All Forum Posts by: Lilly Olabre

These can be some of the toughest decisions for some RE investors. If it were me, and I know because I've been in a similar situation, I would keep the property and rent it. If it's in a touristy area, STR.

The property I made this decision with, 14 years later, cashflows $500+ per month and has over $200k equity in it. I'm glad I stuck it out.

@Lilly Olabre Can you do a cashout refi to pay off the HML and rent it out?

Why do you think it isn't selling at or above break even price? I'd hate to advise risking more money on it, but it's at least worth exploring - are you FSBO or with a realtor? If realtor then what's realtor's take on why it isn't moving? It's with a realtor right now and he's not sure either, he's thinking it's the market slowdown but also, most of the feedback we got was either the house was too small or it's the neighborhood.

If you're sure that it's just not worth enough to sell close to break even regardless of a change in marketing/amenities/design then how long do you think it will take to get to that value? I don't know because I did everything and the house looks great, I'm not sure why it's not selling.  It even has new electrical, plumbing, and hvac!  I'm not sure what other marketing we can do and holding costs per month keep piling up!  Even at loss each month it would probably take a long time to lose $60K renting it out. This is all assuming your refi can payoff enough of your short term debt. - yes that's what I was thinking the same thing, I will probably lose give or take 6k a year?  I'm just not sure if my thought process is correct.. there might be things I'm missing where it would hurt more in the long run to keep the property.

Only other question is how much would losing $60K hurt you? Would it take a long time to recover such that the loss is greater than $60K? It hurts a lot for sure because no matter how much I will work right now at my W2, it'll take a while to recoup that 60k and it's also money I could have made to invest in other properties but instead of investing in a property, I'm paying off a heloc debt.  But then again, if I keep the property then I would have that 100k heloc debt.  I'm stuck between a rock and wall basically.

Without knowing answers to those questions, if you can qualify for a refi that gets you close to breakeven, and you feel your market is healthy enough to appreciate to your original pro forma or better before you'd burn $60K then I'd just rent it out LTR. - I know I can refinance and LTR should cover the PITI, or most of it.  It's the market I'm not sure about, like I wouldn't know if it'll appreciate or not, right?  That's what I'm worried about.  extra note: Each dollar of the $60K loss today worth more than each dollar of the cashflow loss in future years provided you obtain fixed financing until sale. - I'm not sure I understand this statement

I feel your pain.  I had a somewhat similar situation at the start of my investing career.  I didn't go over budget but was trying to sell into the teeth of the start of the 2008 recession.  Fortunately for me, someone showed up who would buy my flip, but only if I could buy their cheap, and very rentable condo.  I rented it for a few years and came out with a small profit.

The $505K figure is the current offer, which may change after inspection.  You are incurring holding costs all along the way.  If closing gets delayed, you could be in a deeper and deeper hole. 

Normally, I would say "rent", but with $20K, you have almost no reserves for future problems. If you need to spend more money to solve a problem, and then run out of cash, you could lose everything.  Hopefully, you could find some funds from somewhere else in an emergency. 

If $20K is your last dollar, you may be better off selling, taking the hit, and getting rid of further financial risk.  If you have more reserves than that, I would rent.

What is the appraised value now?

I have intentionally gone into cash flow negative deals - when I opt for a 15 year mortgage, I get a slight negative cash flow and I am fine with it. Same property with a 30 year mortgage would have been cash flow positive. 

I once got a variable rate loan converted to a fixed rate 3 year loan, because that was the lowest APR option they offered. Negative cash flow was about $2k a month, but in 3 years that property was paid off.

@Lilly Olabre, if your cash flow is negative by less than the principal pay down, I would hold it. Assuming of course you already account for vacancy, maintenance, capex etc.