Foreclosure 401k
should i consider foreclosure on a rental property?
This is my situation. My wife and I were kinda forced into buying a home in Arizona. We had planned on moving out there, but things changed and the builder would not let us back out. We explained this to the broker, but they still qualified us and the builder got his money. Fortunately, we were able to get renter into the home, us still having to foot about $800 bucks out of pocket to complete the monthly mortgage. We were able to buy a house in Ca this year. I had to use my 401k from my last employer, and now we have to ante up the penalties and taxes due on that. So, now we are looking at complimenting the rental property’s mortgage ($1000 a month, because the lease is up in July and the renter’s want to pay $200 bucks less), $500 bucks to the IRS (payment plan for the penalties on the 401k), $100 bucks to the State (payment plan for taxes owed also), our Mortgage of $3,500.00 on our current home. my question is, should i dump my rental property and lose it to foreclosure?
Can you find another renter? I’ve never heard of paying less when it’s time to renew the lease… Especially in a declining sales market – rents usually increase not decrease. It’s the old supply & demand scenario. Those that can no longer buy must now rent.
(Arg, some employers allow you to take a loan against your 401K so you don’t have to be taxed & also penalized on the early distribution)
Unfortunately, you don’t qualify for Mortgage Forgiveness Debt Relief Act of 2007 and you will have to pay yet more taxes:
Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision. In some cases, however, other kinds of tax relief, based on insolvency, for example, may be available. See Form 982 for details.
http://www.irs.gov/irs/article/0,,id=179073,00.html
Check out rental market data here & see what comparable homes are renting for: http://www.zilpy.com/
Checkbook IRA – Self Directed IRA, Invest in Real Estate
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