Implosion imminent?

[lifeisgood]

I am hoping you all can point me in the right direction, which probably includes a serious kick in the butt. I have a small business that is doing very well but it's been a rough couple of years. My business partner quit after we'd done an expensive expansion and like many entrepreneurs, I mortgaged to the hilt, borrowed from family, and ran up some credit cards to stop the bleeding. Fortunately I have a great credit rating so the cards have really low interest rates but there's still about 50K of it which is an unfathomable amount to me. I live a pretty simple lifestyle so there aren't a lot of areas to cut back. I have a son starting college in 2 months, child support ending. The only thing I can think to do is sell the house. My mortgage plus all the other home expenses are high, about 40% of my net. I've stopped contributing to my IRA til I can dig out but it seems like it's going to take forever and things will get worse before they get better. It's unlikely I'll make anything on the house if I sell but I don't need 2200 sq. ft. (though I love my house and yard) and I feel like this situation is a ticking time bomb and that's the best solution. What do you think?

[Megan]

Well, I think the first thing to do is to is figure out how much you could potentially be saving every month by renting. Can you find a suitable place to rent for that much less than you're paying for your home? Maybe that's a silly question, but depending on where you live, a valid one.

How far are you from making your monthly payments on all your bills?

I would hate to see you have to sell a house that you love if you don't have to.

[lifeisgood]

I could save $500-800 a month on rent, but I lose my tax deduction which is like adding $300/month onto the rent. If I buy a townhouse, I don't have to deal with yardwork which will simplify my life a lot, I'll reduce utilities, get the deduction and probably reduce the mortgage by about $700. Is that enough to make a difference? During some of the winter months last year, the heating bill was $200 and that was keeping the thermostat set on 66, turning it down when no one was home, etc. It's going to be worse this year. I want to be as eco conscious as possible in space, yard, etc. But I just love my house!

[Julie Rains]

Could you get a roommate for a year or so to help your cash flow while you pay down debt?

[Megan]

Julie makes a good suggstion.

I have a friend who is renting out space in her basement for storage for an acquaintance. It's cheaper for the person storing to use her home rather than pay for storage elsewhere, and my friend makes a bit of extra money for doing nothing at all.

[Xin Lu]

I think the renting idea is good. My parents started renting out a room in their house to graduate students after I left. They have someone to talk to and also collect a bit of rent. They don't really need the money, but I think they're doing it for fun. If you have 2200 sqft you probably have 3 to 4 bedrooms and a couple bathrooms as well. If you could rent out a couple of those bedrooms then I think you'll do fine.

[lifeisgood]

Thanks for your responses. I have thought about a roommate and have had them off and on. The house is set up perfectly with a bedroom, bath and nice living area in the lower level. Do you think the rent would make enough of a difference? Maybe I'm too concerned about worst case scenarios with my finances and I should just relax and keep doing what I'm doing.

[sheecatt]

What? Rent? I wouldn't do that. If you own the home, do NOT sell it. Focus on what is making your income not be enough. It is HARD, but, you must be as frugal as possible at this point without suffering. It will only be temporary. Look at the Big Picture...small sacrifice now will get you to a better place after. Cut back on things you really don't need, and use that extra money to pay off your highest interest credit card (or the one that is holding you down), we all have that ONE hell card that is holding us back. Once you pay that btch off, take that extra money and pay it towards the next hell card, ...etc. Once you pay off that first debt, the rest are like dominoes. It's just hard to pay off that first one. I feel ya. >^..^<

[sheecatt]

I see what is meant by renting. No way, especially with a child. Not needed. Unless the mortgage is completely unaffordable on its own merit, then rent out the whole house. I think it's scary to let a stranger (or anyone) live under the same roof if I had a child, even if it was only me. Shivers.

[Mary Webber]

The renting idea appeals to me as I feel so strongly about keeping a home - not just a house - that you love. There are so many safeguards you can put in place before renting, including a contract with whatever you want clearly stated, such as no overnight guests for more than what? One day? Two days? Negotiable? How are the kitchen privileges to be handled?

Check with your town's schools to see if there's a new teacher who may need a room. Advantage here is that the person may well be gone during vacation periods.
If there's a college nearby, look for a professional who might need living quarters, a research assitant on a one-year grant, an exchange student, etc. I'd be very hesitant to take in a regular undergrad student unless they were older and came with impeccable references, which anyone and everyone you consider should have, AND you should check out!