REI question

New to the forum and am looking for some input:

I have a rental townhouse that is no longer cash flowing due to increased property taxes and HOA fees (due to increased insurance rates) and decreased rent (soft rental market). I can’t afford the leakage anymore, so am trying to understand all of my opportunities. Is it worth going with a lower interest only rate? Or should I just sell and look for a property with better numbers?

Any help would be appreciated.



Howdy Erik:

Sell it to the tenant on a wrap or lease purchase. They may even be able to give you a little cash as a down payment or option fee.

Another idea is just to dump it for cash at a discount. I had a condo and had the same problem. I git behind and had to give it to the lender.

If your market is real bad you may be forced to keep it rented and hope for better days ahead.

Well, I don’t think it’d be a problem selling this place at somewhat of a premium. It’s a townhouse in CA, and it has appreciated tremendously since it was purchased (which is why I didn’t have a problem with the slight negative cash flow in the beginning; it’s just too much now).

I’m just wondering if I have other options other than selling. Right now, I’m pondering refi’g to an lower interest only loan w/ no costs. Any other thoughts or suggestions?



Erik, living in SoCal, I say you should take the sure thing now. You have no guarantees where the market is going. Take the equity and put it to better use elsewhere. If you plan to stay in real estate, be sure to do a 1031 so that the feds and our buddies in Sacramento don’t eat you alive on taxes.

I completely understand - The bubble is expected to burst sometime. But if not investing in CA, then where? I’m slightly apprehensive about investing out of the area, where I can’t put my hand on the property, but that seems to be the option if cash flow is desired. I’ve been following the Marshall Reddick network, and the setup does seem very desirable. Anyone have any experience there? What other areas are good to look into right now? Where else are the rent to purchase ratios in an investor’s favor?

Erik, I would like to know a little more about this prop before I put in my 2 cents. Depending on where it is in Cali will make a big diff. If you are in N San Diego County I would almost say keep it. Its landlocked and people will always have to pay a premium to live there unless you want to drive 2 hours to work one way.

Hi Mark. Thanks for the post. Property is a townhouse in Mission Viejo - South Orange County. Property values have been good, but rents have been down. I’d love to just have a long term income property where the cash flow is break even…