Home equity line of credit or??? - Posted by Marye

import · May 20, 2006, 9:17pm

Posted by marye on May 21, 2006 at 13:46:30:

thanks! that is pretty much what I was thinking.

import · May 20, 2006, 9:17pm

Posted by Marye on May 20, 2006 at 21:17:31:

I need some help in knowing how to proceed.

We have 2 investment properties with a combined equity of appoximatly 45,000. Our residence is paid off, with an approximate equity of 289,000.00

We are trying to liquidate to move out of state.

We had a business go bad and are about 25,000. in debt, our taxes are due on our residence AND one of our investment homes is unexpectedly vacant…with a mortgage payment due now.
IS it wise to get a home equity line of credit to bail us out and provide the funds to buy us time while we liquidate? SHould we just work on getting someone in the house as a rental to get the mortgage paid?
Right now our credit is pretty maxed out and it is going to start looking bad if we dont do soemthing. Help!?

import · May 21, 2006, 11:47am

Re: Home equity line of credit or??? - Posted by John Corey

Posted by John Corey on May 21, 2006 at 11:47:45:

Marye,

Your problem is mostly in your approach as you likely have many different options. You did not indicate what your credit looks like, if you have any issues with judgments and if you have a source of income that can be verified. Even without knowing any of that I believe you can pull out some cash and keep everything up to date.

Your ability to sell is also a function of price. If you were to offer the personal residence for $1.00 you would have buyers lined up with cash in their hand.

The point of all of this is you are seeing the problems but are not really thinking about all the possible solutions. The best advice would require a bit of a discussion to so that the person providing the advice has a more complete picture. Relax a bit with the knowledge that there is likely multiple good exit strategies. It might even be wise not to sell the two rentals but that will depend on factors not presented so far.

What state are you in? If all things were equal is there a preferred path and tell us why you have such a preference.

If you want you can just reply by email. More people might be able to help if you post a reply.

John Corey

import · May 21, 2006, 10:47am

Re: Home equity line of credit or??? - Posted by Shaun

Posted by Shaun on May 21, 2006 at 10:47:52:

Refinancing or a HELOC is an option depending on a number of things. If you can get someone in the house, go for it. Just remember, once the credi goes bad it is going to be tough to get the loans you need.

import · May 21, 2006, 11:57am

Re: Home equity line of credit or??? - Posted by marye

Posted by marye on May 21, 2006 at 11:57:02:

we are in Texas.

The goal is to liquidate with as much cashout as possible and move to Maine (don’t ask! LOL!)
Our residence is a historic home (4300 sq ft) in the end process of restoration… But to use the equity as a line of credit to consolidate the other bills (the payment would be less) would also allow us to finish up some more of the work and make it more marketable.
Our credit was in the high range…We have not missed any payments but our debt to income ratio is not great and so has lowered our score.

We do not HAVE to move…it is a desire.
Thanks!

import · May 21, 2006, 12:22pm

Re: Home equity line of credit or??? - Posted by John Corey

Posted by John Corey on May 21, 2006 at 12:22:22:

A simple answer based on the surface details. If we were to dig deeper the answer might change.

Get the HELOC set up.
Use the HELOC to make sure you are current with the bills and stay that way.
Spend no money on personal items. The HELOC is not the same as an income from a job.
Finish the remodel and make it quick. Quality work and use professionals if needed so it does not drag on. Most buyers discount more than it costs to finish something so you should make back what it costs you to finish compared to selling as is. Get it done quickly so that the interest does not pile up or the market makes a dramatic shift.
Definitely look at the tax situation. It might be that you 1031 the rentals into property in ME. Or you might hold the rentals. I figure you will sell the residence so that you can take advantage of the tax break for a personal residence. Also look at the capital gains rate for any gain on the rentals though watch out for the recapture tax.
You have business losses. They might soften any tax bill on the rentals.

ME - I grew up in MA and spent some time racing bicycles in ME. Nice place if you can deal with the winters.

John Corey