Negative Cash Flow with Cash Out
Hello All,
I have a duplex that is paid off and purchased when I wasn't familiar with crunching all of the necessary numbers from the start (i.e. Cap Ex., vacancy rates, etc.). When I evaluate this property and consider financing and cashing out, it would put me at a negative cash flow of approximately $200 per month. Given the current market, should I sell or continue to gain the benefits as it is paid in full? I feel as though I made a mistake from the beginning, which is beyond frustrating.... What are your thoughts?
Most Popular Reply
#5 All Forums Contributor
- Plymouth, MI
Sell, sell and as fast as you can....SELL!!
The relation ship between appreciation and property value, specifically equity build up, is on a 1 to 1 ratio. For every dollar a property appreciates, you gain the same dollar in PV and equity.
Now, if you sell the property, all that equity now has a 5 to 1 ratio of face value to PV. The equity is the same whether you keep the property or invest it in another, but thanks to leveraging, your PV would be 5 times that of the current property.
Also, any further appreciation would be gained based on 5 times the base you would have now.
Another also, you would then be able to buy properties that cash flowed.
Don't fall in love with properties...fall in love with the dollars.