Should I hold on or sell?

[Allison Spencer]

Hi all, I'm in need of advice.We have 130k equity in a rental home in Mesa, AZ. We are on a 10 year, 2.99 interest and only have 5 more years till it's completely paid off. We are paying an additional $200 a month because rent isn't bringing in enough to cover our mortgage and HOA. We are paying $1480 and renting it for $1300. So, should we 1) continue doing what we are doing and in 5 years once it's paid off, we will have $1300/mo in passive income 2) sell this home and take the equity of 130k and pay cash for a home that would generate about 800/month right now 3) refinance this home back to a 30 year or 4) any other ideas. Thank you!

[Ryan Swan]

@Allison Spencer The answer is in the math! You're losing (at least) $2,400/year, or over $12,000 over the next 5 years, VS gaining (assuming best case scenario for easy math) $9,600/year with a different rental flowing $800/month. Over the next 5 years, that would generate around $48,000 in positive cash flow, which would be enough for a nice down payment on another rental property! If you decide to pay off the current condo, it will take you another four years after paying it off and renting it for $1300/month just to dig yourself out of the red and break even with the other scenario. 

There may be other scenarios to consider, so feel free to PM me if you want to discuss them!