I have a problem. I bought a buy-and-hold investment property for $599,000 plus another $35000 closing costs in August 2006. I put $5000 down on the house and the rest is mortgage. But these numbers aren't really the issue here.

This house is in an area where there are lots of 2 family homes. Some of these homes have finished basements that are illegally rented out by the owner. I took my chances when I bought this house- I had intentions from the beginning of illegally putting 3 families in it.

I was getting 1800, 1600, and 1000 a month in rent from this house- the beautiful basement was getting the 1000 rent. 4400 a month total, pretty good. The 19 year old son on the first floor started getting in trouble with a retired ex-cop across the street. The cops were called to the house a couple of times. A couple of days later, the housing inspectors came by. No one let them in, but it's now a matter of time before they inspect my house. There is no legal below ground living in this town.

My temporary solution was to tell the basement apartment people they had to leave, and I told the people on the first floor to avoid the inspectors as long as possible.

The problem is... now I'm only getting 3400 a month in rent! This means that I am losing money every month, unless the value of this house increases faster than expected. I've pretty much decided I have to sell the house. Nevermind any interest I've paid on the mortgage, or the high taxes- I accept that loss. I'm worried about trying to sell a house that has tenants that are under lease for another year and a half, and I'm not even sure I can get a buyer for $650,000. Should I try to sell it myself to avoid the real estate commissions?

I accept I'm going to lose money on this house. I just want to minimize those losses and move on. If I were to pay 4-6% commission and dump the house for $600,000 it would be a disaster (that I can't afford)! Any advice at all is appreciated.

Also my email is robert2557@yahoo.com, phone number is (516) 830-1508 after 5PM.