2 Killeen 4-Plexes Underwater $100,000 w/ Balloon due

[Brian Adams]

Hello all -

I have a seller with a problem looking for a solution.

She owns two fouplexes in Killeen, TX (Fort Hood, TX) purchased in 2007 with two mortgages on each and has a balloon payment due in 2016 on the second mortgages. She owes approximately $429,500 on both, and I (an agent in the area) estimate the current market value of both at $320,000 ($185,000 and $135,000).

Gross rents are $4100 ($2500 and $1600).

She can't refinance because the fourplexes wouldn't appraise.

She can't sell because it would be $100,000+ out of pocket.

She can't continue renting, sub-2 or wrap because of the balloon payment.

Trying to avoid short selling and anything else that would damage credit.

I have no more ideas, which is why I'm here! Thanks everyone!

[Jon Holdman]

There's no miracle here.  She's made an investment that's $100K in the hole.   Had she bought $430K of stock that is now worth $330K, she could sell at a loss.  But with leveraged real estate you buy first and pay later.  That's the danger of leverage.  She's now stuck with a $100K loss that, from what you say, she can't absorb.  And she want's to escape that loss without pain.  Its not going to happen.  If she can't sacrifice the $100K in cash and can't hold onto these properties (which would allow her to sacrifice it a little at a time) then she's going to sacrifice her credit.  No other choice.

Does she have other assets she could sell or borrow against to generate cash to do a cash-in refi?  I have a mini-storage deal that ballooned a couple of years ago and we had to kick in a pile of cash to do the refi.

A short sale will hurt, but it will hurt less than foreclosures.  If there's no other choice, she should pursue that.