All Forum Posts by: Steve Borgman

The ever increasing tax costs are just one small problem. Read in the Rental Property forum about the 50% rule and the TRUE expenses of rental properties. If your rent is just $200 over the PITI payment, you're almost certainly losing money every month. Well, not every month, because hopefully in most months you collect the rent and pay only taxes and insurance as expenses (debt service is not an expense)

The 50% rule says expenses will eat 50% of the rent. That includes taxes, insurance, maintenance, vacancy, legal fees, CPA fees, capital items like roofs and furnaces, tenant damage over security deposits, eviction expenses, utilities (at least when empty), etc. Again, read in the Rental Property forum.

If you're just above water in the good months, you're really going to be hurting when one of those bad events inevitably hits. Now, if you mean your PITI payment is $300 and the rent is $500, you're not too far off. OTOH, I'd guess (have to guess, since you still haven't given us a look at the real picture), your PITI is more like $800 and your rent is $1000. If $600 of that is P&I, then you're actually in the hole only about $100 a month, and ahead $200 a month in the good months. Save the $200 and add in another $100 out of your pocket each month until you have reserves of about $3000 and hang on.

OTOH, if you really mean the rent is $2000 and PITI is $1800, you're really hurting. If that's $1400 P&I and $400 in taxes and insurance, you're in the hole $400 a month. If you can sell now at a $10,000 loss or hold on with a $4800 annual loss, selling now is equivalent to a little over two years of holding on. If you hold on for two years and then take the $10K loss (highly likely, IMHO, knowing nothing more about your market than its in the US.), then you've doubled your pain.

Josh, I think your confirming that selling right now may be the best scenario. In the future, I'll definitely keep the 50/50 rule in mind :(

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I want to thank every single one of you for your well thought out and caring advice. The nice thing is that the rent does cover a couple hundred above the cost of of the mortgage payment. However, the difficulty lies in the ever increasing tax costs, which are what is causing the bleeding. We are going to appeal the taxes, possibly.

I also like the idea of comparing the loss of holding the property for 2-5 more years, versus selling now.

The challenge is finding a way to cover the costs of holding. The loan, unfortunately, is held against my own residence.

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John, thank you for the untarnished facts. Yes, there is some equity, but I was thinking that perhaps we could assume future equity? But, given the amount of great deals that are out there, it would take a very benevolent investor to go in on that type of partnerships.

Another thought: looking for commercial loans to cover holding expenses? Or converting the current home equity loan into a commercial loan?

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I'm a first time owner of an investment property. Challenge is that I did not figure in a senior tax exemption as well as homeowner exemption, which made the taxes look deceptively lower.

As it is, with the downturn in real estate in the Chicago area (we've had the property for about two years), in order to get tenants, we've had to go lower on the price, in order to fill the vacancy. We've been fortunate to have good tenants. However, it's becoming cost-prohibitive to hold the property. I've dipped way into savings, and even gone into some debt to cover the cost of taxes on the property.

Am wondering if there are creative options besides selling the place at a loss.

What I've already considered: rent to own (making for a higher rental price)

Using a self directed IRA to somehow tap into extra funds. (legally)

Is hard money a worthwile option?

Would it be realistic to approach a seasoned investor who has a lot of extra funds and ask him to invest some money (which would cover holding costs until the future sale of the property), and count him/her in as a part-owner?

Right now, we are considering the following: rent w/ option to own, rent (letting the renter we will need to be showing the house, and that this will be a month by month rental situation, until the house is sold), sell immediately (but the average wait time till sale seems to be 3-6 months)

If there's anything I have not thought of, please let me know! I am in problem solving mode....I don't want to amputate my arm (sell the home at a huge loss) if I can put on a few tourniquets to make it only a small bleed :(

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All Forum Posts by: Steve Borgman

Steve Borgman has started 1 posts and replied 4 times.

Post: Creative Solutions for Negative Cash Flow Situation

Post: Creative Solutions for Negative Cash Flow Situation

Post: Creative Solutions for Negative Cash Flow Situation

Post: Creative Solutions for Negative Cash Flow Situation