Quote from @Andrew Freed:
@Lahiru S Hettiarachchi Gamage - If the property is negatively cash flowing 400 a month, why are you keeping it? Does it have equity in it? Can you sell it and make a profit? I wouldn't be keeping a rental that cost me money each month, thats not investing.... thats spending.
If I were you, I'd consider 1031ing that or selling the property and transitioning that into a multifamily or something that actually makes you both money each month. You will realize quickly that you will max out the amount of properties you can buy if you keep picking up negatively cash flowing properties. Lastly, and most importantly, you will be more tied to your W2 job if you keep picking up properties like this since you will need the income to cover the overhead of your "investments." The goal is to reduce your reliance on your W2, not increase it.
Thanks for the detailed information. Really helpful. I meant the $400 is HOA fees. Cash flow is around $75(+ve) without considering maintenance. 1650 - 400(HOA) - 1050(mortgage) - 125(property management).
I hope that the maintenance will be less after the initial fixes since the outside is covered by the HOA.
Similar properties are now selling for $195K, so I think it is possible to recover the expenses if we sell.
You provided great input. I don't like the fact that our $65K is stuck on this property. I also want to learn about 1031 (and will watch some videos on that).
I also missed some rent since we lowered the price too soon. Otherwise, it could have been rented for around $1750. So there is a chance that this can make the cash flow positive.
We can buy the second property without selling this, but I am keeping the options open as I accumulate knowledge on the space to make better decisions.
