Financial problems

[adaran01]

Hello
I suppose its not nice to have to do this however if anyone can help me they are likely to be on this forum.

I lost my job in August last year, and thought it was a great time to start renovating a house that I had been renting out.
I feel I did a pretty good job on the renovation and have just recently finished.
To cut a long story short I have run out of money, and when you have 600k of loans it stops being a laughing matter.
I have managed to keep my head above water for the last couple of months, and am frantically looking for employment now the renovation has finished, and have several strong possibilities on that front, however anyone whos been a job seeker knows it can be a waiting game.
Once I have a job my problems will be sorted, however this is the state of affairs:

Assets

House 1 valued at 185k
house 2 valued at 280k
house 3 valued at 460k Total assets = 925K

rents total $2250 per month

Liabilities

mortgage 520k (over all 3 properties) $2700 per month
credit card 1 10K $@300 per month
credit card 2 8k $@260 per month
realestate agent 8k ingnoring the letters
tradesman 4k has been very understanding
miscilaneous loan 26k from my DAD

Total liabilities = 576K
total min repayments @3,000 per month

of course council rates etc don't stop arriving either so that rental income is more like $1500 per month (varying of course)
The dumb thing about this is that I cant think of anyway to avoid the approaching crunch, yet if I can postpone it, in 3 months time it wont be a problem.
I tried selling house 3 and the highest offer I got was 360k which is almost 100K less than the bank valuation (done before the renovation), and only 100K more than I paid for it 4 years ago, this house is 2.5 acres(steep) 15 mins to Adelaide. I am currently trying to sell house 1, yet the highest offer Ive had is 160k, which I think is just someone fishing for bargains. The problem I have is that house is tenanted, and the house which has alot of potential is a mess and the tenants leave the place filthy and intimidate potential buyers even after I gave them 2 weeks rent free. They will leave only if I give them 3K (they have 6 months to run on the lease).
I never actually wanted to sell any of my houses, because the strategy has been buy and hold.
I can see the last 10 years of work that I have put into these houses dissolving, as well as the next 7 years being put on hold because of a poor credit history, so I hope someone will be able to say "well as a matter of fact I have an answer to all your problems" almost makes me wish I spent all my money on alchohol, good times and women of low moral fibre instead of worrying about tenants, rent and maintenance, because it looks like its going to have the same results.
Regards Adam

 

[Kristine..]

Hi Adam

I have sent you a technical reply by private message.

Remember, there's more than one way to eat dim sims!

cheers

Kristine

 

[Rolf Latham]

Hiya

If you are positive that you will have the hump sorted within 3 mths there will likely be a lender that will provide funds. If you arent sure you may be better off selling a property AsAp

Who are your current loans with and are they cross collateralised ?


ta
rolf

 

[stanley]

Total assets = 925K
rents total $2250 per month

Based on these figures, you have an average gross yield of about 2.9%.

It seems your valuations are probably optimistic, especially if you've had offers less than your own estimates of the values.

Your tenants in house 1 sound like thugs if they're asking for $3k to vacate. I would give them the minimum required notice to vacate, do a quick reno (lipstick & rouge) and then sell it, pay off your credit cards, cut them up and start again.

 

[sbe]

Really sorry to hear of your situation.

You have equity in the properties (providing the vals you posted stack up anyway).

You *May* be able to refinance the loans, but servicability would probably be an issue, unless you can find an understanding financier.

The best solution I can think of right now is a Navra style cashbond. The bank may be more willing to loan if it's to purchase a cashbond to service the debt. It buys you time, which right now is what you need.

Speak to the Mortgage Brokers online here, and Steve Navra and see who can help you.

Best of luck.

Simon.

 

[Kennethkohsg]

Hello
I suppose its not nice to have to do this however if anyone can help me they are likely to be on this forum.

I lost my job in August last year, and thought it was a great time to start renovating a house that I had been renting out.
I feel I did a pretty good job on the renovation and have just recently finished.
To cut a long story short I have run out of money, and when you have 600k of loans it stops being a laughing matter.
I have managed to keep my head above water for the last couple of months, and am frantically looking for employment now the renovation has finished, and have several strong possibilities on that front, however anyone whos been a job seeker knows it can be a waiting game.
Once I have a job my problems will be sorted, however this is the state of affairs:

Assets

House 1 valued at 185k
house 2 valued at 280k
house 3 valued at 460k Total assets = 925K

rents total $2250 per month

Liabilities

mortgage 520k (over all 3 properties) $2700 per month
credit card 1 10K $@300 per month
credit card 2 8k $@260 per month
realestate agent 8k ingnoring the letters
tradesman 4k has been very understanding
miscilaneous loan 26k from my DAD

Total liabilities = 576K
total min repayments @3,000 per month

of course council rates etc don't stop arriving either so that rental income is more like $1500 per month (varying of course)
The dumb thing about this is that I cant think of anyway to avoid the approaching crunch, yet if I can postpone it, in 3 months time it wont be a problem.
I tried selling house 3 and the highest offer I got was 360k which is almost 100K less than the bank valuation (done before the renovation), and only 100K more than I paid for it 4 years ago, this house is 2.5 acres(steep) 15 mins to Adelaide. I am currently trying to sell house 1, yet the highest offer Ive had is 160k, which I think is just someone fishing for bargains. The problem I have is that house is tenanted, and the house which has alot of potential is a mess and the tenants leave the place filthy and intimidate potential buyers even after I gave them 2 weeks rent free. They will leave only if I give them 3K (they have 6 months to run on the lease).
I never actually wanted to sell any of my houses, because the strategy has been buy and hold.
I can see the last 10 years of work that I have put into these houses dissolving, as well as the next 7 years being put on hold because of a poor credit history, so I hope someone will be able to say "well as a matter of fact I have an answer to all your problems" almost makes me wish I spent all my money on alchohol, good times and women of low moral fibre instead of worrying about tenants, rent and maintenance, because it looks like its going to have the same results.
Regards Adam

**************************************8
Dear Adam

1. If I am in your situation, I will seek help from Steve Narva immediately to see how he can help me re-structure the loans and debt payment with his cashbond and getting a LOC to lock-in the houses' high valuation prices to free up the excess house equity.

2. I will then dispose off the bad debts and continue to service my good debts and try lving off the available house equity while I seek to create more welath through property investing or/and through an alternative employment income in the mean time.

3. You may want to know that I am presently not financially free yet. However, I have begun to live off my house equity through the cwealth creation processs through property investment, as a full time property investor.

4. I hope all these helps

5. Thank you

regards,
Kenneth KOH

 

[macduff]

Let us know

Hi

I think it is instructive to all investors and newbies of detailing the ups as well as the downs of property investment.

It seems now that you have fallen on hard times and perhaps your karma has needed some adjustment....or you got stiffed with real bad luck.

I guess it doesn't particularly help you out right now but everyone learns best from their mistakes and i guess all you need is a job and your set like a jelly.


my advice is to keep the houses, take any job going, take 2 jobs if necessary and scrape by until life gets better.

good luck and let the forum know how you progress.

 

[holdandrefinanc]

i have not read all the replies but what about refinancing??????????????????

 

[Cadbury]

Just remember that tough times never last, only tough people.

 

[Henry]

this may sound simplistic, and you've probably already thought of it but do you have any other liabilities you could sell? eg. cars, toys, tools, furniture?

do you live in one of the houses? if you do, could you not move out and rent it or stay and take some boarders to help pay the mortgage?

my parents are in a similar situation except my dad has employment but the LVR is higher and credit cards = $50k+

they could do with some help also. you're not alone, adam.

good luck

 

[Ajax]

Hi Adaran,

I initially thought why don't you apply for a no doc loan (no income declaration) with LVR up to 65%. I don't have much experience with refinancing questions and you should speak to a good finance broker about this. Bear in mind that the ATO is looking at income declarations on lo-doc loans.

RESI, Collins Securities and a few others do no doc loans with max LVR of 65% at interest rates around 7.7%.

http://www.resi.com.au/product.asp?productId=431&productDetails=1

http://www.collins-securities.com.au/products/productsheet.cfm?product_id=11309

Assuming your valuations are correct (not sure they are) this would enable you to have borrowings of approx $600k-which is marginally more than your $550k debt when the $26k you owe your dad is excluded. Im not sure what costs/break charges and mortgage stamp duty would be involved in refinancing. It also wouldn't be a good long term solution if you don't find employment.

Ajax

 

[astroboy]

Adam,
Unfortunate situation you have found yourself in. Obviously you need to address it quickly. The last thing you want to do is ignore any people who you owe money to, contact them all and let them know the situation.
People have made a number of suggestions of what you can do, have you any assets you can get sell quickly, that is cars, boats, bikes etc. The sale of some of these may help with cashflow in the short term.
Investigating things like cashbonds, refinancing and the like may also offer some help and are good suggestions.
You seem quite confident in finding work in 3 mths do you have something already lined up ? Unfortunately you still have to service those loans in for the next 3 mths.
The last thing you want to do is default, if I were in your position I would be looking at the best way of containing your risk and any potential losses.
The question Rolf asked about the properties be crossed is important, if they are and you default the bank may sell them all and your loss may be substantial and you have the addition problem of you credit history screwed for 7 years.

Contain the risk even if it comes at a cost. That cost will be far less then the cost if the worst happens and you default.
You may not like the idea of selling an IP at less than you feel it is worth but I would if it solved the problem, better than losing the lot.
Time is not on you side so don’t serialize the options you have and investigate the next possibility only after the previous one has proved not feasible.
Do everything in parallel and start now!
Talk to Navara about cashbonds, talk to a broker about refinancing, put any non property assets you can do without up for sale, put all your properties on the market, grab any job you can find, do all of this and do it all today. This is really important.
By doing all of this at once, your chances of a result in a short time frame are greatly increased. You may not like selling a property a less than what you would like but if it prevents the loss of everything and you can continue to move forward then its only a small stumble in your path.
By containing the risk you can contain the loss.
Paul Zag had a great post along the lines of taking the parallel approach and initiating all actions simultaneously in this type of situation but I can’t find it now.
Good Luck.
AB

 

[Henry]

great answer astroboy!

 

[Sarah...]

Hello

Assets

House 1 valued at 185k
house 2 valued at 280k
house 3 valued at 460k Total assets = 925K

rents total $2250 per month

Liabilities

mortgage 520k (over all 3 properties) $2700 per month
credit card 1 10K $@300 per month
credit card 2 8k $@260 per month
realestate agent 8k ingnoring the letters
tradesman 4k has been very understanding
miscilaneous loan 26k from my DAD

Total liabilities = 576K
total min repayments @3,000 per month

Hey Adam

I wont even try and offer advice on what you should do as I have no idea, but think positive, you are very lucky that you your properties. I know you want to hold onto all three of them, but if worse comes to worse and you have to sell one of them, it is not as bad at it seems. Think positively and think you could only have the loans and NO assets, I know it may all seem doom and gloom now but you are in a position that you can sell one of your properties and get back on tract and start again. I bet if this is the case, you will never get in that situation again, a learning experience.

Be positive and positive things will happen

Sarah

 

[Les]

G'day Adam,

Simplistically, a No-Doc at 65% might cost a bit, but gross released should be $80k (out of that, take any costs - break costs if fixed, loan appl fees, early payout fees, etc.) This should leave a huge bunch of bucks to sort out the immediate shortfall.... and you keep the IP's. Might mean stepping away from current lender, and might mean 3 separate NoDoc's (talk to Rolf or similar) - but you at least seem to have the equity to deal with it.

Rolf often says "If you have equity, DSR is not a problem".

And someone else mentioned cashbonds - not sure if appropriate ATM, but worth asking.

Good luck, and do step us through the results - though "soul-baring", I reckon you are helping loads of us in so doing. Thanks,

Regards,