Sell or Refi? Negative cash flow in an appreciated market.

[Sherwin Gonzales]

I currently own a loft that I am renting out in an up and coming neighborhood that has many planned developments in the works, which include apartments, retail, parks, etc. all walking distance from my property.

The property is producing me negative cash flow now and if I choose to refi and keep the property, it will be -$600 out of my pocket every month to cover items such items as the property tax, HOA, etc. The current rent only covers the mortgage.

According to zestimate, which I know is not entirely accurate but just for the sake of argument, the property has appreciated 50k in the past 6 months.

Should I refi and keep the property at -$600 per month (-$7200 per year) hoping that within a years time the property would appreciate at least $7200 to cover my losses or should I just sell and take the equity and buy another property?

I owe 409k in loans and my neighbor just sold his property, which is a mirrored version of my loft, just 6 months ago for 527k.

Thanks in advance for any advice!

[Jeff Pollack]

Hey @Sherwin Gonzales  You have a great problem.  

Here's how I think about your situation.  People who work W2 jobs are thrilled if they get an employ match of any kind on their 401k contribution   If you're lucky that's a 1:1 match on some fraction of what you contribute.  For decades people may put $15k into their 401k, get a $5k employee match, have no access to the money or control over it for 10, 20, 30+ years, and they think its the greatest thing since sliced bread.

Yet if you own real estate in a market like the Bay Area and are cash negative $500/mo on an asset that appreciates $5000/month people say you are insane.  Hello????  That's like a 10:1 employee match on a 401k and you have infinitely more control over the asset.  

If your property was in fly over country I'd say to definitely cash out.  But @Account Closed is right. Bay Area appreciation is not some blip on the radar or icing on the cake.  There is a trend going back decades that says real estate here appreciates over time more than almost any other market in the country.  The trend is your friend.