2024 · 13 posts · 6 votes
2y
Borrow from 401(k).
1 Reply
Victor Hong
Member since 2024 · 13 posts · 6 votes
2y
Quote from @Victor Hong:

Quote from @Corbin H.:

Greatly appreciate the response @Chris Seveney.

I would possibly be able to roll the repairs into the tax bill even if the city says they aren't at fault?
I have a little over $200k in equity on the property but can't seem to find a lender that is willing to lend on an investment property. Do you know where I may be able to find a potential lender?
Can you default on an outstanding loan, and give the property to the lender? If so, the lender might then sell it back to you at a discount.
Better yet, if no other easy choice, force your lender to the negotiating table. Demand that the lender give a loan for the sewer repair, just to avoid a foreclosure and certainly high loss on the mortgage loan.
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Matthew Paul
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
2y
Quote from @Corbin H.:

@Matthew Paul, I'm on hold for the weekend until I can get other quotes. Supposedly this break happens up to the connection to the city. It does require excavating an alley 8ft deep, hydrojet line, backfill and bed pipe, compaction test, etc. I've already paid $4k for their initial work. This $20k is in addition to them already digging up the line.

No reason to hydro jet if they are replacing , backfill and bed the pipe is not a line iten , its putting sand around the pipe 6 inches and filling in the trench . 8 ft isnt that deep , still need a trehch box , but nothing out of the ordinary .
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Andrew SyriosPro Member
Moderator
Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
2y
$20,000 sounds like an awful lot for a sewer line replacement, especially if all you need to do is a spot repair. First and foremost I would start by getting some more bids.
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