No. of Recommendations: 6
Homes in my market have continued to appreciate at 5% per year, even with the slowdown.
and
There are no buyers to sell those properties to. I would sell them if I could, and I will when I can.

There are buyers for these houses at the right price, as there always are in every housing market. What you are really saying is that there are no buyers willing to pay 5% more than they would have paid last year. In the current real estate environment this should not surprise anybody.

These houses will not be worth 5% more next year, if you are lucky they will be merely be worth only 5% less, and by that I mean 5% less than the price they would actually sell for today, not the imaginary price you think they should sell for. Houses are still overpriced and prices will continue to fall!

Let's suppose these extra townhomes are worth $500,000 together (I made this number up because I don't see an appraised or realistically estimated value anywhere in the thread) and will lose 5% during the next year. That's $25000 of equity that will evaporate. Since you say you have no equity now, that means you'll be in the hole. Since your current estimate of the value of these townhomes is probably too high, you're probably in the hole already. It's probably worth it to lose a little money now just to get rid of them.

This should be a minor point, as the real problems are the big pile of credit card debt and having too many expenses for your income. But minor issues can grow into major issues if unchecked. If you saved the $500 a month you are spending on your primary residence (over and above what you would pay in rent) plus whatever you are actually losing on these rental properties, that adds up to enough to turn what appears to be about a $600 shortfall of fixed costs into a slight surplus. You can probably break about even after food and other daily living expenses if you are frugal, maybe refinance your car, and scare up some child support.

Another place to look for extra cash would be in renting for less than you originally said you could. $1300 for a 2-bedroom apartment seems like it could be a reasonable price, but it totally depends on your area. Moving further away may increase your commute, but save you money anyway. Let's say you move 20 miles out of the city, you drive a luxury car for showing clients around that only gets 20 MPG, and you drive into town four times a week to do showings. That's 18 trips per month which works out to 36 gallons of gas, which would be about $150 per month. If you can save $300 a month in rent by moving farther away, you're saving money by burning more gas... and as crime rates tend to drop the further you go from the city, you can probably get by with a more downscale place, saving additional money.

You haven't said what your card interest rates are, but all the standard rules about arranging your card debt to optimize interest payments apply.

Anyway, all these austerity measures are just going to make it possible to break even and stop hemorrhaging money. If you do all this then you will be counting on future income increases (and the ability to avoid further misfortune) to give yourself some wiggle room, pay down your debt principal and start bringing your luxury level up a bit. If that is realistic then you may have some hope.

It would be great to have enough equity from your primary residence to cover all your transaction costs plus up front rental fees and then be able to pay down some of your revolving debt too. But really, your goal in selling is just being able to get away from all your real estate before it sinks you.

Real estate right now is like the dot-com stocks in 2001. Somebody has to own them, but you don't want it to be you. And owning extra investment properties that don't even produce enough income to cover their mortgages is like owning those dot-com stocks on margin. Do not do this! Sure, you may have a tax benefit, but I'll quote one of the more sensible things Jim Cramer has said - don't be afraid of the tax man, be afraid of the loss man.

Don't take this personally, but I think you are guilty of fudging the data in favor of the conclusions you want to draw. You don't want to move, so you say you can't do it for the sake of the kids, and that your costs of sale would destroy all your equity even though it looks like there is at least $20,000 more equity than would be lost. You don't want to sell your townhomes, so you claim there are no buyers and the price is appreciating even though this is a contradiction, and cite a tax benefit that will not make up for the direct cash losses those townhomes are costing you.
Print the post  

Announcements

UGC Disclosure Notice Regarding Credit Card Posts
Community board discussions about credit cards are not provided or commissioned by banks who may have advertising relationships with The Motley Fool. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.
TMF Credit Center
The Motley Fool Credit Center arms you with real tools and simple messages, that will help you in every credit situation.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.