Tracey P., Both Buyer and Seller in San Diego, CA

We own 2 condos & the unit we rent out is a monthly loss of about $650. The market is bad in Tierrasanta so we are unsure if we should sell now.

Asked by Tracey P., San Diego, CA Tue Jul 5, 2011

Help condo in 92124
not under water
steady renters
monthly out of pocket loss= $650

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Answers

24
I would consider if you can afford the out of pocket expenses and also the net profit or loss on the rentals. Assuming you have an amortized loan, a portion of each mortgage is used to pay down principle, which is effectively a savings and not an expense.

Keep in mind it is not an all or nothing. You can always sell one to reduce your lose and your risk.
1 vote Thank Flag Link Thu Jul 14, 2011
If yo can afford $7800 loss/yr and want the tax write off - great. Whatever you net from the sale would be considered alturnative use of funds. So, if you net $100k what can you invest it in and at what income stream would you get? If you keep the condo, what are fair estimates of wherer the value will be in 2, 4, etc. years. Consider your investment (condo) is basically depreciating by $7800 each year. Good luck.
1 vote Thank Flag Link Thu Jul 14, 2011
Tracey, You say that you're not under water, but is that after factoring in at least 7% Cost-of-Sale? If so, then You should sell the property no question about it. It's not worth the headache of being a Landlord to take a loss on the HOPE of appreciation. Take that $650 NET that it's costing You and put $800/month GROSS into Your 401k or another tax deferred retirement investment.

Mr Credit
0 votes Thank Flag Link Tue Aug 16, 2011
Dear Tracey,

$650.00 a month is a significant loss but as one person described below by working the numbers, if they pan out in your favor then you will be ahead of the game. ON THE OTHER HAND should this prove to be too much of a burden your best bet is to sit down with an EXPERIENCED AND KNOWLEDGABLE Realtor like myself and go over all the details. If there are options and there always are then great if not and you prefer to not be so burdened by this debt then lets tallk.

I can be reached at 619-507-4555
Debbie Faremouth
Remax Ranch and Beach
Associate Broker
0 votes Thank Flag Link Tue Aug 2, 2011
Sounds like you have some substance. Hang in there. If you're hurting.....................Bail!
0 votes Thank Flag Link Sun Jul 31, 2011
If you can afford the monthly lose for now, hold out till better prices start to show in the market!
0 votes Thank Flag Link Sun Jul 31, 2011
Hello Traci,
Many of us are in the same position that you are in. Like you I bought 'income property' 4 to 7 years ago and have found that the 'income' has eluded us. What do you do? Well, you can search for the analytical answer and the posts have offered many good tips and ways at looking at your position.

I have a similar situation that I can use as an example. Townhouse across the street from Azusa Pacific University. Bought 7 yrs ago @$325K. Value now $235K. Loan 231K. Rents @ $1900/mo. HOA fee:$305/mo. Total mortgage pmt (PITI) is $1556/mo of which $517 is principal reduction. Lets see 1900-305-1556+517= positive $556/mo. What feels like a loss every month actually is a positive, BUT it is only positive because I am converting my cash into loan principal reduction. Work your numbers this way. Oh! Good News: I have an ARM loan (I know, I know) and they just adjusted my loan from 3.875% down to 3.5% saving me almost $50 per month! (see things can change for the better). I have decided to keep the condo BECAUSE I believe that its value will recover EVENTUALLY.

Your decision will depend on your cash flow (your personal finances) , also on what net proceeds you could net from a sale, What the tax consequences of that sale and what confidence you have in your property's ability to grow into a 'income property'. Remember that there are costs if you decide to sell it. Also factor in things like impending HOA litigation, Special Assessments etc. There are a lot of moving parts to these quandries. If you'd like to talk 858-414-9996

Good luck with your analysis. I do feel your pain! (I own two properties like this)
0 votes Thank Flag Link Sun Jul 31, 2011
Hmm...

Many variables here..
My opinion is it would depend when you bought this condo you are renting out.
Did you take advantage of the market just recently and bought in the last couple years and got an awesome deal?..
If so I would hold off. The trends are showing that we will be experience an increase in rental inventory pricing so there is hope there for you!

If on the other hand, you are really hurting because of this loss, then sell! You can always buy another property that will pencil out the investment and cash flow numbers.

Hope this helps, and good luck with whatever you decide!
Thanks,


Real Estate Supergirl
Khrystyna Chorna
Allison James Estates and Homes
7 Horton Plaza,
San Diego, CA, 92101
tel: 619-808-7064
resupergirl@me.com
http://www.sandiegodowntowncondos.net
http://www.youtube.com/chornarealestate
0 votes Thank Flag Link Mon Jul 18, 2011
not underwater, but not throwing off a decent return...in fact a negative one. this one is easy...sell it and use the money for investments that have positive rate(s) of return.

if there is no hope of bumping income and cutting expenses it is the definition of a crummy investment. i planted the for sale sign on one of my properties just yesterday with a similar set of facts. it's a positive cash flow property (just barely) but the return on investment is so low as to be embarrassing...so it has to go. i will lose a few bucks on the place but the money can be redeployed to something more profitable. there are some great buys out there today and pretty much anything i replace it with will have a far better return on investment.

you are learning what we all learn in the landlord business...some properties are just not good candidates for the rental pool. the fact that you are monthly negative is worsened by the fact that if the tenants move you'll have some lost rents and a few (or more) bucks for rehab and repairs. even props that seem like winners can go south fast.

that's the bad news...here's the good. the rental market is firming, and rising, here. if the rent can be raised and expenses trimmed your true cash loss after tax benies is well less than the $650 you cited. if you are on a fixed rate loan and it's amortizing you are eventually going to pay the thing off. if the true loss approaches zero it gets more reasonable to hold and have it longterm. an additional point in your favor is that you have it financed already. if you sell it and look for another rental with a prettier return you may have a hard time financing the new purchase. financing these days is a bear...a rental is extra hard.

if you would we'd appreciate hearing back from you as you work through the decision...its nice to see the process unfold.
0 votes Thank Flag Link Fri Jul 15, 2011
If you do want to sell give us a call. We specialize in quick sales throughout San Diego County and would love to have the opportunity to help you.
0 votes Thank Flag Link Thu Jul 7, 2011
Tracey,
This is a tough call. Selling at a low point in the market doesn't return much to you but you are out of the monthly drain, and then there is no guarantee of selling quickly so the loss could be even more than anticipated. If you can hold onto the property with the negative and benefit from some write offs, the rental market is strong and improving, and over the long haul you'll be doing good. The Tierrasanta area & San Diego for that fact is one of the nations best markets and expected to improve the quickest. Annual increase in rent and/or identifying that you are currently recieving top rental rate is important.
Need any assistance let me know.
Chris
Web Reference: http://www.fbs-pm.com
0 votes Thank Flag Link Tue Jul 5, 2011
Dear Tracey,

You are taking the right steps. The more you know, the better decisions you'll be able to make. I did a little research and found the following activity in the last three months in Tierrasanta:
- A total of 28 condos SOLD: 15 equity sales/ 7 lender owned/ 6 short sales.
- The median 2 br/2 bath - 1350 sq.ft. SOLD at $245,553 (Average SOLD $283,778), 17 days on the market.
This is the best information I can provide without knowing more about your home, but hopefully will give you a general idea.

If I can be of additional help, just give me a call (619) 818-6982. You can also find me at http://www.GinasHomes.net and my email is AskGina@GinasHomes.net
Regards,
Gina
Web Reference: http://GinasHomes.net
0 votes Thank Flag Link Tue Jul 5, 2011
Tracey,
According to comparable sales, condominiums in Belsera are selling for $275,000 to just under $300,000. The decision whether to sell or keep covering the negative rent is not simple. If you were able to sell and break even, avoiding a short sale, it may be easier on your cash flow. If you sold and it was a short sale then your credit would be affected and may prevent you from buying another property for a couple of years. Short sales are harder to do on investment properties unless a true hardship can be proved.
If you can afford to hold onto the property for a few more years the market may start improving by them and you could get out from under this property. Rents in this area, according to http://www.rentometer.com are around $1,700 to $1,800/ month.
I hope this is of help.

Jerry Heard
Your Broker
The San Diego Property Shop
http://www.TheSanDiegoPropertyShop.com
jerry.sdps@cox.net
Direct 619-920-9796
Office 619-269-5545
Fax 619-269-9168
CA DRE #00648687
0 votes Thank Flag Link Tue Jul 5, 2011
What are the chances you could minimize your losses by moving into the condo that you are taking a loss on? Much depends on your current situation and each persons situation is unique. Real estate in the long term will eventually surpass what you paid. It may take some years but I've always said real estate is not a get rich quick scheme. Happy to discuss.

Alexander 858-483-4687
0 votes Thank Flag Link Tue Jul 5, 2011
Hi Tracey,

My first question to you is this...do you have a detailed analysis of your investment properties, which takes into consideration all cash and non cash items? When you say your actual out of pocket losses are 650/month, the net loss after taking into consideration the tax benefits and your tax bracket is most likely reduced by quite a bit. It may seem obvious, but there are 2 ways to improve upon this monthly loss...either increase the rental amount or reduce the monthly expenses. I'm sure you have tried to squeeze out as much as you can. Generally speaking, it is probably not in your best interest to be taking monthly losses, unless you believe the probability of future capital gains is significant enough to offset. My question is this, "Would you buy your unit at it's current market value?" If you say no, then that means you believe it is going down, which would probably be one good indication that you should sell. You can take that money from the sale, and invest it in another property that will generate positive cash flow, of which there are several properties out there. It's always a question of, "What is the highest and best use of our capital?" To have it tied up into something that is generating negative cash flow and may not have tremendous capital appreciation potential appears to be a losing combination. However, I'd have to know more about your goals and plans to give you the best answer.
In summary, make sure that you have a thorough analysis done on this investment property or any others that you are contemplating. All too often, people buy real estate without doing their due diligence. During the peak when markets went straight up, one could get away with this. Now, more than ever, it is critical to know the actual numbers because as the saying goes, "the numbers don't lie".

Chad Basinger, REALTOR®, CPA, CFP®
858-997-3704
chad@chadbasinger.com
0 votes Thank Flag Link Tue Jul 5, 2011
My quick answer would be to have a real estate professional like myself provide you a Comparative Market Analysis, or CMA, to get an idea of what your rental property is actually worth. There is no cost or obligation to get this. I would then recommend that you take that information to your tax professional to see what the implications would be to you financially of selling today at that price, taking into account current depreciation write-offs that you may still be able to enjoy, or capital gains on the sale that you may have as a result of past depreciation...and also if you would be served better by participating in a 1031 exchange rather than taking the capital gains tax hit now. It may make perfect sense to go ahead and cut your losses today rather than wait for a slowly recovering housing market. Please let me know if you would like more information, and I'll be happy to provide it. Best regards.
Garold Wampler
0 votes Thank Flag Link Tue Jul 5, 2011
Hi Tracy,

Please call if you can. I have sold a few properties just recently in Tierrasanta. It was tough. I can give a cash flow summation that will help. This is a very crstal ball type question. It reall comes down to how long you want to go on this very bumpy ride. Bobby 619 459-5900.

Sincerely,

From Craftsman to Condo.......

Bobby Stefano
Ascent Real Estate Inc.
Direct 619 325 4111
Cell 619 459 5900
Fax 619 325 0750
Award Winning Agent


http://www.AmericasFinestCity.com
0 votes Thank Flag Link Tue Jul 5, 2011
The answer is a bit more complicated than appears. You should look at your rent and expenses to see if there is anything you can do to shave down the loss. Then need to look at your tax bracket and income to see how the loss is effecting your overall income. I assume this loss is actual loss and not including depretiation. Then we need to look at the future outlook of the area and if you will be able to make us the loss by the appretiation in the market in the next few years.

As you can see not an easy answer. The hardest one is putting an appretiation number for the future. If you have more questions feel free to email me bmaher@mcubedproperties.com
0 votes Thank Flag Link Tue Jul 5, 2011
The answer is a bit more complicated than appears. You should look at your rent and expenses to see if there is anything you can do to shave down the loss. Then need to look at your tax bracket and income to see how the loss is effecting your overall income. I assume this loss is actual loss and not including depretiation. Then we need to look at the future outlook of the area and if you will be able to make us the loss by the appretiation in the market in the next few years.

As you can see not an easy answer. The hardest one is putting an appretiation number for the future. If you have more questions feel free to email me bmaher@mcubedproperties.com
0 votes Thank Flag Link Tue Jul 5, 2011
Hi Tracey!

While the market isn't what it used to be 5 years ago, it's a hot market for buyers. Low prices and low interest has created a 'perfect storm' of sorts for those looking to acquire property. You mentioned that you're losing $650 every month.

You have nothing to lose from putting your properties on the market - let's set up an appointment to meet. I can get your units on the market within the week, and we can keep your tenants in them. I have limited info about your particular properties, but I feel confident in saying that now is as good a time as any to sell - the buyers are out there, and summer always peaks interest. At the very least, we can review ways to cut your losses and hold on to your investments.

Give me a call and lets talk - 858.228.6434

Nicole Scalese
Ascent Real Estate, Inc.
DRE#01879432
nicole@ascentrealestate.net
0 votes Thank Flag Link Tue Jul 5, 2011
Hi Tracy,
If you have decided you no longer want to hold on to this property, then the time to sell is now. Unfortunately, with the amount of inventory for sale in San Diego county the value of properties will likely trend down further, as it has continued to do for the past few months.

Do you know what your condo is valued at today?

Call me if I can answer any questions for you.

Thanks!
Lori Demirdjian
619-241-1015 - LoriDemirdjian@gmail.com - http://www.LoriSellsSD.com
Web Reference: http://www.LoriSellsSD.com
0 votes Thank Flag Link Tue Jul 5, 2011
Depends on how negatively that 650 is affecting you. If you are comfortable covering it, hold off. If it is kicking your butt every month and you can sell, sell...

Is this a personal finance question or a market "crystal ball" question? If it is a personal finance question, it depends on what you guys can handle in terms of negative cash flow. If it is a crystal ball market question, markets tend to be really local, so find someone that specializes in tierrasanta and have them give you a breakdown of what it would take to get you out of the investment...
Web Reference: http://www.lehmagrp.com
0 votes Thank Flag Link Tue Jul 5, 2011
Tracey,

Are you charging fair market rent for that property?

Nick
Web Reference: http://www.NickRuiz.com
0 votes Thank Flag Link Tue Jul 5, 2011
Hi Tracey!
If you want to email me the exact address of the property, I would be more than happy to prepare a market analysis for you. Based upon what you can sell it for versus if you are getting the maximum amount in rent, we should be able to identify the best option for you and see what would make the most sense. You may be able to refiinance into a better payment, where you wouldn't be taking such a large loss. I lived in Tierrasanta and am very familiar with the market there. Looking forward to working with you,

Thanks!
Sinead McAllister
858-205-5215
brokermcallister@gmail.com
0 votes Thank Flag Link Tue Jul 5, 2011
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