Take a loss or hang on?

[PhilipHauck]

I own a nice condo a couple of blocks from west edmonton mall that is no longer cash flowing.
It has broke even over the last 2 years until now.
I checked into its value which is at about the same as I paid for it. To pay out the mortgage is about a $5000 hit as well as realitor costs. I can afford the $200. neg cash flow but I certainly do not like it.
Do I take the hit and sell or hang in at a negative cash flow. It would probably on the market a while unless I fire sold it as well.
Thanks for your input
Philip Hauck

 

[Nir]

It depends on your goal. unfortunately "we don`t know" is the best answer. what is the fundamental difference between the questions "Should I buy/sell DOW now" and "should I buy/sell this condo"? it sounds like in the short term you are losing money whether you sell or hold.
(note: I am not comparing DOW to RE in general but rather to this specific condo losing money)

 

[JimWhitelaw]

You said it has had breakeven cash flow until now. What has changed? Perhaps you can lower your mortgage payment or make improvements to the property to get a higher rent. Are you sure you`re getting market (or above) rental rate?

 

[invst4profit]

If you are a small time investor, one property, it depends on your future plans. If you presently have all the properties you want then assuming it is affordable hanging on is not a bad idea.
On the other hand if you have plans to grow then the question boils down to how many negative cash flow properties can you afford to hold or how much will this one hold you back.
Keep in mind the longer you have to hold it with negative cash flow the lower your chances of ever seeing a profit.

This is a good example of how a combination of break even properties and speculating on appreciation can take a double bite out of investors.

 

[realfortin]

QUOTE (invst4profit @ Mar 3 2009, 06:23 AM) Keep in mind the longer you have to hold it with negative cash flow the lower your chances of ever seeing a profit.
I think I have a different point of view on this one. We are in a special period and things will likely rebound back. A loss is a loss only if we sell. If it was not negative cashflowing you wouldn`t consider selling it as you know that if you buy and hold, you will win in the end. 200 neg cashflow does suck, but it won`t adversely affect your portfolio over the next few years. If you hold on to it for 2 years, you will have neg of 4800. That`s less than the cost of paying out your mortgage, but over those 2 years, your tenants shouldl have put more principal in than that, easily. If the condo rents well, is not a headache and has decent tenants, I would keep it. I certainly wouldn`t keep a bunch of these as it would affect your ability to get other properties. If property prices stay the same over the next 2 years, you are still ahead because your mortgage payout will be less, your principal will be more.

A few more thoughts: Will your mortgage holder allow you to skip a payment once a year? that would make your property cash flow and if you did it once a year over the next 2 years, it will get you through without having to sell.

If you sell at the same price as you bought, even if it happened right away, consider the real estate fees, lawyers etc on top of the mortgage cashout.

Is your mortgage portable? If it is portable maybe you can sell this condo, and take the dip in the market as an opportunity to find a cashflowing property that you can transfer the mortgage to?

Real