Upside Down Since 2008

[Michael Curran]

Just wanted to see what some people who have been in the business for a while have to say about my situation.  My brother and I brought a house together in 2007.  I feel like we finished signing on the last dotted line and the market fell apart. Since, we have both married and purchased our own personal residence.  It is rented out but we both have to come out of pocket about 450.00 a month.  As long as it is rented we have just rolled with the punch's but we have thrown around the ideas of short sailing it but both of us have good credit and don't want to jeopardize that or take the chance of having leans put on our house.  We know there probably not a lot of options but just figured I would put it out there and see what kind of advice is out there.

[Cody Campbell]

Im fairly new, but the situation you discussed seems the property does not cash flow, not necessarily that your upside-down in the property. Lots of markets have turned since 2008. What do you owe on the property? What are the comps in your area? Whats that size of the house? What do a house  of that size rent for in your area? Lots of unknowns. Give us a little more info so we can help you figure this thing out. @Michael Curran

[Michael Curran]

We owe about 300,000 on it comps are around 225,000.  Its a single family 2 bedroom ranch 1000 sqft on less then a quarter acre of property.  We are getting 2000 a month in rent tenants cover utilities except for garbage, water, lawn care and snow removal.  Comps in the area are actually renting for a little less.  The mortgage is 2900 and we also refinanced under the HARP act to lower the interest rates a bit. 

[Russell Brazil]

That is a really tough call. That far under water and it is going to take a long time to get back to even. If you do not need to borrow for the next 2-3 years, I might seriously consider a short sale in your situation, and I almost never council that. 

[Thomas S.]

Chances are you are farther behind than $900/month, with insurance and other repair/upkeep expenses over the long term you will be in the range of being out of pocket a total of maybe $1400 - $1500 per month. If you figure it will take another 10 years to break even, which is probably wish full thinking, it will cost you another $168,000 -$180,000 in total. If you change tenants your rent may drop and major repairs could be significant.

All things considered you would be farther ahead and each take a $40,000 - $50,000 loss now than wait for the financial pressures to build slowly.

[Michael Curran]

Thanks everyone who took the time to send some advice my way.  I don't think I am going to be rushing into a short sale with out some careful consideration.  Its not putting me in the poor house and I'm still stashing some money away to purchase and investment property and don't want a damaed crdit score when that time comes.

[Michael Shao]

@Michael Curran Hi Michael, why would a short sale damage your credit score, as long as you pay off the loan ? Thanks, I am a newbie, just get started in real estate investing. 

[Account Closed]

it sounds like a Short sale, i am sorry to say but that will not affect your credit score, or simply wait and hope that market becomes hot.

[Maria Keating]

How can your mortgage amount be $2900 on a $300,000 loan? I assume there is property tax and HOA and insurance included. Still seems incredibly high. What interest rate do you have?

[Michael Curran]

So your saying short sales don't hurt your credit score?

The mortgage payment seems so high because it includes taxes and insurance.

Interest rate is 4%.

[Jonathan Towell]

Short sale won't hurt your credit score. You'd just sell it for $225k and pay the difference in the note. In fact, I wouldn't be surprised if removing that debt would positively impact your credit.

[Carolyn Morales]

I would like to know how this ends. Are there any value add opportunities at all on or within the property?