When a lot of people think of investment properties they seem to assume that they are treated much differently from the home that you live in, but that’s not true, especially where issues like payments and foreclosures are concerned. Any investment property that’s facing foreclosure is a serious problem because that will go on a person’s credit like any other foreclosure. The payments on the investment property have to be kept current and that can be hard to do in a recession and a tight credit market where an investor might not know from month to month whether the money to make the payment will be available.
Investment properties were very popular back when the housing market was booming, and everyone was buying and selling them. Flipping them and reselling them was popular, and so was renting them out for the income. There were waiting lists and houses that went to the highest bidder because people were so eager for them.
Now, though, there are some properties that are almost impossible to even give away. Cities like Detroit and others are allowing people to buy property that nobody else wants for amounts only in the hundreds of dollars, not thousands or tens of thousands. If you picked up a lot of investment properties when the market for them was really hot you probably did very well, but what happened when the bottom fell out of the market and you suddenly weren’t doing so well anymore?
If you’re stuck in the situation where you’ve got investment properties and you don’t know what you’re going to do with them, you are definitely not the only one and you’ll find that there are a lot of people with whom you can talk and commiserate about what happened to the market at exactly the wrong time for you. You might also find that things aren’t improving for you just yet and that you’re starting to get behind on the payments that you’re making to the mortgage company for the investment property that you can’t sell, can’t rent, and can’t seem to do anything with. If you’re facing this kind of problem your options are limited mostly to hanging on (if you can) until the market improves and trying to get out of the property in any legal way possible before it completely ruins your credit rating.
As for your credit rating, it’s possible that there will be some damage done already, but stopping that as quickly as possible would be the thing that you would want to focus on, since the sooner you get away from late payments and other problems and the shorter amount of time that they show up on your credit report the better off you’ll be. If you aren’t able to complete avoid the damage to your credit, lessening it is the next best step and to do that you’ll have to work with the bank or lender that you’re paying for the investment properties. Find out what you owe on the property, what it’s worth through an honest appraisal, and what the bank will help you with to get out from under it, since you might be able to do a short sale or a deed in lieu of foreclosure instead of having an actual foreclosure and letting your credit take such a hit.
Talking with your bank or lender and being honest about your financial difficulties is one of the best and smartest things that you could ever do when it comes to an investment property that otherwise might be facing foreclosure. Ideally, you should talk to your lender before you really get behind, but a lot of people wait much longer than that because they think that things will turn around and they’re embarrassed to admit that they’re having a problem. Don’t let embarrassment or discomfort ruin your financial future and your good credit rating - talk to your lender right away as soon as you see that there might be a problem.
If you’re up front about things, a lender that’s handling your investment properties will be more likely to work with you and try to help you renegotiate your way to a better rate, a longer term, or something that can help you continue your investment. If it becomes clear that you won’t be able to keep the property, though, talk to your bank about the options you have. You really want to keep a foreclosure off of your credit if at all possible, so check out the possible options that you have and pick the one that’s the least damaging to your credit rating.
Tags: Credit, investing, personal finance