breaking even

This is not easy to admit but as newer investors my husband and I overpaid for a property and we don’t see much if any of a cash flow.
We bought it slightly below appraisal and I don’t necesarrily want to sell. Just looking for advice.

It is a seven unit, beautiful building, we only went in w/ 10% down and the previous owner is holding a 20% second, 70% w/ lending co.

There is a little room to raise rent but being a seven unit that will only slightly make a difference.

We have lowered our insurance coverage- still good coverage just not replacement value.

With our finance co. we locked in to a seven YEAR prepayment penalty, so selling, unless on a land contract, is not an option.
My husband and I both have other jobs that pay the bills, real estate was just a way we thought we could retire a little sooner.
My question is… Is it o.k. to just break even? I try to tell my husband it is because we are allowed all of the tax benefits and depreciation AND someone else (renters) are actually buying the building for us.
Yes I wish I would not have been in such a hurry and I wish we had a little cash flow but since that is not the case I am looking for the positives in a not so great situation.
We do have other properties that do much better.
I have learned from this situation and won’t make this mistake again BUT I wonder are any of you in this situation?
I still think since someone else is paying for our retirement its an o.k. deal.
Please anyone your thoughts…
Much thanks,

What are your operating expenses?

Howdy Wendy:

You could have done better and of course worse. I buy dogs and fix them up and resell or keep as rentals. In the past I would do zero down deals that I thought were break even. I was doing sub2 deals were they owed what the house was worth and even more and if the payment equalled the rent thought I was breaking even. I held on for 5 years to these 20 something properties and was finally forced to filed BK because I was always past due and could not catch up and the market had not turned where I had a profit if I sold. Five years later I would have been a millionaire. If you are truly breaking even including all the expenses of maintenance and vacancy and collection loss then you are doing good especially since you paid retail with little or no rehab. Of course you are now in the game and should not be a motivated buyer. You will find better deals and get cash flow. It is kind of like buying stocks and the price goes down, a lot of investors just buy more at a better bargain than their first purchase. Know which way the market is going in your area and buy accordingly.

You’re building equity and that is something that can be used when you retire if that’s really what these properties are supposed to help you with. As long as you’re not dipping in your own pocket this property is a positive in your life, added to your cash flowing properties you should do ok and be able to retire that much sooner.

So, Ted, you buy dogs, sterilize or neuter them, and either resell or rent them. What do the people rent them for - to bite the neighbor or poop on his lawn? LOL

No, it is absolutely not OK to just break even, unless that means that you’re making enough of a profit to take care of all the contingencies that will come up. Eventually, something bad will happen and just breaking even will rapidly turn into a big loss. For example: several units all become vacant at once; a lawsuit forces you to spend thousands (tens of thousands); a big maintenance item occurs; the market turns south and you are forced to lower rents; taxes suddenly increase sharply; etc, etc, etc.

These are all things that WILL happen if you hold the property long enough. That is exactly why you need a significant cash flow to survive in this business. Fortunately, you have other jobs and other properties that can hopefully cover the loss on this building.

Here’s a question that you should ask yourself with each property you buy: “how many of these investments could I afford”? The point is that if you had 100 of these investments, would it add to your financial life or would it force you into bankruptcy?

The good thing in all of this is that you’ve learned your lesson. If you can survive this mistake, then you’ll be stronger for it.

Good Luck,



There was a time when a property investment with zero cash flow was acceptable because of appreciation and tax incentives like depreciation.

Now people are getting away from that theory. The question is, could you have taken the same 10% down put it into something else that would have brought a higher rate of return or positive cash flow? I am guessing maybe yes, however, owner financing in any amount is very tempting.

Everything is negotiable.
Ask your 2nd mortgage holder to reduce your loan percent a couple of points until you can raise rents in a year or two. It is so inexpense to rewrite and re record a purchase money mortgage. What’s it going to hurt to ask? Be creative and convincing. He has a vested interest in your success.
It won’t amount to much/yr but it’s in your pocket, not someone elses.

Two years from now you will look back and laugh about this.

The initial year of two of owning a property can raise these concerns you have mentioned. It sounds like overall, you will be just fine.

Thanks guys for all your moral support. We literally have about $50.00 after all expenses. And we did have a problem w/ the roof causing some damage inside. Even tho the ins. will cover some we will have some out of pocket expense. Thank God we are employed and have other properties for cusion. I could see where this could break a person quickly.
With my first purchase I asked my self “In the worst case senario will this property hurt my family?”
I still always sk myself this but didn’t look at the answer honestly.
Great sugestion about the second mortgage holder, I will call him on Mon.
Thanks again,