12 years ago my husband and I bought our dream home, a house on a lake. We had spent years working towards the goal. Our first house was a 2 family in a really great neighborhood. We went with the two family because at the time we didn't want to live in the single family homes we could qualify for. 10 years after buying the two family we found our lake front dream home. We had zero credit card debt, we had a little money in the bank, and the 2 family would rent out quite profitibly. Just one of the units would pay all the bills on the 2 family, the other unit was money to save and spend. That was in 2001, credit scores were 720+ for me, 800+ for him.
2004 we decided to sell the 2 family and invest the proceeds of the sale into an 8 unit property. We attacked thge eight unit and made many repairs/improvements leaving us with little savings, but we still had our good credit to fall back on and our home equity line for emergencies. The first 5 years of a new property are always the hardest, making the improvements and fixing all the maintenance issues the prior owners never tackled. Then the economy turned with the housing bubble bursting....
At one point we had only 4 of the 8 units rented. tenants lost jobs and just packed up and left. No notice,just gone. Most were already behind on their rent and leaving was their only way out. They weren't collectible, not worth going after them when they had already lost everything. So we found ourselves turning to credit to get us through. Our home equity line was our savior. Then came the letter from the home equiry line folks. The letter said that they felt our home was no longer valued high enough to continue using the line and they froze it. Now what? We were averaging 2 vacancies every month and the bills still needed to be paid, repairs still had to be made. Of course oil, real estate taxes and electricity all skyrocketed, although rents were stagnant..........
We turned to credit cards............
Well here we are now in 2013 with a fully rented eoght unit property for the first time in 5 years and a whopping $74,000 in credit card debt. Of course, as we started to lean heavily on our credit all of our credit lines were dropped down to whatever we owed on them leaving us almost no available credit. Between the apartment's debt (owned in an LLC) and our own debt I'm looking at a hude mountain to climb.
But I feel hopeful for the first time in a long time. We are trying to refinance the mortgage on the apartments as we do have a lot of equity there. We want to take some the equity and use it to pay off the credit card debts. Then, we waould take the money we currently send out in credit card payments (we pay WAY above what they ask for) and split it in half. One half would to savings, the other half would go to accelerate the mortgage paydown.
Of course, our credit has taken a hit. I'm now a 620 and he's a 740. Thankfully we save his credit for the big things like mortgages, all the crap credit is in my name. So our plan all hinges on the ability to refinance the apartments. But I feel like it's a solid plan and one that could definitely work. What do you think?
