Posted by JPiper on January 16, 2001 at 18:37:55:
One thing for sure…to fully understand your situation would take a 1003 and a credit report. You could do that with Ed, and frankly, it would probably be worth your while. I would recommend it.
But let’s look at this another way first. HOLDING properties versus SELLING them is always the age-old question…a conundrum as Bill Gatten would say.
It might make PERFECT sense to hold that property, enjoy the cashflow, and not pay tax on your equity. BUT, you’re now out of business in a sense. You’re against the wall for some reason. The lenders have cut you off. So eventhough it may make PERFECT sense, it may not be the BEST SOLUTION for you.
Here’s a situation I’m currently in now. I hold a property that is probably worth something around $50K retail. I hold it free and clear. I can rent the property for $525. Without expenses, it takes me about 8 years to gross $50K.
Or I can sell the property. With the proceeds my guess is I can buy 2 properties, fix them, and sell them for let’s say $100K…pre-tax.
Which is better? You have to love the thought of owning a property the rest of your life…chunking out that cashflow every month. But not without expenses, and many other difficulties. OR, you can turn the properties, reinvest in other properties which builds your equity that much faster…but not without taxes.
Having had this argument many times with myself…long into the night…I’ve decided that both methods make PERFECT SENSE. The question is, which method works BEST for you given your personal circumstances at the time. Each method has it’s advantages…AND disadvantages. No method is PERFECT, they just make PERFECT SENSE.
The problem here is that you’ve hit the financial wall so to speak. So that the method that makes PERFECT SENSE to you, make not make sense given your circumstances.
One way or the other…something needs to change now. If you keep the property you’re done for now. If you want to keep doing deals, you’ll need to learn some new tricks. There are plenty around…maybe you need to learn how to do sandwich leases as an example to build your income, or some other creative technique.
But if you want to continue dealing with lenders, you’re out of business for now. UNLESS, it would make sense to you to SELL one of those properties to realize the equity, and simultaneously eliminate some debt.
Having said all this, my suggestion to you would be to contact Ed. He’s the financing expert. You might be able to do some stated income type loans. Or he may be able to inform you how to restructure yourself. He’s in a position to look at your complete picture.
My main point here is that you’re never truly in a box, which is where you seem to think you are right now. All you have to do is change what you’re doing.