Underwater Investment Property

[Peter Vallone]

Time to pick your brains!

I own five properties in northern NJ. Total of 17 rental units. The problem is I am cash flow negative on 4 of them and the value of 60% of what I paid for them.

In the long run, does it make sense to keep on pumping money to keep these properties afloat or should I bite the bullet, sell them at a loss and settle with the bank?

I know I'm not providing too much detail, but wanted to see what other people thought that might be in my shoes.

What is my solution, payoff the mortgages, but that is easier said than done, right?

[Aaron Mazzrillo]

Originally posted by Peter Vallone:

In the long run, does it make sense to keep on pumping money to keep these properties afloat or should I bite the bullet, sell them at a loss and settle with the bank?

There is an old saying "cut your losses and let your profits ride." Unfortunately, every person with a loser on their hands always disagrees or gets argumentative.

You said 'long run'. How long are you talking? Why are you throwing good money after bad and how long does it make sense to continue to do so? The only upside I an possibly see is if we get hyper-inflation and it drives rents way up. Is that going to happen? Lots of people say yes, but lots of people don't know anything about economics.

So many people here in American think "the market will come back. I'll just hold till the properties go back up". I say, go check out Japan. They went through the same thing in the late 80s that we are going through now. 21 years later and guess what? Their market still hasn't 'come back'.