Scared multi-family in MA

[bkinMA1985]

Hey all,

This is a bit complicated but I'm so stressed over this whole thing...

Husband and I bought 4-family house in MA in 2008. We live in one of the apartments. Renters are family/friends of family and think it's their right to pay as little as they think they should. Section 8 tenant barters and only pays some of their portion of the rent but we would rather something rather than not be able to rent the apartment at all. Water bill, common electric bills got crazy end of 2010 just as we found out we were expecting our second child. Behind 3 mortgage payments and had to stop paying credit cards since daycare expenses doubled. We have decided to stop paying mortgage at all and save rental income (just barely covers the mortgage and we spent most of the laast 4 years paying the difference).

We need to file BK for the credit cards and other debts anyhow, but think we might as well include the house and walk. Modification doesn't look promising (still trying...BoA). House needs work and I know we would never be able to do it if we file a chapter 13. On top of that, everyone just trashes the back yard and thinks they own the joint. My kids can't even play in the yard. I know this is our fault, but due to issues with the house (water shuts off on 3rd and 4th floors if too many people running water etc) that we didn't know of before we bought the house, we can't rent to outsiders without the headaches of repairs we can't afford.

We need to file BK in April so our lookback period would be ideal (i was on maternity leave during that time so no income for a month or so).

I just feel hopeless and stupid. My husband and I are only 26 and have tried to do everything right. I feel out of control since I don't know what's going to happen.

Should we stay and continue trying for the mod? but then if we file after april we might not be able to do a chapter 7 as easily and I don't have the money to pay our lawyer extra.

I'm afraid we will do the BK and then the FC will take forever and we will be required to pay water bill etc. until house is out of our name. Not sure when we need to get a rental and don't want to wait too long since we have two young kids.

Anyone been thru this with a multi-family???

Thanks...sorry for the rant. This has been the worst experience of my life so far and we haven't even filed BK yet

[justbroke]

As a former landlord of single family homes, and owning a multi-tenant building myself, you may want to look at just getting out of the business! With all of the physical defects you listed, I would be hard pressed to be of the opinion to have you stay! Especially since you are trying to raise a family.

I also learned the leasing to family and friends... is a model for failure. You should have started eviction proceedings immediately! I went through tens of thousands of dollars of credit to stay afloat with my rentals. I wish I can tell you not to do that, but you probably already have.

File bankruptcy, reject all the leases, and just start evicting people who don't pay. I mean on day 5 send the obligatory certified mail return receipt (CMRR) demand for payment and then on day 15 you should be filing for eviction. I don't know what it is, but renters seem to think that we non-commercial property owners have a lot of money! The unfortunate part is that they are stiffing you, not some bank.

What do your leases look like? Are they enforceable? Are they even unexpired?

Personally, I would be running different financial scenarios in a spreadsheet. This is all about finances, and your decision should be purely financial. Think about your new family.

[bkinMA1985]

Thanks!

Only our Section 8 tenant has a lease...I know, stupid! But with all the issues of finding people to rent (lead laws etc) we found ourselves trapped and having to rent to family/friends who were willing. Evicting them would only mean we would have nothing to help pay the mortgage.

Believe me, I will never ever own a rental again. Ever. We never imgained my mother in law and her boyfriend being so selfish. Or other family/friends of family behaving how they do. Granted, my mother in law helps with our kids but I have come home on 3 separate occassions to new satellite dishes screwed onto the house because her boyfriend kept telling Directv/dish he was the landlord.

We have run different scenarios and while renting will be hard for us financially seeing as we no longer will live somehwhat cheaper with the rental income paying the mortage (sometimes), emotionally I will feel better.

Don't get me wrong, we made some bad decisions with credit cards etc., but we spent alot trying to keep a house that was only benefitting the tenants. They still think we are making money off them...ugh.

What can I expect after the BK in terms of paying the water/sewer bills etc. I can't just shut them off I assume since people will still live here.

[BKorbust]

Have you had a consultation with a bankruptcy attorney yet. Their are some pretty interesting options to cramdown your mortgage on a multi-family property in a chaper 13. Their is also one judge that has endorsed a hybrid chapter 13 plan which proposed to modify a first mortgage on a multi-family home while, at the same time, extending the payment on the secured claim beyond the life of the plan. Maybe worth looking into.

[justbroke]

Yes, BKorbust does bring up the fact that you could, possibly, cramdown the property to its current value inside a Chapter 13. However, you have to factor in a bunch of other things including what a Chapter 13 would "cost" you in terms of paying other creditors. The Chapter 13 can be a great option if the parameters all fit your financial goals.

If you could get the right tenants, BKorbust's post could be an option. However, you'd have to clean house first. Literally.