For Mitch and Lynda Richards, pursuing a dream has become fraught with uncertainty. As the owners of the Lovejoy Inn in Coupeville, on Whidbey...

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For Mitch and Lynda Richards, pursuing a dream has become fraught with uncertainty.

As the owners of the Lovejoy Inn in Coupeville, on Whidbey Island, a four-room bed-and-breakfast they established, they are living and working in a charming town with a close-knit community.

But their real-estate investments have come with a price: a lot of debt and not much cash.

Specifically, between the inn (where they also live with their three daughters, ages 14, 12 and 9), the cottage next door (which is owned through a family corporation as a vacation home, and which pays for itself), and another house in town that they lease to long-term renters, the Richardses have found themselves with high monthly expenses and a cash flow that varies widely from month to month, but never seems to be enough.

They’ve tried refinancing the Inn four times, and the rental house three times, and also applied for mortgage adjustments, to no avail. With monthly payments on the Inn coming to $2,500, and $1,700 a month for the rental, they would love to get better terms, or get out from under the mortgages.

Lynda Richards, 46, said that the first two times they tried refinancing they were turned down for not making enough money. The third time they were turned down for making too much and therefore

not needing the refinancing.

Nonetheless, while the Inn’s income has been growing 10 to 15 percent per year since it opened in 2007, the cash doesn’t stick around long, the credit cards take over, and the Richardses didn’t know what more they could do.

The income varies widely by season: in summer they could bring in $8,000 a month. In winter, said Mitch Richards, 51, they probably could close and not lose any income.

The rental house is a particular concern. They bought it for Mitch’s parents in 2006 (they were living and working at Seattle Pacific University’s Camp Casey Conference Center on the island at the time). But Mitch’s father died three years later, and the next year his mother moved into an assisted-living home.

They tried to sell the house last year, during which time it sat empty for six months. They gave up and rented it out, albeit for a loss at $1,250 a month.

“We totally can’t refinance, it’s worth what we owe; what do we do? Do we walk away?” Lynda said.

This was the issue that drove them to fill out an online survey to participate in a free financial makeover

Joe Wride, a certified financial planner with Seattle-based Sage Advisors and member of the Puget Sound chapter of the Financial Planning Association, says the couple have found themselves in a common conundrum.

“They’re not in a dire situation where things are horrible,” Wride said. “They are on the precipice, and if things continue down the same path they’re going in, they could get into some real trouble.”

“They took on a lot of investment in real estate and other things that are illiquid for their level of income,” he added.

In addition to the mortgages, which are $415,000 for the inn and $224,000 for the rental house in town, the Richardses have about $25,000 in credit-card debt across three cards, much of which came from maintenance costs on their three properties. The combined minimum payment on those three cards is more than $1,000 a month.

They own their minivan and pickup outright — “because we buy old,” Mitch said — but would eventually like to get something more fuel-efficient to make the daily 20-mile round trip to Oak Harbor to take their two oldest girls to school. The youngest goes to school near home in Coupeville.

They probably spend up to $300 per month on gas and up to $800 for groceries.

And then there are the expenses that come from running a home-based business. While 47 percent of the inn can be counted as a home office for tax purposes, the utilities are not separated out.

During the summer, Mitch said he’s doing six loads of laundry a day. “In the winter it’s heat.”

The Richardses live in the older portion of the house, an 1886 Victorian with 1,800 square feet and two bedrooms, with the back porch converted into Mitch and Lynda’s room. A newer addition houses the four guest rooms.

Lynda makes breakfast and manages the books. Mitch is the handyman, marketing department, cleaning service and everything else.

Lynda also works for the Island County government for 32 hours a week, which provides the family’s health insurance, and she puts $300 a week into a deferred-compensation retirement plan. Mitch has about $45,000 in an IRA from his work for Seattle Pacific University, and Lynda an additional $10,000 in a pension fund from when she worked for the city of Seattle.

The family also contributes to the state’s GET fund for their kids’ college education, with a goal being that they will eventually have enough in there to cover one year of college for each daughter.

“They know they need to do their part and get good grades,” Lynda said.

The financial plan Wride drew up for them relies on some strategic cash-flow management to make sure they slowly can get out of debt, and a little bit on the hope that the real-estate market will eventually turn around.

One of the top priorities was to take care of what Wride saw was a critical need for term life insurance, as well as disability insurance for Mitch, who has none.

Second, he advised that Lynda shift her retirement fund to a Roth IRA so she will not get dinged by taxes when she retires.

The Richardses had already been prioritizing their credit-card payments, paying down the card with the highest interest rate first.

The key piece is to not give up on refinancing the rental house, and Wride recommended they consult with a mortgage broker who can shop around for good rates for them.

But that also means the Richardses have to bide their time: It may be six months to a year before a sale or a refinance could come through, during which time they will have to be careful not to go deeper into debt.

“If they can hold on and make some minor changes, they can be in a position that’s pretty good in the medium term,” Wride said.

As a family, the Richardses are worth about $200,000, with isn’t atypical for people their age. Their problem is one of liquidity.

Those words are somewhat of a relief to the Richardses, even if it doesn’t point to a quick and easy solution.

The plan has given them the hope that they will eventually get out of the debt hole, even if it means carrying the rental house for another year.

Walking away from that mortgage is a desperate move that they don’t want to take, and which Wride advised against because of the damage it would do to their credit rating.

“Bottom line, we don’t feel like we’ve got a magic answer for the house, but we feel better plugging along, that it’s not all in vain,” Lynda said.

“Our cash flow’s not good, but I feel like there’s light at the end of the tunnel,” she said.