Blog Posts
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Seek Advice When You Can’t Pay Your Investment Property Mortgage
For some, the embarrassment of not being able to pay your monthly mortgage payment is so condemning that you would never think to ask for help in solving the underlying problem or to seek advice regarding alternatives you may have in working with your lender to solve this problem. However, there’s almost always a variety of solutions if you approach this matter properly.
The first step to getting back on the right path is understanding why your current income will not service your debt. Did you pay too much for the property? Have your operating expenses increased to a point where your tenant income is not adequately covering the same? Is it a vacancy problem or are your tenants not paying their contracted rents? Have your mortgage terms changed recently?
Outside of freestanding single-tenant net-leased facilities, most income property is subtly, but regularly, changing and being impacted by influences like the market, the economy, age, design, the environment, and other similar factors. As such, you must continually adjust your investment to these influences to maintain optimum net income and property value. Unfortunately, most investors fail to make these adjustments and after time these investments become vulnerable.
The current economic downturn has effected a substantial number of income property investors. I would venture to guess that anyone with a 50% or less equity position in their income property going into 2007 has been severely impacted by the current market contraction and has even found it difficult or even impossible to renew their existing mortgages when they expire.
When you find yourself in this situation, it pays to get qualified advice to avoid making additional mistakes and potentially risking the loss of your property (and potentially thousands of dollars of invested capital) before considering the tax impacts of these losses, which can also be substantial! Depending upon your specific situation, there can be many different solutions if you’re proactive and willing to address these issues before you get too far down a negative path with your lender. This is definitely not a time to bury your head in the sand; rather, developing a proactive and strong relationship with your lender, and keeping in touch with them regularly regarding changes in your property’s financial and physical condition, is an important first step in effectively working through these current market adjustments and surviving foreclosure.
Keeping your head in the game, taking the time to regularly plan and forecast through changing conditions, establishing operating and refreshment reserves, and regularly communicating with your lender, are all sound practices to help you avoid falling victim to market downturns.
foreclosure investment property advice restructuring financing cre
