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We have a rental house in N Las Vegas and we're upside down to the tune of $120k on an adjustable rate mortgage that's set to increase on 12/1...and we just lost the tenant. Not to mention the fact that we pay most of the mortgage with the rent payment, the rest with military retirement income. Our expense each month above the rental income, when there is a tenant, is approx. $500, but will probably increase to $700 after the mortgage changes to a fixed rate. We're not in a position credit wise to refinance and the property has been refinanced previously. If we don't get a tenant, we will not be able to keep up the payments. We also have a mortgage on the home we live in in Arizona which is also upside down by about the same amount. Are we candidates for a short sale and would that be better than filing bankruptcy? With the rental, we just feel like we are sinking money into a sinking ship that may never rise again. Help!!!
It's an interest only ARM and on 12/1, it converts to a fixed rate with principal. The interest rate may not change very much, but the additional principal will cause an increase. My concern is two fold considering the loss of the rental income and the increase in payment. In the past, tenant turnover has been pretty quick, inside a month, but the last 2 took close to two months. Counting the expense of travel from AZ to NV and unforeseen repairs, maintenance, etc., we take a loss every year at about $11k which is great for taxes, but not for income. When the house was increasing in value, taking a temporary hit was ok, but now the future's not so bright and I'd rather have the income in my bank account. We're looking at a real estate market that may not bounce back for 15 years or so, so from a business perspective, this investment is not looking so good. More than that, it's looking like a foreclosure in the next 6 months if we can't do a short sale. I've never filed bankruptcy, or had a foreclosure and I've always paid my debts, but this situation is scaring us more than a little bit. So, if I can do a short sale and not ruin our credit completely, I'd rather go that route now than wait until it's too late.
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