Should I sell a rental property now ?

[Jasmine Lu]

Hey, I am new to BP. I started RE investing before really knowing the ABCs. Now I am seeking some help to decide if I should sell a rental unit. I bought a condo unit for 388k in 2017 ( I live in a high cost area). The current rent is 1900/month and it’s a two year lease ending August 2020. Now I know it’s a bad investment ... the question now is whether to hold or sell. It currently costs me $500 to maintain this unit after rent (aka negative cash flow). A similar unit got sold in Jan for 390k, which lowered the market price a lot. So the realtor said my unit might only gets 425k at most. Plus I need to figure out a way to incentivize my tenant to move out earlier. On the other hand, I could keep hold the unit until the lease ends next summer or even longer. Do some reno and sell for a higher price. But my concern is that the market might drop in the future. I have enough cash reserve to hold the unit for longer time. If I do sell the unit, I will probably put the proceeds into a index fund as I still have other rentals. What are some factors I should consider when make a sell/hold decision? Any suggestions would help. Thanks a lot!

[Joe Villeneuve]

Originally posted by @Frederic Babeux:

I wouldn't say you're losing money if the tenant is paying your mortgage/hoa fees. Most likely you're building some kind of equity by having a tenant in there paying down the capital on your mortgage.

Now it all depends on your investment goals.. 

 You're losing money to the tune of at least 12k over that 2 year period.

The best equity build up from the tenant, over that same time period is around $10k.  You're losing money.

After 2 years, you're either going to continue to lose money ($6k/year) from negative CF, or you're going to sell the property for less than you paid for it, and lose more money .

It appears that your strategy is to base a larger sale than now...which means you're banking on future events you have no control over...and based on current events, your future event isn't likely to happen...which means you're going to lose MORE money.

Get out now while you can.  Take your proceeds, and get into a better property (as in Positive cash flow), recover the losses from this one, and start making a profit.