First rental turned out to be negative cash flowed.

[Supada L.]

Hello,

Can anyone please give this first-time landlady some advice on this issue?

I bought a turnkey from Roofstock last summer. It is out of state and I have a PM to take care of it. It's supposed to cashflow about $100/mo. But there have been a lot of fixings and left me with negative cashflow. The major fix was on the gas line, one on tub drain, and a couple minor fixes like clogged pipe.

What should I do with this property? Should I keep it and hope it would cashflow this year or plan to sell it? What would be the worst thing that could happen if I keep having negative cashflow year after year? This situation makes me nervous about rental investment now. :(

[Joe Villeneuve]

Ok.  The worst thing that would happen is you would keep negative cash flowing...which adds up, and subtracts.  Think of it as having a job, that you pay the employer for the privilege to work there.  So you say you can cover it with your current job.  Fine, then let me reword what I just said.

It's like working full time, and making enough money so you can work a 2nd job...and pay that employer for the privilege of working there.  If that was the case, what should you do?  Probably quit the 2nd job...right?  So I ask you this, using that same thought process, what should you do with this rental?

Now, onto the property specifics.  I wouldn't buy any property that only has $100/month CF...and you're seeing why now.  That's not positive CF...that's negative CF, guaranteed to happen.

Any money you lost so far though negative CF is gone, and you'll never get it back, as long as this job property has negative CF.  If it starts to get positive CF, then in order to start making a profit, the first thing that has to happen is get all the negative CF back...from the new positive CF.  How long will that take?  How long and how far behind are you?

Don't fall in love with any property.  The property is just the temporary resting place for your cash/equity until said time it grows enough for you move it forward into exponential gains.  The longer you retain a negative CF property, the more negative CF you have to recover, the less money you have left to recover it with, and the longer it takes to actually recover it.  Cut your losses, stop moving backwards, and move forward.