I have two rental properties- one is a single family home I have owned for 7 years, the other a building with 4 apartments. I live in the apartment building, had to agree to that for the loan to work, so I ended up renting my previous house (the one I have owned for 7 years). So basically, both of my properties are considered rental/ commercial property. The apartment buidling I bought last year turned out to be in worse shape than I thought, I have blown through the $10,000 in savings I had on repairs in no time. Is there ANY WAY Possible to get a equity line/ 2nd loan/ or Something to get some cash out of these two houses?? I have a little over $70,000 in equity (80% loan on each) in them. Everyone I have talked to has told me No,No,No since they are Commerical property. Any suggestions/ names/ companies that could help would be greatly appreciated.

LisaB4657

You can always find someone to give you a second (or third, or fourth) loan that is secured by property, either residential or commercial. The question is whether you can afford the interest and fees they will hit you with. First try speaking with the bank where you do your banking. To make your loan more attractive to them, try offering direct deposit by the tenants of the rental payments into your account at that bank. Bankers always feel better when they're holding your money. If your bank doesn't want to make the loan then talk to local banks in your town. Make it very clear that this is a commercial loan. Next step is a total refinance on the whole package. If all else fails try advertising for private investors.

LeeAnnMemphis

I've been to my bank, the bank who did the loan on my apartment buidling, and a few others. They have all said NO, Commerical property has to have 65% Equity at all Times. That is why I am trying to get some suggestions.

LisaB4657

Have you considered getting an unsecured personal loan or line of credit? The interest rate will be higher than a secured loan. But if you have good credit it should be possible.

LeeAnnMemphis

Yes, that is what I am currently looking into, with a nice interest rate of 22% for $8,500. I really didn't think anything involving a 22% interest rate was a good idea. So at this point I am trying to find another way that would be more reasonable.

LisaB4657

Ouch! You'd probably do better using a credit card. How much of a loan are you looking for?

LeeAnnMemphis

$10,000. Due to a mixture of circumstances, some my fault, some just bad luck, I spent all my savings and then started putting stuff on my credit card to fix all the stuff that just kept breaking. Originally, I had a credit card with a $9,000 limit and 11% interest rate. Once I maxed it out, they jumped my interest rate to 31%- OUCH!!! So I am paying almost $400 a month in just Interest on that balance and I have got to change something! Sheesh, now the board knows more about my finances than my own mother!

LisaB4657

The first thing you have to do is apply for a new credit card and transfer your balance. There are a bunch of credit card companies that offer 0% or 1% interest for the first year on balance transfers, and something like 7 or 8% after that. Check out Capital One, AT&T Universal and other big-name companies.

As for the commercial properties...it looks like you are discovering (the hard way) that it takes either a lot of cash or a very handy person to maintain an older multi-unit dwelling. On the average tenants do not treat the property as carefully as an owner would and somehow the owner always ends up paying the price. If you are really that close to the edge financially you may want to consider selling the house and living in the apartment building until you can build up some cash and equity. With the kind of debt you're currently carrying I think that taking out a second loan on the properties would hurt more than help. How do you intend to recoup the money you've been spending and intend to spend? If you plan on fixing up the apartments and increasing the rent, you have to do 2 things: (1) you have to figure out how much it will cost you to fix each apartment and (2) you have to figure out how much rent you can charge. Once you do that you have to see how long it will take before the increased rent will pay back the money you've spent. You've gone through $10,000 in savings, $9,000 in credit cards and you need another $10,000 to finish. So let's round it off to $30,000. That means that you need to collect rent from 3 apartments that will cover your mortgage payments PLUS $30,000 in repairs. If you charge $1,000 more per month in rent than you were previously charging it would take 2.5 years to recoup the money you paid out for repairs. But will you be able to charge that much more for rent in your area?

Investing in real estate is great in the long term but can be a cash-flow killer in the short run.

LeeAnnMemphis

Well, part of the problem was their was a lot of Lying on the end of the seller, covering up damage, etc. I have already done all the improvements I plan on, and I don't see how much of anything else could break since it seems like everything has been replaced (Knock on Wood). I want the $10,000 to pay off my credit card, that was all money I put into the house anyways. Applying for a low-interest credit card doesn't mean you receive one, as I have learned. 3 of the 4 units were vacant when I bought the property cause they were so dirty, poorly taken care of. Once I fixed them up, I was able to rent them all in less than a week cause it is a wonderful neighborhood, and I am getting currently receiving rent that is a little higher than the market average for my neighborhood. There is one apartment I could be getting around $150 more a month on, but the woman is a Katrina victim that lost everything and was having a hard time finding a place to live in her price range, so I gave her a good deal (bleeding hearts are bad in business, I know).
Currently the monthly house expenses are:
$1,433 note (includes taxes, insurance)
$100 utility bill for laundry room
$50 misc. (filters, bug killer, etc.)
Income:
$1,700
So, it's a small, if any profit, but I also live there for free since the rent covers the entire monthly mortgage payment. The good thing, once you include depreciation expense I have a net loss, which you can apply against your salary (up to $25k), and you get a tax refund at the end of the year.
I am just trying to find someway to get rid of this high interest credit card I have right now, and get some back into savings.

LisaB4657

Ok, the good news is that you're not financially on the edge. That's actually great news. The bad news is that you used these words: "I don't see how much of anything else could break since it seems like everything has been replaced." That kind of thinking is way too optimistic for a landlord. You should be allowing for annual repair costs of at least 5% of annual rental income. I think that 10% is more realistic but I'm the conservative type. How's your roof? How's your boiler? A/C? Electric? These are all things that can be considered capital improvements and will look great on your taxes but will play hell with your cash flow.

It sounds like your financial situation isn't bad at the moment other than the credit card. Keep looking for a new credit card company. Don't be so concerned about the low interest rate long term. Concentrate on looking for short term low interest for balance transfers instead. That will give you a chance to pay down a chunk and get it to a more manageable balance.