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mandysioux · Joined: 12 Jul 2011 Posts: 1 1.41 Dollars($)

We purchased a home in 2007 while our other home was on the market. Unable to sell the home we were currently living in we rented it out to keep current on our payments.
The monthly rental amount that we are able to rent the home out for does not cover or mortgage.
At the time we thought that was our best option. 3 years later we are still renting the home at a lose and as a result have paid our mortgage 30 days late for the past probably 6 months. We have never been 60 days late, yet.
Is it more detrimental to our credit to continue to kill ourselves slowly by paying a mortgage late every month or get it all done in one fell swoop by letting it go into foreclosure? And will a foreclosure likely affect our new home?

gmakerley · Posted: Tue Jul 12, 2011 9:58 am Post subject:

First...a foreclosure on one rental property won't have any impact on your current property and the mortgage on it.

Second, do you not see any light at the end of this particular tunnel? It'd seem not since you're contemplating the foreclosure on the rental home. Can you sell it? Can you increase the rental? Is there nothing you can do other than continue as you've been (30 days late) or simply let it go to foreclosure?

To answer the question that you posed about which is worse...being 30 days late chronically is always going to have a lesser impact than a foreclosure on your credit record. Neither is going to give you a pretty credit score, but legal action of such a nature is always going to drag down the score even more.

chrisgummerson · Posted: Tue Jul 12, 2011 12:28 pm Post subject:

Check to see if your county allows for section 8 Housing, you may be able to get guaranteed income from the state and also charge the section 8 tenant. Also if you dont think about the downturn in the market, as far as value is concerned, someone else is paying your mortgage off. Yes you may have to come to the table each month and make up the difference, but after the home is paid off, you only put a small portion into it. Then you have a home for retirement, to get income, to sell ect. If you can make the difference, keep it. Housing is a cycle and we are in a deep low, but history only proves, homes ALWAYS appreciate over time...Good luck

gmakerley · Posted: Wed Jul 13, 2011 9:12 am Post subject:

Good points, Chris, and simply to elaborate on your last comment...

We've seen in real estate an ebb and flow continually. Markets appreciate, markets depreciate. I'll just cite my own experience in Hartford, CT.
I bought a condo in Hartford in 1996. The property in question consists of an 1895 vintage brick and brownstone building that was converted to condos in the mid-to-late 1980s. The original owners paid upwards of $200,000 to purchase a 2- or 3-bedroom unit, with garage.
The unit I bought was a foreclosed property, and I paid $30,000. For that, I had 1400 square feet, 2 bedrooms, 2 1/2 baths, large living room, formal dining room and fully-equipped kitchen and a garage...oh yeah, also a large front porch where I dined almost year-round.
In 2005, I sold the unit for $175,900; only one other unit sold for more than mine within the next 12 months.
The market tanked in early to mid-1997, and prices pretty much evaporated. In fact, you couldn't sell one of these condos unless you were willing to stick it on the market for many months.
In order to bring you up to date, I'm looking at similar units on the market right now. There's a 2 bedroom unit which is 2 doors away from the one I owned, showing a current asking price of $120,000. It's a comparable layout, but a bit bigger at 1560 square feet.
It's probably priced just right to sell at this stage of the game. The unit sold for $145,000 in 2003. Another unit offered for sale today is also for $120,000 but a much lesser unit, but it sold in 2009 (from a lender) for $57,500.
See how cyclical these markets can be?

Okay...I apologize for rattling on and on, but I believe this gives support to what Chris has to say. Holding on and realizing a bump in value, while also recognizing that someone else is paying most of the monthly debt on the property, as Chris noted, is probably the wisest decision you can make on this property.

'Nuf said.

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