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Renting or Selling with negative cashflow
Friends I am in need of some guidance. I currently own a home in Hawaii, unfortunately my family and I are moving and we want to make the correct choice. We have the means to rent our current hawaii home and purchase our next home in the mainland. The only problem is that we will be negative cashflow with our current hawaii home by about 1k every month. If we sell, we will make some profit but not much. With the Hawaii market, will it be smart to be negative for a few years and let appreciation catch up? Or will it be better to take the small profit and buy elsewhere?
we purchased the home at a 3% rate and have owned it for about 2 and a half years. The negative 1K per month includes the property management fee. Honestly we could afford to go negative monthly without a huge financial burden. This would be our first rental and we would be living out of state.
#4 Off Topic Contributor
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#4 Off Topic Contributor
- Property Manager
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@Lucas Gomez investors in California and Washington face the same question.
You'd need to analyze the trends and get comfortable with the risks, but it's done all the time.
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Why are you hiring property management to manage one single-family home? You could easily manage that yourself with a handyperson on call. Most people make this mistake. What do you need a property management company for? You can manage remote from anywhere without paying the fees. If you have a lot of units, sure, that makes sense. If you manage yourself, what is your deficit?
Also, if you want to be removed from management of one property, definitely sell it. The rate is good, but Hawaii has continually hit appreciation booms for the last several years so it should still go up, but not as crazily as from the pandemic to now.
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#5 New Member Introductions Contributor
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I would do a deep dive into the market and determine whether you think it will continue to appreciate.
you can always do short term, might get more money that way but it will be a little more work with the clean ups. doesn’t hurt to try! read up on short term rentals & check the laws.
Quote from @Jonathan Greene:
Why are you hiring property management to manage one single-family home? You could easily manage that yourself with a handyperson on call. Most people make this mistake. What do you need a property management company for? You can manage remote from anywhere without paying the fees. If you have a lot of units, sure, that makes sense. If you manage yourself, what is your deficit?
Also, if you want to be removed from management of one property, definitely sell it. The rate is good, but Hawaii has continually hit appreciation booms for the last several years so it should still go up, but not as crazily as from the pandemic to now.
I’d hang onto it with that 3% rate if you can afford to eat that 1k/month. I bet it appreciates 2 or 3k/month over time. And it’s simple to self manage if you want to save a buck. I self manage 26 houses and it’s easy to do.
Quote from @Lucas Gomez:
Friends I am in need of some guidance. I currently own a home in Hawaii, unfortunately my family and I are moving and we want to make the correct choice. We have the means to rent our current hawaii home and purchase our next home in the mainland. The only problem is that we will be negative cashflow with our current hawaii home by about 1k every month. If we sell, we will make some profit but not much. With the Hawaii market, will it be smart to be negative for a few years and let appreciation catch up? Or will it be better to take the small profit and buy elsewhere?
we purchased the home at a 3% rate and have owned it for about 2 and a half years. The negative 1K per month includes the property management fee. Honestly we could afford to go negative monthly without a huge financial burden. This would be our first rental and we would be living out of state.
Aloha Lucas, where is your property located? Are you looking to rent it as a MTR? You can get higher rent rates that way. Do you have a VA or conventional loan? Please let me know if you need assistance with options, I'll be glad to meet in person. Mahalo!
Quote from @Lucas Gomez:
Friends I am in need of some guidance. I currently own a home in Hawaii, unfortunately my family and I are moving and we want to make the correct choice. We have the means to rent our current hawaii home and purchase our next home in the mainland. The only problem is that we will be negative cashflow with our current hawaii home by about 1k every month. If we sell, we will make some profit but not much. With the Hawaii market, will it be smart to be negative for a few years and let appreciation catch up? Or will it be better to take the small profit and buy elsewhere?
we purchased the home at a 3% rate and have owned it for about 2 and a half years. The negative 1K per month includes the property management fee. Honestly we could afford to go negative monthly without a huge financial burden. This would be our first rental and we would be living out of state.
Hey Lucas, just wanted to know if you have any update to share. Did you end up in selling the property or you still renting it?
@Lucas Gomez
I would look at it another way. Could you find a better investment on the mainland? If you sell, take the cash and the monthly money and put that into another property - where would you be better off? I would assume little to no appreciation over next five years so I would model it and see where it plays out
I am assuming that your home is a detached single family house, irrespective of the island or neighborhood, I think you should hang on to it, as real estate in Hawaii only goes up. As far taking a $1K loss a month, maybe talk to different prop mgmt companies to see if you can get a better deal or if your property needs any upgrades that you can perform in order to ask for a better or higher rent, something to consider.
@Lucas Gomez Have you considered running it as a Mid Term Rental? Depending on how well you set it up, you may be able to break even, or even positive cash flow.