The House On Dewey

[Leon Henry]

I moved to Pittsfield Ma back in 2007. Upon moving to the area I decided to purchase a duplex with the thought of living for free. I landed a great job in the Berkshires and figured it would be a good idea to save money. Not know the area or much about real estate at 24yrs old.. I purchase this property being my first home purchase in what is know as a bad area in town which I was not aware of coming from NYC. 

I realized that renting the property to good tenants was a major struggle ( very low income if any income at all neighborhood). I went through many bad tenants and nearly went broke due to the destructive tenants, late or none paying tenants, criminal activity and drama. Not have enough capital saved and needing to always get a new tenant quickly helped things get worse for me. 

I was able to overcome this issues after many years of pushing through to the point where I have been able to get steady tenants and maintain the property making on time payment for the past 3 years. Even through now I am getting a little cash flow from the property and things have been going well.. its still not a property I want to hold onto. Since then I have moved on and purchase more properties but I still have the headache of the house on Dewey.

I would like to get rid of the home but I have found that I cant get what I owe on the property.. so I am stuck with the house on Dewey.. by at least 20k.. 

What should I do??

put the 20k down and cut my losses...

invest to upgrade property and try to break even if I get it sold...( not likely going to happen)

walk away and suffer the consequences on my credit.. ( I do have a good amount of capital to continue investing with cash) 

continue pushing forward with the headache to pay down the principle... 

Just looking for suggestions.. 

This was definitely a great learning experience but I think I have learned enough from it and would like to break ties with the house on Dewey as soon as possible...

thanks for the insight.. I could make a horror movie out of this experience..

[Ann Bellamy]

Leon, welcome to Bigger Pockets.  Interesting first post.  Thanks for sharing your situation.

In my mind, there are two basic concepts in play here:

Sunk Costs

Integrity

Sunk Costs:  What happened before and the pain you went through to stabilize the building are part of who you are, but don't play into the decision going forward.  They are past and done with and won't change or affect the future.   There is nothing you can do to change what happened, so the decision should be made based solely on pluses and minuses from this point forward.  

Integrity:  While it is popular lately to strategically default and walk away if it doesn't make financial sense to pay the mortgage or the shortfall, you made a commitment to pay.  It's one thing to default when circumstances are beyond your control:  Health issues, lost job, etc.  That's why people who are foreclosed on or declare bankruptcy get a second chance, so they can recover from bad decisions or bad circumstances.  

But when you have the funds and have no compelling reason not to pay other than convenience, my feeling is you should own up to your obligations and bite the bullet.  Where sunk costs come into this is twofold:  Going forward, you'll have both your good credit and your self esteem.  You'll be a little poorer financially but the internal damage from taking the low road can be much more expensive.

Good luck to you, hope this isn't too preachy and is useful.