Apartment won't rent

[Brian Ky]

I have a friend who recently moved from Germany to California and is attempting to rent his apartment, in Germany, by owner but isn't having any luck. It has been about 4 months now. My wife wanted me to talk with him about his strategy so he can get it rented.  I wanted to reach out to the BP community to see if there were any other ideas before I talk with him. He doesn't want to sell the property as he intends on moving back to Germany some time in the future. 

Here is some back ground of the problem. He has been owner occupant in the property for the last 10 years and has a 15 year mortgage. Since the loan is 15 years, the payments are a little high to habe a positive cash flow. But he wants to rent the property at a rate to break even. So I believe the issue is he is charging too much for rent. He appears to be aware of this and is marketing to newer US government employees moving to Germany as the government will pay more than far market value. But none of them are biting, to the point my wife has only shown the apartment once. I again belive that they are finding better places to live at the same rental cost. 

So here is my first idea. Lower the rent to the fair market value and eat up the negative cash flow for a few years. Then he will have the apartment paid off which will cash flow very well. 

Option two is to refinance their mortgage so the payment is lower and they can positively cash flow with the fair market rent. 

Either way, he also needs to hire a PM as his current marketing strategy is not working. 

Any other options which would help are greatly appreciated. 

[Jon Holdman]

The amount of his mortgage payment is ABSOLUTELY IRRELEVANT to determining the rent.   If he really wants to rent it he will need to get it priced in line with the market for similar rentals in the same area.  

If you've been around here for a while, you'll know that just having rent more than the mortgage payment is a long ways from being cash flow break even.  So, even with refinancing, he may be out of pocket.  If not every month, then every time some other expense comes up.  He needs to be realistic in his plan.  I understand wanting to hold onto the place.  But if he's going be cash flow negative can he sustain that?  What can happen in these shakey situations is that it goes OK as long as the tenant is there and paying.  But the tenant moves out, and fixup is needed.  Or some big expense comes up.  And your friend doesn't have the cash to deal with is.  So, the work doesn't get done.  The place either can't be rented at all or has to be rented at a significant discount.  And the cash flow situation is even worse.

How long is he planning to be here?  Is keeping the place really something he can afford to do?