First, please remember that a "negative cash flow" situation (where the income is insufficient to cover the expenses) is pretty common for investment property. In most cases, savvy investors anticipate a a period of time when an investment property will be "upside down" and then when it will begin to make money. Seldom do owners of rental properties immediately find themselves in positive cash flow territory.
Now, as to walking away, unless you have a hardship--loss of a job, medical problems, divorce, etc., simply stating that you're not making any money on the investment or that it is costing more than income will not be a good reason for either a loan modification or a short sale. You need a legitimate reason to request forgiveness or modifications from the bank. And, in my mind, not making enough money does not constitute a good enough hardship. You can always ask for assistance from the bank, but they can say no without a good reason. Also, please keep in mind that owners of investment property (rather than principle residences) do not as easily qualify for assistance since this is an investment.
Finally, your only real answers on what to do next will come after talking with the most important advisors in your life--your accountant or CPA and your attorney. There are both serious legal and financial consequences for "dumping" your investment since you are unlikely to get the same types of protections afforded to homeowners facing similar problems for their principle residences. Before taking such a precipitous and costly step, talk with your advisors to get a better picture of the options you actually have and the consequences you might face.
Area Pro Realty-People's Choice
Realtor since 1973
True-Vision Network Real Estate
A Short Sale MAY be your best option; however, quite frankly, while the new law below prevents a deficiency judgment against you, given the fact the property is not your principal residence even a successful Short Sale will still provide potential debt forgiveness exposure from the IRS come tax time.
"CA Senate Bill 458 Now Prohibits 1st/2nd Deficiency Judgments*"
DO NOT spend your time on Trulia trying to cobble together a solution to your situation - you need to speak with a RealtorÂ® to get you pointed in the right direction, which should be an initial consultation with a CPA to determine your actual financial position and/or a Tax Lawyer immediately to discuss your best move.
The California Association of RealtorsÂ® website devoted to this subject of Short Sales: http://www.shortsalescalifornia.org
You have several options, none of which needs to be a short sale or damage to your credit.
First and foremost, with the new HARP 2 program that will be live within a month or so, you can re-finance the property even though you have so little equity. Perhaps then, with lower mortgage payments, the rent will cover the mortgage. I am starting to take applications for such loans on Monday, but I suppose I could start over this weekend.
Second, if first does not look good enough, you can arrange a sale as a rent to own. This gives you the advantage of covering costs and getting it sold without having to take money from your own pocket. I am selling a condo in this manner as I write this.
Third, you can re-finance the property and then sell it.
Fourth, you can raise the rent, depending on rent control, whether there is a tenant in it now and such factors.
I can discuss all these options in detail for you. My phone number is 408-639-0211. My email is email@example.com.
The first thing I would ask you is what is your goal? With that then you can determine your options and what steps and when to put them into place. With out an end in mind the rest doesn't really much.
All the best to you.
BTW, I have a buyer looking for a home in Santa Teresa and Blossom Valley, if you are considering selling drop me a note and we could see if there is a fit.
All the best to you.
Glen S Etherington, NMLS #346658
Castle & Cooke - Since 1837
Straight Talk, Fast Loans - We Know a Quicker Way Home
You may have more than that or less than that, depending on your calculations.
My team is experienced in short sales, loan modification and lien stripping, call me with any question, no obligation.
Wayne Y Haraguchi, Realtor
Seniors Real Estate Specialist (SRES)
Member: Silicon Valley, California and National Association of Realtors
It all depends on the situation and I would suggest to sit with a real estate professional to see what is best for you in this situation rather than walking away have foreclosure on your credit and since this is your investment property, you may have tax consequences. So, don't just walk away, consult with an experienced professional for your best option.
Essentially walking away means a foreclosure on your credit record. That is the worst thing that you can do.
There are a number of other options open to you that will achieve the results that you want without putting a foreclosure on your credit record.
For more information, please call me at my cell phone (408)509-6218.
Charles Butterfield MBA
Real Estate Broker/REALTOR
Cell Phone: (408)509-6218
Email Address: firstname.lastname@example.org
I work with short sales and help to consult with people on what might be your best options. Let me know if I can help.
Pat Chadwell, broker
Ceritified Distressed Property Expert
Realty World - Residential Specialists
408-927-6565 x 11
CRS, SRES, CDPE, CIAS, ePro, SFR