Advice Needed on a Property that is Barely Cashflowing

[Wenjing Wang]

Hi BP,

This is my very first post here :) 

We need some advice with one of our rental properties. It was not the best investment, (bought in 2007 during peak), the property is barely cash flowing. $76 monthly cash flow, cash on cash return is ~1%. We don't expect the property to have much capital gain, the market price is fairly stable (don't expect it to fall very much either). 

We see three options: 

1) sell the property, we expect to get ~$70K and invest it else well for better than 1% return

2) pay down mortgage ($160K) that would bring up cash flow to over $1K a month, but over all ROI is still low (6%) We don't have the cash now, but could save towards it and may be able to pay it down in a couple of years. If we do this, we would miss out on mortgage interest deduction, not sure how to calculate that.

3) leave it as it, although cash flow is low, it is paying for mortgage (easiest option, but I really don't like that 1% in my spreadsheet)

Any advice would be much appreciated! 

Thank you

-Lily

Detailed numbers: 

Current Market Value: $230,000

Money Invested (down pay + extra payments): $70,000

Mortgage Balance: $160,000

Monthly Mortgage: $1000

Monthly Expenses: $524

Monthly Rent: $1600

Monthly Cash flow: $ 76

[Dan Perrott]

Will a refi bring a lower payment and larger cash flow?