Cash flow neutral vs Sell

[Logan Sierra]

BP,

BLUF: Based on raise in HOA/fees in our current home and the decrease in rent based on current market there is a possibility that we would have to rent at cash flow neutral.

Our initial decision to rent was based on the data at the time (4 months ago). At that point we would cash flow approx $250-300. Since then, rent has decreased by about $100-150 and we are expecting HOA fees to increase $100-125.

We never decided to rent based on cash flow. Primarily, based on the area, we are looking at long term appreciation. However, there are risks to not having cash flow as well. 

What would you do? 
thanks!

[Jake Andronico]

@Logan Sierra

I'm sorry you're in that situation. Would need more info. 

Do you have equity? 

Is the house turnkey? Older? Renovated? 

Do you have cash reserves? 

[Logan Sierra]

Quote from @Jake Andronico:

@Logan Sierra

I'm sorry you're in that situation. Would need more info. 

Do you have equity? 

Is the house turnkey? Older? Renovated? 

Do you have cash reserves? 

@Jake Andronico We used a VA loan 3 years ago with zero down. The property is in an A class neighborhood. Condo style property. It's definitely turnkey. Build in 2020.
I do not specifically have cash reserves for property investing atm. I do have a general emergency fund but I wouldn’t really want to use it for that, if that makes sense. 
Thanks for spending the time!

[Joe Villeneuve]

Sell it.  Cash flow neutral is just another way of saying negative cash flow when you realize all you need is one month where there's a capital expense, vacancy, etc...  That means you will be paying your tenant to live in your house.  

That added cost could be enough to turn an entire year negative.  Using your own property, when it was CFP at $300/month, it would only take a cost of over $3600 total to turn that property negative for that year.  This is an added cost to you.  If the rent covers it, the tenant is paying for it since that is the source of the funds.

Your property is a business, that must stand on it's own. A business can own a ton of equipment, all paid for, but if a business was bleeding cash, losing money, it eventually goes under, and all that equity will be lost.  The business owner must realize this, and the sooner the better. Equity is great, and a necessity, but can't make up for negative cost in a business. 

Positive CF is very important.  Don't buy specifically for it, but don't buy without it...and sell  when you lose it, it won't get better, and will continue to be a cost to you month after month, year after year.  Your money could/should be better spent.