Should I sell or keep my long-term rental when it isn't cash flowing?? Please HELP

Oklahoma City, Oklahoma
Buying & Selling Real Estate
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Should I sell or keep my long-term rental when it isn't cash flowing?? Please HELP

Ryan Johnston
Rental Property Investor · Oklahoma City, OK · Member since 2022 · 10 posts · 1 vote

I bought this property as a brand-new turn-key property in December 2022 (3bed & 2bath-1544 sq-ft). Lived in the house for 1 year. For most of the 1st year I house hacked and rented out my 2 spare bedrooms, for 6 months that covered the mortgage. After that I moved out and did Airbnb for 4-6 months but struggled keeping up with it not living in the same city anymore, so I switched it to a long-term rental. I'm having to offer this as a fully furnished house to be able to charge a premium on rent just to get close to the mortgage. I've kept it rented out consistently, however, I'm negative $75-$150 in cash flow a month. Mortgage rates have kept increasing as well, that's why I put a range on negative cash flow. Thanks for reading!

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Scott JohnsonBusiness Member
Specialist · Greenville, NC · Member since 2019 · 673 posts · 408 votes
1y

What's up, brother? I stick to Robert Kiyosaki's teachings. If it's not positively cash flowing, it's not an asset. so what's the point of holding it? Also, after a year, the mortgage hasn't been paid down by much, especially if it's a 30 year mortgage.

The only challenge you may run into is if you purchased it using a low or no money down mortgage option like FHA or VA lending. At that point, you may have to come out of pocket broker commissions unless you sell it FSBO (which is always an option if you have the time to dedicate to it).

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  • Scott JohnsonBusiness Member
    Specialist · Greenville, NC · Member since 2019 · 673 posts · 408 votes
    1y

    What's up, brother? I stick to Robert Kiyosaki's teachings. If it's not positively cash flowing, it's not an asset. so what's the point of holding it? Also, after a year, the mortgage hasn't been paid down by much, especially if it's a 30 year mortgage.

    The only challenge you may run into is if you purchased it using a low or no money down mortgage option like FHA or VA lending. At that point, you may have to come out of pocket broker commissions unless you sell it FSBO (which is always an option if you have the time to dedicate to it).

    [email protected]
    2Reply
  • Ryan Johnston
    OP
    Rental Property Investor · Oklahoma City, OK · Member since 2022 · 10 posts · 1 vote
    1y

    Thank you so much for the response! So true, I've read his stuff as well. I'll shoot you an email! 

    0Reply
  • Jaycee GreenePro Member
    Real Estate Consultant · St. Louis MSA · Member since 2024 · 3k+ posts · 727 votes
    1y
    Quote from @Ryan Johnston:

    I bought this property as a brand-new turn-key property in December 2022 (3bed & 2bath-1544 sq-ft). Lived in the house for 1 year. For most of the 1st year I house hacked and rented out my 2 spare bedrooms, for 6 months that covered the mortgage. After that I moved out and did Airbnb for 4-6 months but struggled keeping up with it not living in the same city anymore, so I switched it to a long-term rental. I'm having to offer this as a fully furnished house to be able to charge a premium on rent just to get close to the mortgage. I've kept it rented out consistently, however, I'm negative $75-$150 in cash flow a month. Mortgage rates have kept increasing as well, that's why I put a range on negative cash flow. Thanks for reading!

    Hey @Ryan Johnston, welcome to the BP Forum! What do you think the property is worth today and how much is your mortgage balance? In what zip code is the property located?

    [email protected]
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  • Ryan Johnston
    OP
    Rental Property Investor · Oklahoma City, OK · Member since 2022 · 10 posts · 1 vote
    1y

    Yes thank you! I've been on for a while but this is my first post!

    Sales price: 227k

    I would be hopeful for like 240k-246K possibly. With the option of a fully furnished home as well! All the furniture could be an addition.

    Zip: 73099 in Yukon, OK

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  • Jaycee GreenePro Member
    Real Estate Consultant · St. Louis MSA · Member since 2024 · 3k+ posts · 727 votes
    1y

    Would this be a good comp: https://www.realtor.com/realestateandhomes-detail/1313-Osweg...?

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  • Ryan Johnston
    OP
    Rental Property Investor · Oklahoma City, OK · Member since 2022 · 10 posts · 1 vote
    1y

    11757 NW 95th St. Yukon, OK 73099 is the address! Mine is a 2022 build 

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  • Jaycee GreenePro Member
    Real Estate Consultant · St. Louis MSA · Member since 2024 · 3k+ posts · 727 votes
    1y

    @Ryan Johnston I was trying to validate your sales price.  The one I linked is asking $240k, assumingly without any furnishings. Have you asked any agents in the area for their opinions of value?

    Is your property close enough to attract military tenants from Tinker AFB?

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  • Ryan Johnston
    OP
    Rental Property Investor · Oklahoma City, OK · Member since 2022 · 10 posts · 1 vote
    1y

    Yes possibly! The AF base is about 20 mins from the house. I'm curious as well how likely someone would want to buy the furniture with the house as well. 

    1Reply
  • Vivian Yip
    Specialist · Austin TX · Member since 2018 · 82 posts · 55 votes
    1y
    Quote from @Ryan Johnston:

    11757 NW 95th St. Yukon, OK 73099 is the address! Mine is a 2022 build 


     Hey Ryan, Your property checks alot of boxes for me for a MTR focused on attracting families as a whole home rental.

    Single story, Good school district, Little to no competition on Airbnb, No HOA.

    I bought a property once in 2015 and it barely cash flowed as a LTR but now 10 years later, I cash flow as a LTR about $600 per month.  I think there are some tax benefits that outway the small negative cash flow that you're currently experiencing.  It will cost you alot more to pay an agent and sell it. 

    Have you added your home to any of the insurance databases for consideration to help displaced homeowners get temporary housing?

    1Reply
  • Ryan Johnston
    OP
    Rental Property Investor · Oklahoma City, OK · Member since 2022 · 10 posts · 1 vote
    1y

    What's your email?

    0Reply
  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    1y

    I like the idea above about trying to do MTR. In my area it is 1.5x the LTR(give or take). Selling a house with furnishings doesn't really add value and many buyers won't want the furniture. I would clear that out if you sell, keep a little to "stage" it. Agents can quickly run comps so that would be helpful for you. Selling costs would be 8-10% of the sales price but there should be an estimated proceeds sheet that would show you costs.

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  • Ryan Johnston
    OP
    Rental Property Investor · Oklahoma City, OK · Member since 2022 · 10 posts · 1 vote
    1y

    @Vivian Yip How would I go about adding on insurance databases for consideration to help displaced homeowners get temporary housing?

    0Reply
  • Justin BrickmanBusiness Member
    Realtor · San Antonio, TX · Member since 2021 · 502 posts · 274 votes
    1y

    Are you confident in the appreciation of the home? It may be worth looking at other deals and if the right one comes up, you can pull the trigger. 

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  • Jeremy Horton
    Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
    1y

    I personally would sell the house - it's negatively cash flowing ~100/month, if you were to add in repairs/maintenance, CapEx, vacancy, rising insurance/property tax costs I would think you're actually losing more than you estimate (luckily it's new so you are on the very low end of that right now). If you had a PM it would be even more.

    You cannot maintain a business with negative cashflow. 

    The alternative is to hope for appreciation - this may or may not happen. If it does happen, how long does it take? What's the opportunity cost of letting that equity sit and taking a loss each month? That money would likely be better allocated elsewhere.

    What's your equity look like? It's crappy, but you may take a loss selling as well due to realtor commissions and general selling costs (concessions the buyer may ask for). 

    It is what it is - if anything you lose a little and learn some lessons going forward to apply to your real estate investing career. 

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  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    1y

    Unlike Robert K and many on this site, I judge a property based on total return.  This implies that if I had confidence of better than normal appreciation or ways to add value, I would purchase a negative cash flow property.  In fact my last completed purchase (I am under contract now for a different purchase) was huge negative cash flow.   Today it has good cash flow (~$6k/month using 49% expense ratio) and is up ~$1m above costs.  

    The issue I see is that market has historical appreciation below average (not bad, but slightly poor).  Negative cash flow combined with historically slightly poor appreciation would lead ne to exit unless I had some reason to have confidence of appreciation above its historic rate.

    https://www.neighborhoodscout.com/ok/yukon/real-estate


    good luck

    1Reply
  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    1y

    @Ryan Johnston If your rental is costing you $75–$150 per month, weigh the long-term appreciation potential against the ongoing losses. If the market is strong, holding could lead to future gains, especially with depreciation deductions offsetting rental income. Consider increasing rent, refinancing, or switching to a mid-term rental to improve cash flow. Selling may trigger capital gains tax, but if you lived there for two of the last five years, you may qualify for a Section 121 exclusion. A 1031 exchange could also defer taxes if reinvesting in a better cash-flowing property. If losses strain your finances, selling might be the best move, but optimizing rental income or tax deductions could make holding worthwhile.

    This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

    [email protected]941-914-7779
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  • Rob Drum
    Real Estate Broker · Bradenton, FL · Member since 2017 · 544 posts · 363 votes
    1y

    @Ryan Johnston A couple of questions worth asking.. Is $150 negative cashflow a lot for you? Is this your only rental? How much did you put down when you purchased it? 

    If you put less than 5% down, your return on equity is likely sky-high. You've got to include loan pay down, appreciation, and depreciation in your return calculations.

    The point of cash flow is to keep you safe. If you can cover small negative cashflow without destabilizing yourself or the property it's not a problem IMO

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  • Walter Bowser
    Member since 2023 · 44 posts · 19 votes
    1y

    Hi Ryan, I actually own 9512 Ashford Dr, just up the street from you. My property is currently renting for $1,800 per month. I would keep your house even if its a a bit negative as you won't be able to sell for much profit or any. The appreciation will come when its a sellers market. I am a local Property Manager and would love to help in anyway I can of youd like

    1Reply
  • Ryan Johnston
    OP
    Rental Property Investor · Oklahoma City, OK · Member since 2022 · 10 posts · 1 vote
    1y
    Quote from @Rob Drum:

    @Ryan Johnston A couple of questions worth asking.. Is $150 negative cashflow a lot for you? Is this your only rental? How much did you put down when you purchased it? 

    If you put less than 5% down, your return on equity is likely sky-high. You've got to include loan pay down, appreciation, and depreciation in your return calculations.

    The point of cash flow is to keep you safe. If you can cover small negative cashflow without destabilizing yourself or the property it's not a problem IMO


    Thanks! Yes, it was 3.5 % down FHA.

    0Reply
  • Ryan Johnston
    OP
    Rental Property Investor · Oklahoma City, OK · Member since 2022 · 10 posts · 1 vote
    1y
    Quote from @Walter Bowser:

    Hi Ryan, I actually own 9512 Ashford Dr, just up the street from you. My property is currently renting for $1,800 per month. I would keep your house even if its a a bit negative as you won't be able to sell for much profit or any. The appreciation will come when its a sellers market. I am a local Property Manager and would love to help in anyway I can of youd like

    Thank you! What's your email?

    0Reply
  • Eric FernwoodBusiness Member
    Realtor · Las Vegas, NV · Member since 2014 · 997 posts · 1k+ votes
    1y

    Hello @Ryan Johnston,

    The decision to keep or sell a property isn't just about its current performance. You need to take a longer-term view of how it's likely to perform in the future. I created the diagram below to help guide you through the decision of whether to keep or sell. Note that the diagram doesn't consider tax implications—that's another important factor you'll need to include in your decision.

    [Click the image to see full size.]

    Real estate investing is for achieving financial independence. This is a lifelong endeavor. So, what is happening today is not as important as what will happen in the foreseeable future.

    If rents are increasing faster than inflation (I use 5% per year as an average rate), then it may be worth holding the property, since your cash flow will increase as rents rise.

    However, in your post you stated, "Mortgage rates have kept increasing as well, that's why I put a range on negative cash flow." If you have an adjustable rate mortgage and it is likely to increase significantly in the future, rent growth rate may not compensate for this and cash flow is likely to get worse over time.

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    1y

    I personally would sell it.

    Your return from real estate is two items - Cash Flow + Appreciation.

    What is the annual rate of appreciation you are getting, approximately?
    What is your expected return from any type of investment?

    If the return from cash-flow + appreciation is less than your expected return, you should consider selling it.

    [email protected]917-280-8544
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