In 2007 my husband and I bought a converted brick rambler, zoned commercial, with a partner. They are both physicians. The partnership lasted barely several months, and we bought out the partner's 50% in the building. Soon after, the market started to crash. We had trouble getting tenants, had to lower rents, and the botXXXXX XXXXXne is that our building is currently under water by perhaps $100,000-$200.000. Meanwhile, we have had to waste $3,000/month of our own money to keep it afloat, which now translates to nearly $200,000 we have "thrown out the window" which could have gone to retirement, and possibly allowed my husband to retire sooner (he is 61).
We have 2 loans
on the property: SBA (40%) and Banner Bank (60%). The Banner bank had a 5-year balloon, which expires this month. We are trying to refinance. There is a problem with the debt service coverage (i.e. we aren’t bringing in enough rent to cover our mortgage, without using our own funds, which we have been doing. My mother recently passed away and left a condo for me and my siblings which has not sold yet. When it does sell, I expect to receive around $35,000-$40,000. Unfortunately, Banner Bank knows this money is coming to me in the next few months and wants to put together another year extension so I can use that money to lower the total principal and then refinance again. I really do not wish to use that money on the refinance, as right now we have no safety net if anything else happens, and we have a $13,000 tax bill to pay for 2012 which includes taxes from Annuities I received from my mother’s estate.
So the question is:
What would trying to do a short sell on the property do to us in terms of negative impact on our credit and everything else? The building is in an LLC, and we have a home, that we still owe mortgage on, and another rental property which has always had good tenants, and the rent covers the mortgage.
We are tired of throwing good money after bad. We have always honored our commitments, but we are in such a bad financial condition because of this office, that it is getting harder and harder to see any light at the end of the tunnel.
Any advice you could give would be very helpful.