Need 3rd party advise

[ubarti]

I am 50 and have recently married. My wife is questioning my portfolio. It really is not that good. I made the mistake of using my home equity to purchase more real estate. Now I am upsidedown on my primary residence and am barely making ends meet to keep up on the other mortgages. I have a history of hardship that put me in this position.

Primary home purchase 2004 $649k with $150k down. Took out a $150k second and spent it. The house is now worth around $450k.

Purchased 4 Rental houses 2006.

Lost my job for 1 year and spent all of my life insurance, 401k, every cash I had. could not keep 2 of the rentals rented at the same time. 1 rental house foreclosed, another I short sold. Ran up $70k of unsecured debt.

Got a modification for my primary residence 2% for two years, increasing 1% per year, cap at 7%.

Claimed bankruptcy and cleared the $70k unsecured debt.

Income $4200/mo net

Primary mortgage $2300/mo with impounds. Will increase.

Second $150k Payment $500/mo Interest only adjustable, will expire and increase.

Rental Texas Worth $146k, mortgage interest only $1444/mo Rent Received $1225/mo

Rental Spokane Worth $151k mortgage interest only $835/mo Rent Received $736/mo

Spokane Second $13k expiring Dec $75/mo

I do receive around $10k in tax advantages each year from the investments.

My question is what should I keep? I am gambling that the market will turn around, but I am sure the adjustable loans will also increase at the same time. Is my primary house too much of a liability? My new wife likes the house, she is cash flowing on her condo that she is renting out, and unwilling to invest anything to keep my portfolio alive until the market turns around.

[riverwed070707]

Yikes. I hope you were earning more when you purchased your house. Your mortgage is 67% of your income! The recommended threshhold is 25%...

I assume you can't sell the primary due to the gap in value vs owed. Do you have equity in the rentals? If I were in your position I would sell both rentals (rent isn't even covering your payments, let alone maintenance!) and use whatever equity you had in them to pay down/refi your primary to a more manageable payement.

How long ago was your bankruptcy? Do you have any money in savings? Where is your $10k in tax advantages going every year? How does the rest of your budget look -- are you saving for retirement now?

[ubarti]

Bankruptcy was last year.

I have some equity in the rentals, enough to sell them and break even after closing costs and commission.

I have no savings, but am rebuilding my 401k.

The 10k, I usually save to make up for negative cash flow on the rentals and maintenance.

After utility bills I do not have much left over.

[Petunia 100]

May I ask if your wife is contributing to household expenses? I think it is fine if the two of you keep your finances separate, but common expenses should be shared.

The local real estate markets of your rental properties may rebound next year, or they may stay flat for the next 30 years. Meanwhile, you are out of pocket every month even when you have tenants in place. What is the best thing to do? No one can say, because no one knows when the properties will appreciate.

[riverwed070707]

Originally Posted by ubarti

Bankruptcy was last year.

I have some equity in the rentals, enough to sell them and break even after closing costs and commission.

I have no savings, but am rebuilding my 401k.

The 10k, I usually save to make up for negative cash flow on the rentals and maintenance.

After utility bills I do not have much left over.

So why do you keep them? The tax benefits aren't really benefits if you're using them to break even. I'd sell asap and then start working on how you're going to get the rest of your finances in order.

[jpg7n16]

Sooo.... what lessons did we learn from what caused you to go into bankruptcy?

[ubarti]

I lost my job and it took me 8 months to find another. I had two rentals empty for 6 to eight months at the same time. My monthly expenses were $14000. When the house in NC foreclosed it had a $40k second. NC does not dissolve seconds and I was still responsible for it. So I took a BK for $70k to clear the second and credit card bills I ran up while unemployed.

During this time I rented out my house and rented a room in someone else's house for a year. I was one step from the street. I sold everything I owned, except the car I was driving, which was only worth about $1000. The people renting my house stopped paying me. I had to evict them. I stopped paying mortgage on my house and filed for a loan modification. I finally got a job and the modification went through. I moved back into my house with nothing. I bought a sofa off craigslist and borrowed a TV from my daughter. I did keep my bedroom set. I lived like that for a year while trying to either get modifications for my rental houses or letting them foreclose. I think I came out pretty good considering how broke I was. I still have my primary house and two of the four rentals. But I am still struggling with mortgages and when the modification, inflation and interest rates go up so will my mortgages and I will not be able to hold on. I am also trying to rebuild my 401k and pay down the $150k second on my house.

Would I do anything differently? I could have let all my houses foreclose and kept my 401k and life insurance. I probably would have still claimed a BK but I would have money in my pocket now, a crappy apartment and a nice car. Instead I have three upside down houses, including a nice house to live in, a crappy car, no money to eat out with and no retirement.

It does not look like the houses are going to come back in the near future so I guess I should have gotten rid of them a long time ago.