Reader Case Study: late payments and house selling?

[MyCircus, MyMonkeys]

Hi,
I originally wanted help convincing my husband we should move to a smaller house.  Once I found the cash flow spreadsheet (and had to call to find out the balances), I found out we are two months behind on our rental house, one month behind our current house, and late on our car loan. This isn't the first time; in June, I cashed out my TSP to catch up on our houses and cars- with the understanding this s*** never happens again, and he includes me in our money situation.  I kept asking, and he kept delaying, and I tried not to nag (no surprise, marital problems too). 

So.  We are both 36, and our daughter is 13.  Based on my current budget, this is what I plan to do this week:
  -cancel the cable Savings: $140
  -trade in the FJ (our other car is paid for, a 2003 Camry) for a smaller, more efficient car (thinking a 2005 Prius priced at $6900).  I know I shouldn't finance a car, but I can't afford to keep it and I can't afford to pay outright for another. Saving estimate: $300 in payments, $200 in gas
  -lower my thermostat to 62 during the day, and 58 at night. Savings: $50? (currently leave the thermostat at 67 during the day, and 62 at night)
  -put an end to all spending under "useless crap I waste money on." Savings: $1659.

I know my credit card debt is a "hair on fire" emergency, but I need to play catch up with the houses first.

Specific questions: Should I also sell our rental and primary house immediately? 
  -Rental: Right now, I believe its best; but in the long term, I hoped the sale from the rental would help finance college for my 13 year old (its on a 15 year note).  Moving into the rental and selling the current house is not an option, because my daughter needs to stay in the same school (emotional stuff).
  -Primary:  I'm not thrilled by the property taxes and the HOA.  If I sold, there would be a loss (guessing anywhere from $20k - $50k).  But math homework shows me I could save $200-$500 with a house in the $175k-$220k range.  If I waited one year to sell, other new houses would raise the comps higher, and the new park (4.5 acres, walking trails, playground) will be built across the street.  I'm hoping that would mitigate my loss. 

After reading the blog and forums, I hope it might be possible to retire at 57 (minimum retirement age for me).  Or at least work part time and enjoy my life (not a knock on the job.  good hours, good pay, good people, good managers so far.  just not my idea of a fulfilled life).

Commence the beatings.

[nereo]

Hey Nessie1014
Welcome to your first post.  I'll start out by saying that I've seen lots of other people come through here that were in worse shape than you.  Some lost focus but the ones that stuck around have gone from deeply in debt to financially solvent and on the road to FI within a couple of years.  There's hope!

To answer your specific questions, you've certainly got some 'hair-on-fire' situations going on here.  Is the failure to pay the mortgages a result of poor book-keeping/forgetfulness or poor cashflow?  At least on your spreadsheet you have a small surplus of money each month...

$29k in credit card debt is likely eating you alive.  What are the rates?
Your car expenses are also well into 'clown' territory.  Good for you for deciding to sell the FJ. Instead of getting another car, is there any way you can swing one car (at least for the next year)? 

Regarding your rental, you are paying more in your mortgage than you are receiving in rental income - a really bad situation.  Either sell the rental or figure out a way that you can start earning some return on that property. 
Downsizing your housing is another thing you should consider, if only to be closer to work and eliminate one car entirely.  You are spending $1740/month (expenses plus maintenance) - could you buy or rent a place close enough to work that a second car would be unnecessary?

A few other areas that deserve immediate attention:  Groceries are "ok" at $500 (but could be lowered), but holy-crap you spend $860 on lunches and dining.  Cut both NOW and bring your lunch to work.  Make it a goal to NOT increase your grocery spending.  Savings: $860/month.  Direct TV - cut.  Savings $140.  Entertainment - reduce by 50% (sorry, but your hair is on fire.  Find free things to do).  Savings: $150/month.  Netflix or Hulu (cut one or both).  Savings $13-26.  Alcohol & Tobacco (cut by 1/3rd or more).  Savings: $83, plus cumulative health benefits.   
Total monthyl savings - about $1246.  Combined with the savings from eliminating your FJ SUV and its associated costs, you can start to make some progress.

Use those savings to hack apart your CC balance.  Depending on your balance I'm guessing you can ax the smaller one by next Christmas.  The larger one can be paid off about 18 months later.

[J'onn J'onzz]

It sounds to me like you are wanting to downsize your primary home which is might not be a bad idea to help with long term goals/savings but I have to point out that in the mean time to get caught up you can relatively easily save more than the $200-$500/month that you mentioned you could save by downsizing just by making a few spending changes.

Dining at $500 and Lunches at $360 is a huge expense. It is so easy to save money here and it will go a long way to help you get caught up on your mortgages. This will add extra to your grocery bill but you will come out ahead.

$300 on Entertainment - Cut this until caught up, between netflix, hulu, and directv do you really need to pay for more movies right now?

$250 Wine/Beer/Tobacco - I realize this one is hard to cut out but you have to make cuts somewhere. I bought a vaporizer/e-cig  about a year ago and they are way less than cigarettes, if you are at all interested in quitting just decrease the amount of nicotine each time you buy the liquid, if not they are still cheaper than buying cigarettes by 75% or so.

You could save $1000/month on just those items taking $260 in extra groceries and leave $100 for Beer/Wine/Entertainment.

Another big problem that I see is that your rental income is way less than the mortgage on your rental property. Are you significantly below market value here? Did you buy this property with a tenant in place and have just kept the rates the same? How long remains on the current lease. This one could really hurt you if you tenant leaves and you have month or 2 of vacancy. You really needs this to generate some cash flow so that you can build a reserve to cover expenses.

[Field123]

I would look into refinancing the rental house. If you refinanced the $112,000 balance for 30 years, even at 4.5%, that would reduce your principle and interest payment to about $600 a month. You'd have to add taxes and insurance, but you could probably at least be breaking even on it cash flow wise, plus saving the principle.

[MDM]

Once I found the cash flow spreadsheet (and had to call to find out the balances), I found out we are two months behind on our rental house, one month behind our current house, and late on our car loan. This isn't the first time; in June, I cashed out my TSP to catch up on our houses and cars- with the understanding this s*** never happens again, and he includes me in our money situation.  I kept asking, and he kept delaying, and I tried not to nag (no surprise, marital problems too). 

Nessie1014, welcome to the forums.  Nice work summarizing your current situation in the spreadsheet attached to the OP.

Others have already offered good suggestions so I won't repeat them.  One thing I haven't seen, and your OP indicates would be worthwhile: automated payments on all your loans.  A couple of reasons why:
  - You stay current on payments
  - You might get an interest reduction (some lenders will do this).

Of course automating the payments doesn't help if there isn't enough money in the account to make the payment at the scheduled time, so...

...you need to work together so both of you understand your basic cash flow.  We use Quicken, but other options (YNAB, Mint, roll-your-own spreadsheet, etc.) can work.  You should be able to look ahead at least from one paycheck to the next and know that your checking account will stay above $0.

Good luck!

[Chrissy]

I second what everyone else has said, including the e-cigs.  What a good idea!

Sell the rental immediately.

Stay in your current house for a year until downsizing or refinance (if that's possible).

You CAN cancel your phone plan.  Find out about the cancellation fee.  You shouldn't pay more than $90-$100/mo for 3 phones.

What are your pets eating?  I think you could switch to a less expensive brand, or maybe look online for a better price.

Now, here are some questions:  With your current spending, your family should have a surplus of $126/mo, yet, you're having to sell your car to pay the mortgages/loan... and, six months ago, you had to cash out your retirement to pay these bills, so, you're not really late, right?  "Someone" has spent the money intended for those expenses plus the monthly surplus, and then hid it from you... do I have that right?  If so, cutting your spending isn't going to solve the problem, which is THEFT.  Do you have a plan for that particular issue?

[TerriM]

  -lower my thermostat to 62 during the day, and 58 at night. Savings: $50? (currently leave the thermostat at 67 during the day, and 62 at night)

Uhm.... I'm a little worried about your marriage here :)  I think I'd keep the temperature at 58 while no one's home, 67 when someone's home (presumably weekends/evenings), and something comfortable at night,  and focus on reducing the eating out/going out while staying comfortable at your house.  If you make your house totally uncomfortable, it's going to encourage people to be out more than being home which is the opposite of what you want....

[J'onn J'onzz]

Chrissy brings up a good point in that according to your own spreadsheet you should be able to pay all those bills plus have a small surplus. Since you are behind there has been some spending that is not being accounted for. Maybe this spreadsheet is just what you are expecting your expenses to be in the coming months but you should really look back and see where all that extra $ has been going so you can make sure it does not start to go in that direction again.

In addition it sound like maybe it is time for you to take over the finances yourself and instead of trusting your husband to take care of them. At the risk of sounding like an ass you are the one bringing in most of the money so there is no reason that you should not have control of the finances.

[MyCircus, MyMonkeys]

Thanks for the replies.  I talked to my husband this afternoon.  He swears we are not behind on anything (but I called the mortgage company today), oh wait, we were behind, but are catching up.  I said we have to sell his car, maybe sell both houses, and cut cable.  He says (about the cable only) we can switch, and lump cable/internet together and save $80/month.  I'm not sure what planet he lives on.  He apparently thinks he can rob Peter to pay Paul.  At least I watched him pay LAST MONTH's mortgages today.  December payments are not yet paid, though.

I think the late payments are due to NO records/budgeting.  The surplus that shows up on the spreadsheet?  No idea where that is.  After I input what I thought we were paying for everything, there was actually a surplus of $800 that is currently flushed away- I kept adding money to eating out and entertainment to at least show close to zero (it must have been spent somewhere, because we aren't taking any trips).  I forgot to enter my husband's GI Bill (his school is paid for, and he receives $1200 for living expenses).  Rereading the last two sentences makes me nauseous- I can't believe the waste.

Regarding the rental:  yes, we are losing money every month.  We bought at the end of the bubble (2007), and were underwater for a long time.  I refinanced into a 15 year mortgage, so that we wouldn't be underwater forever.  If we sell now, I think we would break even, given the cost to sell.  Right now, its rented until September 2016 (two year tenant).  Can we sell with a tenant?  I don't really want to refi again, back to a 30 (fees!), plus I'm not sure what our credit looks like now.  It used to be high 700/low 800.  But now with late payments for the last six months....?

I'm taking over the "budget" effective immediately.  Actually writing this down (and making cuts as recommended), shows me we should have an extra $2,000 (or more) per month.   I should be able to make this month's mortgage payment before January. 

I'm not telling my husband we could probably afford to keep his car.  I don't want to live paycheck to paycheck; what happens when I'm 70? Or if one of us dies?  If he thinks we are that close to bankruptcy (and we are damn close- its literally 2 weeks away), then I'm using this opportunity to get rid of the debt that can be sold, and pay those freaking credit cards.  If we are in a smaller house too, then that is all the more I can save.  Oh yes, and he's going to buy a cigarette vaporizer tomorrow, if I agree to leave the thermostat at 67. 

[J'onn J'onzz]

Congrats for stepping up and taking control. It can be hard to set up and take over especially when you have to take it away from your SO.

It may be helpful for you to looking to some budgeting/expense tracking software. There are some free options out there like Mint and Person Capital. I use Personal Capital myself but that is mainly because it focuses more on investments than spending, Mint seems to have more of a spending focus.

I know a lot of people here recommend YNAD, You Need a Budget, and almost everyone seems to really like that one. I have personally not tried it and I believe there is a fee to use it where the other 2 I mentioned are free.

Good Luck!!

[Another Reader]

Late payments will likely make it impossible to refinance.  Selling the rental might be helpful in stemming the bleeding.  Talk to a couple of agents to see how difficult it would be to sell with a tenant in place and how much you would likely get for the property.

Taking over the budget is not the same as controlling spending.  Your husband is spending all the money on something and lying to you about the financial situation.  Unless he agrees to you having complete control of the accounts and is willing to have each of you get a cash "allowance," you are just beginning the battle.  You may find he is spending the money on an addiction of some kind, based on the behavior you describe.  Counseling might help get to the root of the problem.

[nereo]

good for oyu and I wish you the best.  Stick around and update us on progress and we'll help you were you can.

I'm not telling my husband we could probably afford to keep his car.  I don't want to live paycheck to paycheck; what happens when I'm 70? Or if one of us dies?  If he thinks we are that close to bankruptcy (and we are damn close- its literally 2 weeks away), then I'm using this opportunity to get rid of the debt that can be sold, and pay those freaking credit cards.  If we are in a smaller house too, then that is all the more I can save.  Oh yes, and he's going to buy a cigarette vaporizer tomorrow, if I agree to leave the thermostat at 67. 

Here's a wake-up call for you/him - you CAN'T afford to keep that car.  You have $29k in CC debt.  You are loosing money every month on a rental.  Sure, it's possible you could stretch it out indefinitely by accruing more debt and delaying payments, but given your debt load you can't afford that car.  That's ok though - unless you or your partner are in search-and-rescue, you don't need an FJ.  no normal commuter does.

[Gimesalot]

You can sell the rental with a tenant in place.  We just bought a multi-unit building with two tenants in place.  It sold just like a normal house except the selling price was decreased by the amount of the deposits.  In our case $1800.  Everything else was similar.  If the house were sold for occupancy, the tenant would have to move out, but that is expected.  If I were you, I would sell as soon as possible to stop the loss.

As others have said, the first step is the big easy cuts (smoking, tv, car, eating out).  After that, you really need to figure out where your money goes. 

[FarmerPete]

Did I read this correctly that you are spending $600 a month on gas AND you work from home?  Please explain.  We've got two cars (16/22 MPG and 24/31 MPG cars) and we always spend under $200 for normal driving.  It's been under $150 with current prices.  Who is doing so much driving!!!!

[frugaliknowit]

1.  Dump the rental.
2.  Ideally, sell your house and move into as cheap of a rental as you can stand (there's little/no equity in either one, so there's no point to keeping them with all that cc debt).  Think of it as a one-year deployment to destroy your debt.
3.  Dump the loan on wheels.
3.  Cut out the clown spending.
4.  Pay off the CC's in one year.
5.  Rebuild savings.

[Chrissy]

It'll be harder to see where the money goes if there are a lot of cash withdrawals.  Try to put everything on a credit card to get the rewards.  Weekly or monthly allowances for yourself and your husband can be cash, but stick to the limit.

One thing you actually need to buy is life insurance.  You have a daughter, and you need to safeguard her future if something should happen to one of you.  Also, you might research putting the insurance payout/your estate in a trust for her until she's 18 or 22 or older, in the event of your death... maybe with your parent or one of your siblings as the trustee. 

If you were to die, and your husband had control of the remaining assets, it's clear that within two or three years, there would be nothing left.

[MyCircus, MyMonkeys]

Hi, wanted to post an update to my first post, and share some good news!

I ended up calling both mortgage companies, and requested a payment plan.  We've been making extra payments each month, and both the primary and rental house are officially caught up (as of July 1).  We still have about $400 in accrued late fees over both houses, but the mortgage company said we can make payments on those as well (they don't accrue interest). 

We traded in the FJ, and financed (I know, financing is  stupid) a Corolla. I hate everything about it, except how often I put gas in- once every two weeks (due to my teleworking twice each week).  My husband now drives the ancient Camry.

As to the credit card debt:  that balance is now sitting at $17,200.  Still crazy high, but we've paid $10,800!  We have one more payment next month of $1200, then we can start on the second card.  (!!!!) I believe by April 2016 the second CC will be close to paid off. 

By next year, I think we will be in the window to sell our rental (tenant lease expires in August).  Because we have been paying on the 15 year mortgage for the rental, I will actually make money on the sale.  Which will go to paying off the car payment, and the rest to paying down the primary house mortgage.

As to the marriage- well, I am in charge of all finances.  He gets an allowance for cigarettes!

[ShoulderThingThatGoesUp]

Wow! I just read your first post today and thought HOLY *****! It's great that you're on track.

[PARedbeard]

Nice job, Nessie!

[Dicey]

Good for you and thanks for the update, Nessie!

You have made great progress, but you still have college looming on the horizon. Have you considered recasting the rental mortgage? If your lender would recast or streamline a re-fi back to a 30 year loan, you will have an income-generating machine to help pay for DD's college. (Starting with 2 years of junior college, natch.)

It's in the bank's best interest to recharacterize/re-cast the loan (more interest for them) and your tenant will be covering the whole nut, plus a surplus, so you will come out ahead, despite a higher amount of interest being paid over the life of the loan. If they won't do it on the cheap, consider a straight re-fi to a 30-year, fixed mortgage. Use that rental property as a mighty engine to propel you towards your life goals.

[meandmyfamily]

Keep up to good work!

[Chrissy]

Way to go!

[MDM]

Hi, wanted to post an update to my first post, and share some good news!
We've been making extra payments each month, and both the primary and rental house are officially caught up (as of July 1).

As to the credit card debt:  that balance is now sitting at $17,200.

Nessie1014, great progress - good for you!

Would it be worthwhile for you to pay the minimums on every debt except the credit card?  The question assumes the CC interest is much higher than your other debts.  See http://www.vertex42.com/Calculators/debt-reduction-calculator.html for a tool to calculate the amount you would save by paying the highest interest loan first.

[MyCircus, MyMonkeys]

MDM, that is what we are doing. The extra payments are really due to a repayment plan for the primary and rental mortgages (we were two months behind on one and one month behind on the other).  I've been focusing on the lower balance credit card, and paying minimums on everything else. After my last payment next month, I will start making triple payments on the last remaining credit card.

Chrissy, I will look into your suggestion. At the moment, my credit score is laughable- I was barely able to finance the cheaper car. I looked into an equity loan on the rental (to pay off cc debt) and the lender said no way. From that experience (and the car trade-in and purchase), I assumed I wouldn't be able to refi the rental mortgage.

As to college and life insurance- definitely on my mind. I'm insured, and I purchased life insurance for my husband through VA (enough for burial only). We are working through a private company to get $100k for him. I know it's not enough, but it's what we can afford with his smoking and my budget. Daughter and I have had an agreement since she was 8- two years at a community college, then I will pay for at least one year in a dorm. I've always regretted not getting he college life experience (for me, it was college after army). So, I hope to give her that- AFTER she has grown up a little (also trying to avoid her dropping out first year due to whatever).

Thanks everyone! I look forward to updating after a very conservative christmas!

[Dicey]

I looked into an equity loan on the rental (to pay off cc debt) and the lender said no way. From that experience (and the car trade-in and purchase), I assumed I wouldn't be able to refi the rental mortgage.

Have you looked into HARP loans? IIRC, they have options for underwater and rental properties. Worth your time to find out.

Thanks everyone! I look forward to updating after a very conservative christmas!

Oh, please don't keep us waiting until Christmas! I hang out here to offer encouragement to people on their way to FIRE. It may not be lolipops and unicorns all the time, but it's not all facepunches either, especially with your progress.

[MyCircus, MyMonkeys]

Hey hey hey! I just re-read my first ever post, and am very excited to be able to quantify our progress this past year.  The first six months of 2015 were very difficult with no extra money and catching up on past-due payments.  House payments are both caught up (late fees and all).

We originally had two credit cards, totaling $29k- both of which were maxed out.  We had one clown car (~$560 a month; balance of ~$29k).

As of today, we have paid off one credit card  and have a balance due of $8863 on the second credit card. I hope to have that card paid off by April/May 2016.  After that, my next plan is to start making monthly $2k payments on the Corolla car payment. I think I can have the car paid off by February 2017 (we will have non-recurring expenses in June and July that will detract some from my payment plans).

I'm able to start planning for the future now- I've upped my TSP to 5% to get the company match, and am currently deciding on going up to 13% for tax planning purposes next year (mainly to drop our annual income to the next lower tax bracket). When accounting for raises that take effect next pay period, my take-home (at the 13% rate) will only be $100 less than it is currently.  Also, we finally purchased a life insurance policy for my husband. 

I have hope for our future.  We still have debt, but we won't always. 

[AZDude]

Realistically, you need to solve this:

  -put an end to all spending under "useless crap I waste money on." Savings: $1659.

before you even start thinking about selling homes, etc... Get your spending under control and to a point where you are financially stable, then take a big picture look and decide what to do. Right now, your hair is on fire. Put it out.

[nereo]

Glad to see you are making progress Nessie.  Keep up the good work.

What are your financial plans/goals after the last of your debts (the corolla) is paid off in Feb 2017?

[BlueHouse]

Hey hey hey! I just re-read my first ever post, and am very excited to be able to quantify our progress this past year.  The first six months of 2015 were very difficult with no extra money and catching up on past-due payments.  House payments are both caught up (late fees and all).

We originally had two credit cards, totaling $29k- both of which were maxed out.  We had one clown car (~$560 a month; balance of ~$29k).

As of today, we have paid off one credit card  and have a balance due of $8863 on the second credit card. I hope to have that card paid off by April/May 2016.  After that, my next plan is to start making monthly $2k payments on the Corolla car payment. I think I can have the car paid off by February 2017 (we will have non-recurring expenses in June and July that will detract some from my payment plans).

I'm able to start planning for the future now- I've upped my TSP to 5% to get the company match, and am currently deciding on going up to 13% for tax planning purposes next year (mainly to drop our annual income to the next lower tax bracket). When accounting for raises that take effect next pay period, my take-home (at the 13% rate) will only be $100 less than it is currently.  Also, we finally purchased a life insurance policy for my husband. 

I have hope for our future.  We still have debt, but we won't always.

That is so impressive!  You've really made fantastic progress and you're motivating me to work on some of my problem areas.  Great work! 

[marty998]

Well done. Incredible change in such a short space of time.

[MyCircus, MyMonkeys]

As for future plans, I'm not entirely sure. My short term goal is to minimize our monthly recurring expenses.  We've eliminated cable and reduced our internet bill.  Our "miscellaneous" spending has gone from WTF to $300 a month.  It really helped when I signed up for Mint, and was able to show my husband our total monthly spending by category- eating out, groceries, CIGARETTES, etc. He was shocked at how much we are still spending, as he thought he was being "good."

For the long term, after the credit card is paid off, I am going to pay off the car note (approx. $16k right now).  After that, I'm thinking my next step will be to max my TSP contribution. Or would it make sense to max my TSP contribution first, then put all extra remaining to my car note? It would be a difference of paying $2000/month on my car, or putting $1200/month on my car (current car note is $327/month).

Then, I suppose I'll start trolling the investments forum, and start learning about Vanguard!

[Dicey]

As for future plans, I'm not entirely sure. My short term goal is to minimize our monthly recurring expenses.  We've eliminated cable and reduced our internet bill.  Our "miscellaneous" spending has gone from WTF to $300 a month.  It really helped when I signed up for Mint, and was able to show my husband our total monthly spending by category- eating out, groceries, CIGARETTES, etc. He was shocked at how much we are still spending, as he thought he was being "good."

For the long term, after the credit card is paid off, I am going to pay off the car note (approx. $16k right now).  After that, I'm thinking my next step will be to max my TSP contribution. Or would it make sense to max my TSP contribution first, then put all extra remaining to my car note? It would be a difference of paying $2000/month on my car, or putting $1200/month on my car (current car note is $327/month).

Then, I suppose I'll start trolling the investments forum, and start learning about Vanguard!

Thanks for the update! Awesome progress. Have you given any thought to recasting the rental property loan back into a 30-year product while the rates are still low? Also, did you look into the HARP program? If you could lower that mortgage payment, you'd kill all the stupid debt (i.e. CC and car loans) even sooner. est of luck to you in 2016 and keep up the good work!

[MyCircus, MyMonkeys]

Diane C, I wanted to provide a general update (also thinking of maybe changing this thread into a journal and moving it over to the right place), and also ask a few questions about potentially refinancing my rental?

We are using YNAB 4.  It's still a learning process- as we just started last week.  I know, I want to punch myself.  I re-read my old posts (yikes), and it's crazy to see (in the past week, since we start officially "budgeting") how much money we were still "losing."  Our only credit card balance is now $2500, and our only car note is about $16k (refinanced a few months ago from 8% to 4%).  All houses are caught up; his is contributing 6% (the minimum required to meet his employer's match) to his 401k; and I am contributing 14% to TSP.

I have a real estate agent coming over this Friday, to provide analysis of both our primary and rental homes. I was going to sell both, now I'm waiting to see what the numbers are before I commit to a decision.  I know we spend too much to live in this house, and ultimately really want to sell soon (like, now or within 12 months).  I know we've been losing money on our rental for the longest, and really wanted to sell that too.  But now, fellow readers, I have a specific question:

is it worthwhile to refinance our rental home to make it finally cash flow?

Details:  original purchase of approx. $141k @6% in 2007, with monthly payments @$950; refinanced $131k into 15 yr loan @3.25%, with current monthly payments at 1063 (this includes property tax, principal and interest- no PMI either time).

Tenant signed a 2 yr lease, and there has been no issues/drama; and I would like to offer a new 2 yr lease, with a 3% raise to 1025/month. We've just replaced the roof, previously updated the kitchen and master bath, and recently replaced the water heater- so, in pretty decent shape.  I've run many different scenarios, and think it may work to keep the rental if we: (1) cancel our property manager, (2) offer a new 2 yr lease to the current tenant, and (3) Refinance our rental mortgage in to a 30yr at whatever rate we qualify for.

if our property appraises at $135k, then our LTV is approx. 74.07%.  However, it will only be in July 2016 that we will have 1 yr of no late payments.  Plus, our FAKO scores are showing as a range of 715-740.  How much will either (or both) hurt us to refi?  Finally, I have no RE comps (those will be provided this Friday). 

Am I crazy?

[Chrissy]

I don't think you're crazy to consider refinancing the rental rather than selling.  In fact, many people here suggested you refinance!  What you CAN'T do is keep losing money on the thing.

[Another Reader]

There's no way the rental will be cash flow positive with your numbers.  The rent with the proposed increase is only $1,025 on a $135k property with a current mortgage payment of $1,063.  Even if you refinance and cut your PITI a couple of hundred a month, the savings will get eaten up over time by vacancy, collection loss, repairs, maintenance, and capital improvements.  Yes, you have spent a lot on recent capital improvements, but houses have ongoing expenses.  You are not in a position to deal with more large expenses.   In your shoes, I would look seriously at selling the rental.