Dear WWKD,
My husband and I have an investment condo. We have been able
to rent the unit for the last 5 years however we were never able to rent
it for the full amount of the mortgage plus HOA dues. We owe approximately 30k more than it is worth. Although it is an inconvenience to rent it, and we
lose approximately $260 every month I don’t want to foreclose and
have that on my credit rating. However, my husband thinks it is best to
foreclose. Need some guidance!! What would you do? BTW we are living approximately $250.00 dollars beyond our monthly budget at this time.
What would Kim do? Signed: Beyond our Budget
Dear Beyond our Budget,
An investment condo means that you are in a positive cash flow each month or that your plan shows there will be a positive cash flow in the very near future. In your case I don’t see either. If you have been losing $260 each month for the last 5 year that means you have lost $15,600 over the last five years on something you purchased with the intent to provide additional income.
If you are like most people, you are not in a position to consistently lose money, in fact you made that point clear by stating you are living $250 beyond your monthly budget each month.
Here a question, is that $250 because of the $260/mo loss from the condo or is it in addition to that meaning you are at a $510 deficit each month?
What I would do is sell the condo, even at a $30k loss. Get a loan for the difference and pay it off. Yep, that hurts, but there is no better learning experience than one that hits your wallet. I am not a big fan of foreclosure unless there are NO alternatives, I don’t see that as being the case here. If that isn’t an option, you could always increase the rent, but I suspect in this market, there are plenty of condos available for rent so most likely your renter would just move on leaving you in the whole for the full amount each month. Best to sell at a loss. Be sure to properly inform your renters of your intent…no reason why they should suffer due to your financial issues.
Regarding living beyond your budget each month by $250, I would revisit my budget. Time to cut back on something, cable TV, eating out, maybe even selling a car that has payments. There is no way I would live in the beyond my budget each month, that means you are not living on your own, you are charging your living habits somewhere. There is some behavior that must changed or something maybe multiple things need to be sold.
