What to do with a serious underwater property...

[Sean B.]

Trying to find a creative solution for my rental investment. I bought the property at the height of the market to fix& flip and wound up becoming a landlord. The property is now about $120k underwater on a $260k loan, so I am thinking about a short sale. My current long term renters are amazing and have never been late but the $1500 (max for the area)a month I get in rental does not make sense with the $2160 mortgage. Ultimately I would love to be able to sell the home short to an investor and repurchase (if possible) to keep the property or provide the renters with an option...Any suggestions would be greatly appreciated.

[John Evan Miller]

Wow, a $2,160 mortgage payment on a $260K loan. If you have a 30 year term that would put your interest rate at an astronomical rate of 9.35%. Ouch. If you have it amortized for 15 years, you are still paying an interest rate of 5.75%.

I believe that you could get out of the situation by refinancing. Assuming that you have less than 4 units, if you finance for 30 years at 3.5% you would be looking at a payment of $1,168. I would approach your bank and see what they can do for you, especially if you have been able to make your payments. That may set you back on your feet.