Upside Down on Rental
I had someone reach out to me this morning with a question regarding their rental property. Currently, there is negative cash flow by a few hundred each month if you also include maintenance and vacancies into the list below. This is a distant property so they are paying a property manager $50/mo. Bottom line is that they obtained their mortgage at the height of the housing boom for $120K and now it is only worth $40K. They currently owe $83K. If they sell they will owe taxes on the difference. Is there a solution that makes sense either way? If they short sale they will be financially penalized and it will hurt their credit. Please advise. Thank you, Lisa
Rent: 1100/mo
Manager: 50/mo
Mortgage: 405/mo
Taxes: 383/mo
HOA: 165/mo
Trash: 25/mo
Water/Sewer: 150-200/mo