The Banks Won’t Refinance the Investment Rental Properties I Bought Using Credit Cards. – Kyle


“Dear Steve,

Quit my job to do real estate investing. Was doing well, but then banks changed lending laws and I couldn’t refinance the houses I had. I bought them using credit cards. I was able to sell one of them, but on top of living on my savings and no income, things depleted quickly. I bought another house thinking that if I could fix and sell it quickly I could make anough money to pay down almost all my debt.

Unfortunately my contractor bailed, I have been paying on it for a year (half is a loan half is on credit cards), and I can’t sell it because he placed a $30k lien on it. I have a contract that will hopefully hold up in court and take the lien off, but until then, I am running out of money.

After this month I can’t pay any bills. I have over $150k in personal credit card debt ($80k is related to the house). The loan is $80k and in my LLC name. The one year hard money loan is due July 1st. I have no idea when the court date is for this lien.

My life is falling apart. I have always been a hard worker and have always had money. This last project has torn me to pieces. I only have a part time job right now. Because of the economy I can’t get a decent position anywhere. What do I do??


Dear Kyle,

You’ve got a big problem. But the good news is that you’ve got a great opportunity to start over again and get out from under this pressure.

While I’m feeling better about the economy improving, it’s still down right now. I seriously don’t see real estate values launching back to space where they were before.

I really can’t see any sort of realistic option that is going to get you quick relief or help you to make ends meet here.

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Some of the things that ran through my head included angel investors, shared equity partnership, etc. In this market with the situation on that house, I doubt anyone is going to want to jump in with any deal that will rescue you personally. They might try to steal the house for the lien amount but that still leaves with with all the credit card debt you still can’t service. Even if they gave you $10,000 to $20,000 that is still not enough to resolve your personal financial problem.

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I would imagine that the credit card payment alone is about $3,000 a month and on top of that you’ll need to add in all your other expenses.

If I read your question right the LLC loan might be a balloon note and maturing in July. That’s really bad news if that’s the case. You certainly don’t have $80,000 to repay the note if it is.

I think the minute you finish reading my answer here you need to be on the phone to a couple of local bankruptcy lawyers and trying to schedule a free bankruptcy consultation appointment to go in and discuss the situation.

When you meet with the bankruptcy attorney you can discuss the situation with the LLC note and if you personally guaranteed it.

With the lien, real estate market, note and cash flow situation, I think the time has come to put this bad situation to rest and instead focus on moving forward with a new life.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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