I am not sure if this is the right forum but I am hoping someone can help.
A friend of mine is stuck. He owns a two family property that he bought as a house hack back before the crash. He has since moved out and rents both units but he is both upside down on the value, and market rents in the area aren't enough to cover the mortgage so he pays the difference. He doesn't want to foreclose and ruin his credit, and he can't refinance. My question is, has this happened to anyone else? And is there any reasonable and safe way to fix the situation? He makes a reasonable salary so he never qualifies for any of the govt programs...
Any suggestions would be greatly appreciated.
He can either do a short sale or just ride it out.
thanks James. Wouldn't a short sale damage his credit?
@David C. Only a few options in this scenario:
* If the rate is high, he can look into a refi. If his loan is owned by Fannie/Freddie he can do a rate-term refi (even if he is underwater) and not have to cash in. Otherwise he will have to put cash to do the refi. This might make the financials better.
* Short sale - yes this will affect his credit.
* Ride it out
thank you Upen
Not sure the laws in your state, but he could look to sell it owner finance and do a wrap over his existing mortgage.
If he sold it to an investor that just can't get a loan but has great credit he can rent it out as an investor. If he did that which I did quite a few that i had in this same scenario the odds of needing to take the property back go down exponentially because you are not dealing with a tenant buyer but an investor that has money and credit but the bank just wont loan him
Is there any possibility of raising rents? Maybe with certain improvements/renovations he can increase the income enough to cover his monthly expenses.
If "ride it out" is more attractive than a short sale, could your friend move back into the home? Unless the friend's current personal housing costs are lower than one of the rents he is charging, that would at least slow down the bleeding. Might also make him eligible for HAMP or whichever program helps owner occupants refi even if value > loan balance (did a quick web search and HAMP does seem to apply to 2-units, not just sfh).
Different tack, is either of the current tenants interested in buying the place? That could be a way to raise the rent...check out the Rent To Own bp forum for ideas.