Analysis - Too Late? Negative cash flow :-(

[Zacharias Salva]

Hello,

I could really use some help analyzing my first rental property. I financed this particular house - newly built in 2013 - as my residence using a VA Loan, (no money down) for 168,000. The home is located in Killeen, Texas which is a military town in case you haven't heard of it. It is quite possibly the lowest value home in this neighborhood. I'm on a cul-de-sac with a 320,000 home on the left and a 200,000 home on the right. I will be moving out at the end of this month and already have a tenant in place, renting for 1200. The low rate was a personal favor to someone I know, and after one year the rent will go back to 1300 and stay there.

If I'm doing this analysis correctly, I believe I'm projecting a negative net cash flow. This is a bit vexing to me especially because the other homes in the neighborhood are renting for a similar price but have much higher values overall.

EFFECTIVE GROSS INCOME (10YEARS) @1300/mo.

Potential Rental Income = 156,000

Vacancy = 15,600

Concessions/Delinquent Rent = 1560

Net Rental Income = 138,840

OPERATING EXPENSES

Insurance = 15,000

Taxes = 24,326

Repair/Maintenance = 15,000

Property Management = 15,600

Landscaping/Pest Control = 4500

NET RENTAL INCOME AFTER OPERATING EXPENSES = 64,414

MORTGAGE EXPENSE (~$800 a month principal and interest) = 96,000

NET CASH FLOW = ................. - 31586

My question, aside from whether I am computing these numbers correctly, is should I consider selling this property instead of holding onto it? I have also already made an additional 8,000 in improvements.

What would you do as an experienced investor if this was YOUR first property? Thank you! -Zach

[Paul Wurster]

You paid retail and financed 100% of the house. It isn't your fault. That does not cashflow anywhere.

You could try to refinance and put more down if you want to make it cashflow.