How to sell a condo with negative cash flow?

[jlprato]

I got a condo which was my first home and property. I got it rented since 2011 and never has been vacant not even one month so far. But since 2015 as the economy in Alberta has been no so good and due to the big inventory of apartment for rents and to sell in the market, I had to reduce the rental and now this only cover the mortgage but not the rest of the payments as Property Taxes + Condo fee that I have been paying from my pocket. Now I'm considering to sell it as these payments impact my family economy. How can I sell a condo with negative cash flow? or are there tools that could help me to reduce the difference to promote a better selling?

 

[Cory Sperle]

This is unfortunately what happens when your cash cushion is too skinny going in, and there are many folks in your situation. I would hold on as long as possible as you never want to sell when prices are down, but if you must I would remove the tenant, spruce up the unit, and sell as owner occupied instead of a rental as there are more buyers and their mortgage options are better.

 

[Matt Crowley]

Adjust the lease so that you can evict the tenant with one month's notice in the case of sale or put them on month to month. Then sell to a consumer, not an investor. Highest value always to a consumer.

 

[Michel Lafleur]

Market the property to someone other than investors, as negative cashflow does not help sell a property.
Do you know any other investors who own in your condo development - maybe they'd like to pick up another unit?
Can you renovate your unit to increase rent and/or sale-ability? Whats your equity situation - would you consider selling creatively?
What do you need from this sale versus what would be ideal to get from this sale?
Is this a townhouse or apartment style condo? How's the condo corp financially, and whats the "street feel" of the condo development?

My suggestion to sell this is to connect with a Realtor - someone who knows your market and can advertise the property to an appropriate audience. Negative cashflow won't appeal to investors - maybe market this property to first time buyers, renovators, students, etc. depending what & where this condo is.

 

[Thomas Beyer]

..Then sell to a consumer, not an investor. Highest value always to a consumer.

Any house or condo is best sold EMPTY, fixed up, to a consumer, not an investor. Budget a few thousand $s in reno and several months of vacancies.

Another option is to sell for $1 (or $1000 or $10,000) cash to mortgage if mortgage approximates condo value. There might even be some REIN members here that take you up on it. Advertise it here in the ad section if you feel like it. Or the existing renter may buy it from you or better, in a rent-to-own scenario.

Is this a fairly new condo, or a condo conversion ? If the latter, expect to take a big bath then.

Where is this ? What size ?

Condos make the worst investment. Don't buy one again, unless you have to live in a city where a house is out of reach. Buy LAND, for example a townhouse that comes with land, or a SF house with land, or a mobile home park or apartment building or commercial property that comes with land. You get the least appreciation of any real estate asset class in condos. Worth, of course, is a fractional condo, called time share.

 

[Alvaro Sanchez]

Investors are the only ones concern with negative cash flow so try to market and sell it to non-investors. If your current renters qualify and interest then offer them a rent-to own option.

 

[BrentRoberts]

It is unfortunate when the rents no longer cover your expenses as you had hoped when you purchased the investment.
I recognize that you have mentioned it is affecting your families cash flow.
A question is, is there any/much Equity in the property?
I believe you could joint venture this property with an investor who would be able to carry the negative cash flow for you over the next few years until the property starts performing properly.
I would like to hear what the numbers are I believe there is an opportunity for you to maintain it or keep your property and joint venture the negative cash flow.

 

[Matt Crowley]

@BrentRoberts no... this needs to be recapitalized and a loss realized.

Since the property eats cash that means the DCSR <1. There is no creative way out, it is a bad investment and for the income the price is too high.

High LTV is generally a terrible investing strategy. These are the guys who lose assets to foreclosure. The point of investing in income real estate is the underlying income.

 

[jlprato]

Wow guys, thank you so much for all your advises. This is an apartments located in South Terwillegar just 200 mts. from Henday. 2Bedrooms 2 Bathrooms and 1100 sq.ft. but as i did buy it brand new in 2008 (remember the selling prices of those days... high) so it still have a mortgage of $213K. What I see here is to spend some $$ in reno and sell it for same $213K... it is rent-to-own an option?