CASH FLOW question

[Michael Seutin]

I bought 3 ppties so far. I am learning and improving eacth time. But I didn't do so good at first. Here is a recap using the 50% expense rule that I believe in cos it is proven in my ppties.

1st Ppty: SFH bought in 2007, in Austin, Tx,
first year, per month
gross rents: $1000
NOI: $500
Debt Service: $769
Cash Flow: ($269) loss per month

2nd Ppty: SFH bought in 2008, in Austin, Tx
first year, per month
gross rents: $1150
NOI: $575
Debt Service: $708.72
Cash Flow: ($133.72) loss per month
second year
gross rents: $1200
NOI: $600
Debt Service: $708.72
Cash Flow: ($108.72) loss per month

3rd Property: Duplex bought in 2009 in Fort Worth, Tx
gross rents: $1775
NOI: $887
Debt Service: $610
Cash Flow: $277, positive at last

Now the first property I know I should resale but I co-own it and it's complicated at the moment.
My question is the second property, I had a loss of $133 per month the first year and $108 the second year. Now I learned my lesson and won't invest in any more neg cash flow. But should I resale it now? or keep it until the cash flow at least break even and starts to become positive ?
Reselling cost money in fees and rebuying also cost money in fees. And I am guessing that in 2010 I will be maybe cash flow neg $50 and then 2011 will be break even.
What do you guys think of rent increases, what is the average rent increase percentage wise per year ?
Even a slight cash flow negative property might be worth holding at times?
or should any wise investor automatically resale such a property.
When I got started I didn't have the same knowledge as today but I told myself that as Warren Buffett did, I would only buy but never resale.
Opinions please.

[Steve Babiak]

The reason that the entire purchase price is used in the determination is to basically compensate your dollars of down payment exactly the same as you are paying your lender. Think about it this way: The bigger the down payment, the easier it becomes to say that the investment is "cash flow positive" - but only due to the injection of funds that you made. Then you can see that this extends to saying that: All houses should cash flow positive if you pay 100% of the price in cash.

So to gauge the investment's cash flow, pretend that 100% financing is used, and pay yourself the bank's interest rate on your down payment. In this manner you will find out whether you have an investment that is more of a winner or more of a loser.