What Would YOU Do? Possible Exit Strategy Needed

[Latisha Douglas]

My first post :D

I have been lurking on this site heavily for the past month and would now like get some feedback on my current situation. I have 2 properties that were bought as a beginner with limited education. Keep in mind that the goal then was more long term investments with a lean on appreciation as oppossed to 'cashflow' (in the NYC tri-state area).

Property #1
Purchase Price $149,500 (Nov 2004)
PITI - $1725 (includes $350 for HELOC, $250 for escrow shortage pymt (12months left), $125 Association Dues)
Rent Received: $1195
Net - -$530 (ouchhhh)
And this does not even take operating expenses into acct (double ouuchhhh)...and a very high vacancy rate in Property #1...

Positives: This areas has NOT seen a decrease in prices at all. The FMV for the unit now approx $175 conservative (still owe $149 b/c of heloc) and there are a couple big plans in the works (huge corporate complex, direct train line to NYC) that would mean lots of growth and possible real estate appreciation in the next couple of years.

Property #2
Purchase Price $95,000 (Nov 2006)
PITI - $1165 (includes $150 for HELOC and $215 Association Dues)
Rent Received - $895
Net - -$270 (ouchhhhh)

Positives: This particular condo unit is in a building that is under renovation. Slum landlord let the building fall apart, city stepped in and forced him to fix building and sell off his majority share of units. He is selling them off one by one. So as the buiding is being fixed the prices rise. Purchased 18 months ago for $95K and currently selling for $115K (owe $93K). Also, the city got approved for a major revitilization last year and once that is complete can also mean major appreciation for real estate in the next few years. The next town over did this revitalization back in 2001 and had a HUGE impact on RE prices (above what everyone saw with the bubble)

Now normally these negative cashflows screams...SELL, SELL, SELL......But these properties are both on the east coast and in areas where appreciation is expected in the next 2-5 years. I look at the $800 loss and money I would just put in the bank every month.

So my question is: Would you hold onto these two properties and possible benefit greatly in the upcoming years? Or do you sell in a down market and possibly get less than the FMV? If I sell, by the time I add selling expenses I would hardly walk away with anything.