Options for a SFH residence turned rental with negative Cash Flow

[Anthony Covington]

Hi guys. Tony here. 

So before BP when i knew less than nothing about REI, I bought my first SFH outside Jacksonville, FL where we lived for a few years. Work brought us to PA, so we rented it out to cover the mortgage.

Now that I know more, I ran the numbers through the calculator(vacancy, capX etc.) and found out I am -$150 cash flow/month. I believe the rent to be near the top of the market(1,500) but I do have good equity (60k). I also got ahead of myself and opened a HELOC on the property for capital on new projects, so I can't sell for a few years.

I think the problem is I didn't buy it as an investment. Any creative ideas on turning it around or mitigating the -CF? 

-Thanks

[Daren Card]

Could consider a lease option to bridge the gap to selling the property. Find someone who wants to own but can't due to issues with credit, etc. Charge small payment to activate lease and agree on an eventual purchase price maybe 3-5 years down the road. From what I hear about Jacksonville, it is appreciating, so that helps you, but perhaps you leave some meat on the bone to entice buyer to commit to future sale price. You're "tenant" then had a few years to become eligible for financing to buy the property from you by executing option.

Then continue accepting your monthly check at about what you are getting now. Benefit of lease option is that your "tenant" now has more of an ownership mentality and you can even contractually unload maintenance and capex expenses to him/her because he/she will eventually own it. Vacancy falls to 0 for duration of lease. So now you might even cashflow on the property with those expenses gone and you have your exit figured out too. Only issue comes if person does not execute the option and purchase, but you can just repeat this same strategy with someone else.