I met a client at a Manchester NH multi family property today. It was a 3 unit apartment building they bought 3 years ago for over $300,000 and today it is worth around $200,000. She wanted me to appraise the property and provide some advise on a plan of action as the building is causing them great pain. The couple bought it nearly 100 percent financed with a subprime mortgage with a $240K 1st mortgage at 8 percent and a $60K 2nd at 13 percent. They were told that they would be able to refinance the property, but since they are now upside down that is impossible. Declining rents combined with a costly mortgage equals a nearly $1000 per month NEGATIVE cash flow. They are stuck!
Unfortunately the Manchester NH apartment building market has suffered severe declining values and anybody who bought property from 2005 to 2008 (or refinanced to pull out cash) is most likely in touble and stressed. If you fall in this category, here are a few things you might want to do
Apply for a Tax Abatement - Since Manchester NH apartment buildings have declined in value so much, they are nearly ALL over assessed compared to other types of real estate. A successful tax abatement will lower your monthly costs and increase your cash flow (or reduce your negative cash flow). While you can apply yourself, I would recommend hiring a consultant or a professional appraiser for a tax abatement.
Short sale – In my client’s case, they cant sell the property traditionally since they owe $100,000 more than they could ever sell the property for. A short sale is when an owner sells a property to a buyer and the lender agrees to accept the purchase price which is far “short” of the mortgage balance as payment. Lenders do this because they realize it is better to get some of the money now rather than have to foreclose upon the property and take it back. If your finances are stressed and you can show hardship you may have a good chance of getting your short sale approved. I have taught courses on “short sales” and will gladly assist you with any questions you may have.
Fill those vacancies - Forget the high rents of yesterday. Lower your rents and keep your building filled. Your apartment building may show a negative cash flow but it will be a lot less damaging than vacancies.
If you need any assistance with your apartment building whether it is located in Manchester or anywhere in Southern New Hampshire, feel free to contact me.