We are broke and I don't know how to fix it.

[Faliciagayle]

This is a very hard post to write.  I feel a deep sense of shame and embarrassment.  I need some real advice, but please, no flames.

Background:

Before I met him, DH bought a small house in a beach community at the peak of the Real Estate boom in CA.  After marriage, we moved together to where I was going to school.  DH adamantly refused to sell the house (it's our retirement! he said) so we found renters for the house and bought a condo in our new town.  DH owned his own business for 7 years which was struggling, he was offered a job requiring relocation.  After I graduated, we moved half way across the country.  DH didn't want to sell the condo, or the house, so we found renters and a property management company for the condo and kept the same renters in the house. 

We move from CA to WI.  While there we are able to max out IRAs but save no money otherwise.

That job was a start up and laid everyone off after 6 months.  Much scrambling ensued, mortgage for the house was already a 30 yr fixed at 5%, and the mortgage for the condo would not change because it was not our primary residence.  Discovered we are ineligible for any HUD program, Deed in Leiu, shortsale, etc because neither residence in our primary.

6 months later, DH got a job at the other end of the country, so we moved all the way east to NY.  We lived off his severance up to that point, and used the severance to fund our move, which while we did on a budget, was not cheap.  Cost of living in NY is 3x what it was in WI and when we moved here DH was making half of what he made in WI.

All through this I have either been a student (loans) or a SAHM.

I have advocated for the sale of the houses this entire time, but somehow, up till now, we've managed to fake our way through this.  DH is still firm in his belief that selling is not an option.  Oh, and neither place is in the black each month.  We have monthly out of pocket expenses for each property.

About this time last year the condo sat empty for three months so what we had left in savings from the severance went to covering that mortgage.  We went into arrears with our property company because of expenses related to that condo.  We finally squared that bill away last month. This September our long time renters in the house moved out, we had to do $4,000 worth of repairs (which we are paying off in installments to our handyman).  We found a renter and we are subsequently in the process of trying to evict them.  Of course we have to pay a lawyer to do this, and we don't have any money to cover that mortgage while this process takes place.  Spoke with the bank today, and again, no help for us since it's not our residence.

Living for over a year without making money to cover our monthly expenses has finally caught up to us in a major, snarling, violent way.  We are now about $2,000 short every month.  I didn't think we had an extravagant lifestyle (one car, 2 br apartment for 4 people, maybe eat out once a month, no movies, no baby sitter, etc) but we can't keep up with the one we have.  And yes, spending in November (DH turned 40) and December has not helped the situation. I have been looking for work for a few months.  The cost of childcare is so high I'd need to being in at least $50,000 to make a monthly contribution to the household.

I can give more information as needed.  I just don't know where to go.  When money is tight (as in, we have no groceries) we put incidentals on AMEX, so those bills are out of hand lately.

Advice is appreciated.  And thanks for reading.

[weliveintheforest]

Can you move back into the condo?  Or the house?  I know it's a long way away... what is dh's current work situation?  Is there any way he can get a job where either of your properties is?

[zepchic]

Yikes!  It sounds like one (or both) of those properties needs to go.  Can you watch kids?  I'm in the same boat as you with childcare.  What about an evening or weekend job? 

[Lucy Alden]

What does your husband think you should do about the homes and the deficit?  I don't think your situation can be changed unless the two of you are the same page.  This isn't something that can be fixed by using coupons or turning the heat down a few degrees.  I honestly only see three solutions:

1.  Foreclose on both homes.

2.  Move back to California and live in one of the homes.

3.  Your husband gets a second job and you get a full-time job.

Perhaps you could get a job at a daycare.  Generally you get a reduced rate on your kids.  I'm so sorry you are going through this FaliciaG.  I can only imagine how stressful this all is.

[zebra15]

Well IMO you need to list BOTH houses to sell if you are not moving back into them ASAP.  You need to find a job opposite hours of DH or DH needs to find a second job.

Can you move out of NY into NJ or someplace cheaper?

It sounds like your DH is in denial.

Do you have student loans to pay on and other debt as well or just the homes?

Find a debt payment style and stick with it, Dave Ramsey, Susie Oreman etc

[MsFortune]

Hi Hon,

I'm in a similar situation.  I don't know that I have advice - just empathy.  

Our situation is not as dire, because I am working full time.  But I really want to SAH, and move somewhere cheaper, but we are tied to two mortgages here.  

Foreclosing is not as simple as I thought it would be - we are looking into it.  Our primary residence has a mortgage and a HELOC.  Our rental just has a mortgage but it is interest only.  

For the primary, I can't do a short sale because I have not defaulted, and I technically can pay the mortgage.  So we could default.  Since is primary, we won't have tax hit on the loss, which is nice. But if the mortgage holder gets all of the money in foreclosure, the HELOC debt does not go away, and I still have to pay that.  And it's $90K!  

The rental, since it is not primary, we would have to pay taxes on the loss.

Sigh.  It's just so overwhelming!

[Ellien C]

Originally Posted by Lucy Alden 

What does your husband think you should do about the homes and the deficit?  

I'm sorry you are in this situation. It sounds very serious. Who else knows about your situation? I think your husband needs to face the cold hard reality that he is not going to become a real estate maven not is his home business going to make him rich or even pay the current rent. But - I think he probably needs to hear this from someone other than you. What is his relationship with his parents? Is there any clergy? Anyone you could trust? He sounds like he is in deep denial and thinks he will accumulate property and it will pay for itself. There's actually some stuff written about real estate and the true costs - repairs, management company etc. There's some stuff that you'd be better investing in mutual funds if you aren't prepared to work the property yourself - which given your distance, you aren't. 

[mnnice]

I guess my questions would be:

Where do you want to live? 

Exactly, how much are you going backwards in both properties each month?

What do you know about the work prospects in each of the three locations?

Do you think if you moved back into either the CA house or the WI condo you would be eligible for any modification programs?

Is it more important for your family to not go bankrupt or have a full time SAHP?  I think pretty personal decision, but given what you share its a real choice you are going to probabily going to be confronted with.  It's unlikely you are going to be able to afford to keep both of these properties and stay home with you current income and expenses.

[Denvergirlie]

As much as your DH doesn't want to lose the house & condo, the math has shown you that you can no longer afford your current lifestyle.

Either you need more income, or less expenses, plain and simple.

So what's more important to you as a family? If your DH absolutely will not re-consider getting rid of the other properties, then you both need to work to increase your income. You will need a job, your DH will need a second job and perhaps you can eek thru this. However, you will most likely have to sacrifice your home life and just work all the time in order to increase your income.

Or you need to lower expenses, which would mean getting rid of at least one if not both of the other properties.

What's more important to your family? Having the 2 properties and working a lot more to make ends meet? Or would you rather decrease your expenses and be able to spend more time together?

I understand that both situations are not your ideal situation, but it is simple math. You either need more income, or lower expenses.

If you don't do something to change this and fast, you could be looking at a much bleaker situation in 6 months.

I climbed out of debt using a modified Dave Ramsey method, but you must stop the bleeding one way or another. best of luck to you and yours.

[GuildJenn]

Just going on your post, which I know is not a complete story, some of the trouble you seem to be having together is that you delay budgeting or decisions. (Selling property, getting a handle on cost of living in a new area, and so on.) I really applaud that you are looking at it now. No flames at all.

That said I think you need to sit down and really look at your expenses - and like a PP said, you need to do that pretty swiftly. Adding to your credit card debt is only going to make things progressively much worse.

Then you probably need to list either one or both properties (in your shoes, I would list both and sell whichever sells for first as a start).  I don't know what you paid vs. what they are worth, and I don't know why your DH is so resistant. But at the very least it needs to be clear on paper how these are draining your resources and you should take that to your DH.  Do you know why he is so invested in them? You could agree that once you have finances under control you will look again for some kind of investment property.

For going back to work there are a number of reasons to do it or not. It sounds like bringing almost any amount in over 0 would help you right now. And your having a job, being on the grid, etc., would help with further job loss. However, your DH could also look for a higher paying job. You could definitely look for jobs or ways to earn money where you don't have to invest, or invest as much, in childcare.

[Faliciagayle]

Thanks for all the replies, I want to reply in greater detail later but quickly - yes, we have no working budget.  And pretty much every single "wrong" financial thing you can do, we have done by a factor of 6.  I have written this out in a spreadsheet for DH, he just doesn't see.  And to the PP who asked if anyone else can tell him this - everyone, my parents, my ILs, his sister, his aunt, has told him this is a dire situation.  Last week he told me that even if Dave Ramsey told him the only way to get out of this situation was to sell the house and FC the condo, he wouldn't believe it.

[laohaire]

Sounds like he has a very emotional attachment to his view on the properties.

A different way to approach this with him would be to ask him what he thinks should be done. When you're coming up against a wall, you're just going to keep butting your head against it - so saying "we need to sell" is just going to make him reinforce his wall, most likely. So forget that path. What does HE think the solution is? Likely his ideas will fall short, so you can just keep saying "great, and what else?" For example, he might say "let's just tighten our belts and not go out to eat as much" and you can say "great, that will save about $120-150 a month. We need to come up with another $1800 a month. What else?"

The big worry is that he will completely turn a blind eye to the issue altogether. "We're fine." "Everyone is in debt." "It will get better next year, the economy is recovering." "It's just this month that's high, next month will be fine." That's the big worry because this degree of denial is very hard to get past - there is no amount of logic that will help because this is not a logical position. You could try to show him how much you guys have gone in the red over the past 6 months and ask how that's going to change, but if he's determined not to see the issue, he simply won't.

So in that very worst case scenario. I guess I'd start looking into legal/financial advice. I do not know anything about this, but perhaps you can legally disentangle your finances from his - but unfortunately I suspect the only way to do that is divorce. I have no idea what I'd do in that situation, but it's just something to keep in mind.

As a tool for you, may I recommend www.mint.com? It makes it so easy to track every transaction, your budgets and spending down to the penny. It's free and it updates in realtime. They state on their site that they don't store your financial account information on the site, only use it temporarily to create a secure link to your accounts (bank, credit cards, mortgage, whatever you choose to give them). Plus you can't make ANY transactions on Mint, it just displays the transactions you make. We used to try so hard to track all our purchases, but always ended up forgetting something here or there, and it could screw up our accounting a lot, plus it was so time-consuming. But Mint just does it automatically for me, and all I have to do is log in to see how much we have left this month for groceries, or to make sure the mortgage payment hit, etc. And the reports are great - you can easily figure out where you are going over, how much you've spent this month, this year, whatever.

[mattemma04]

If dh had property that was costing us money I would suggest selling them even at a loss.Better to lose say 20k than to keep paying on a 60k mortgage.

If your partner will not sell then I would suggest seperating your financial accounts. You want the properties to be his legal issue. If I earned money I would also not pay towards the properties(sinking ships),because that is just wasting money that could be used more wisely.

When we bought our home we thought 92k was a good price.Now 5 years later,and spending 14k,we will be lucky to sell for 80k.Big loss.But we lose on the sale and move on to a home we can get at a good deal.

I doubt he would listen to Clark Howard,but I would suggest a call into him,and see what he suggests.

http://www.clarkhoward.com/ 

[Vaske]

I get the impression that your husband is focusing on retirement at the expense of everything else--this is worthy of further investigation.  Would he be willing to go to a financial planner for help in setting up a workable budget for living expenses, and for help in figuring out what is actually gained or lost with the rental properties, compared with alternative retirement investments?  If he really wants to keep the properties, then he needs to create a viable plan to make it happen.  Otherwise, it's only a matter of time before he loses them both.

I disagree with the previous poster who said you need to either increase income or lower expenses; at this point, you can't just do one or the other, you need to do both.  I do agree with the others that if he continues in such deep denial, you should start developing some financial resources of your own (find job, open bank accounts in your name only), and separate yourself from his obligations, if possible.  While I'm not a fan of separate marital finances, your partnership is not working well right now.

[Faliciagayle]

My suggested action plan to DH is: 1)  set up a budget immediately, 2) list the house for sale ASAP and try to maintain renters while we get it sold, 3) walk away from the condo.

When I mentioned this to him on our walk yesterday, again, he vehemently refused to see that selling the house is a worthy thing to do.  

We do have equity.  I have suggested that selling the house to pay off the condo and then reset ourselves at ZERO is better than where we are now, but by now, I'm sure you can guess what he thought of that.  On the other hand, yesterday when I was going over the money and drove home the point that we can't even sustain the house for one month(!) without a renter - or with our current squatters - that seemed to get his attention.  

And I am trying to get a job.  Pray something with a decent paycheck turns up.  Positions for which I figured I would be a shoe in haven't responded so I keep sending out resumes.  

At this point I'm not willing to separate myself financially (I can't) but I certainly think I will be opening another account when I finally do get a job.

As far as moving back to CA I don't think that's a viable option, though I have suggested it.  Neither location really supports either of our industries.  And DH rather likes his position here... I hope it doesn't come to that.

Denial... yes I think he is in deep denial but it's also an unwavering faith in the power of the real estate market.  He absolutely believes that the house, at the very least, will sell for half a million dollars or more, if we can just "hold on a few more years"  It really is like talking to a wall.  

I've been reading and learning a lot in this forum, which is where my statement about shame and embarrassment came from.  I can't believe we've managed to get this far in life making the same mistakes over and over.  

[Faliciagayle]

I just joined mint.com and it's shocking how much I was off on our food bills..  yikes.  I'm not sure I like it - I can't quite get things to input the way I want but otherwise, it is an excellent tool.  Thanks for the suggestion, laohaire.

[texmati]

Originally Posted by Faliciagayle 

I just joined mint.com and it's shocking how much I was off on our food bills..  yikes.  I'm not sure I like it - I can't quite get things to input the way I want but otherwise, it is an excellent tool.  Thanks for the suggestion, laohaire.

I just wanted to chime in with a hug. I just recently put all our stuff in quicken--- and I was shocked at how different what we were spending vs what we thought we were spending was. It was wonderful to sit down with DH and be able to actually show him that this is where our money was going. It took a few times of him saying "oh this can't be, you are forgetting about this..." but eventually using the tool, he belived. We think of ourselves as frugal and savers, but it was hard to deny when with a few clicks you could go back and see a record of how much you spent.

Perhaps your dh needs a similar awakening? Showing him that you will go bankrupt before you see a return on these properties might really open his eyes. His self view might be so strong (how is it possible that we can't afford this?) that it's hard for him to see the truth.

[GuildJenn]

Originally Posted by Faliciagayle 

My suggested action plan to DH is: 1)  set up a budget immediately, 2) list the house for sale ASAP and try to maintain renters while we get it sold, 3) walk away from the condo.

When I mentioned this to him on our walk yesterday, again, he vehemently refused to see that selling the house is a worthy thing to do.  

We do have equity.  I have suggested that selling the house to pay off the condo and then reset ourselves at ZERO is better than where we are now, but by now, I'm sure you can guess what he thought of that.  On the other hand, yesterday when I was going over the money and drove home the point that we can't even sustain the house for one month(!) without a renter - or with our current squatters - that seemed to get his attention.  

And I am trying to get a job.  Pray something with a decent paycheck turns up.  Positions for which I figured I would be a shoe in haven't responded so I keep sending out resumes.  

At this point I'm not willing to separate myself financially (I can't) but I certainly think I will be opening another account when I finally do get a job.

As far as moving back to CA I don't think that's a viable option, though I have suggested it.  Neither location really supports either of our industries.  And DH rather likes his position here... I hope it doesn't come to that.

Denial... yes I think he is in deep denial but it's also an unwavering faith in the power of the real estate market.  He absolutely believes that the house, at the very least, will sell for half a million dollars or more, if we can just "hold on a few more years"  It really is like talking to a wall.  

I've been reading and learning a lot in this forum, which is where my statement about shame and embarrassment came from.  I can't believe we've managed to get this far in life making the same mistakes over and over.  

You know, we all make mistakes and it really is okay. That you are looking at this now is huge, and although it sounds very rough with your DH, hopefully he will come around as well. You go for getting clarity on your finances! That is truly a big deal and I hope you remember to give yourself kudos for it.

I had a thought - what if you take all the info you've gathered (go you!!!!) and project it 6 months forward and a year forward under different scenarios - that you find a renter in Feb, that you don't find one until Apr, etc. It's a lot of work but it might help to show how badly things could go...show the impact with compound interest, using a debt calculator. (For example, if you continue to $200/mo on keeping the house in the black instead of $200 towards credit card bills, you will be in debt 6 years longer, or if you default on student loans...that kind of thing.) 

Obviously don't overwhelm yourself too much with all kinds of doomsday scenarios, but if you can do a few projections it may help him to understand the real impact of his choice. It seems like he is having trouble with that piece.

I also don't quite know how foreclosure, etc. works and hopefully people know more but would it be possible to walk away from the condo and keep the house? Or will they come after you for that? Sorry to be ignorant but my thinking is if you're doomed to lose the condo, better to just stop putting anything into it (including paying the mgmt company) and focus on the house. I still personally would list both but I get that your DH is stonewalling you. It might be a first step for him though. I myself would also point out that since you're willing to get a job, that's a big deal and he needs to put something into the pot as well.

I really like the idea of consulting an outside expert too. I wonder if a (reputable, truly non-profit) credit counsellor might help. It must be very, very stressful to have your DH on such a different on this and any help you can get is good.

And good luck with the job search, I am sending good wishes your way.

[Faliciagayle]

Originally Posted by GuildJenn 

I also don't quite know how foreclosure, etc. works and hopefully people know more but would it be possible to walk away from the condo and keep the house? 

I have been trying to talk to a RE lawyer to find out for sure, but from what I understand, since the mortgages are held by two different banks, no they cannot go after the house.  But we need to find out for sure.  That's a good suggestion about projecting real numbers into the future.  I think both of us suffer from taking the abstract knowing and making it concrete.

Found out that the house is worth (according to a website) $406,000 (he bought for $250,000) and the condo is at $73,000, we paid $160,000.  

[mtm]

You've got to get your dh on side. Can you show him your projected debt if you keep both places and are going 2000 into debt each month? I'd show him how much you'll owe in a year and in 5 years.  Will that shake him?  I'd also ask him to read one finance book or website and to commit to a budget for 3 months. I think Dave Ramsey (total money makeover), Gail vax-Oxlade, Suze Orman all have books and websites that might help if he's willing. Get Rick Slowly and the Simple Dollar are good blogs with great archives for step by step how to get out of debt and make a budget if he's more a blog guy. I'm sorry you're in the situation.

I'm a little worried your dh won't consider selling, it sounds like he's not listening to as you are yelling that your house/financial future is at stake.