Looking for Ideas to Reduce High Negative Cash Flow – 2-Unit

[Miguel Alvarez]

I’ve got a 2-unit in San Diego that’s bleeding cash:

• $10K/month all-in expenses (mortgage + MI + other costs)

• $7.5K/month in rent income

• Locked at 5.5% interest

• Can’t raise rents for another year, and local rents are trending down

Even with future rent bumps, I’m years away from breaking even.

Possible moves I’ve thought about: 

- Short-term rentals

- Expanding the units (lot space available), or adding a second story (to create more units). 

I don’t have blueprints, so building would mean paying to get plans drawn.

What would you do in my shoes? Looking for any and all creative, outside-the-box ideas.

[Basit Siddiqi]

You are losing $2,500 a month in cash-flow assuming your $10K expenses also includes Vacancy/Capex/Repair reservees. If the $10,000 does not factor in these amounts, you might be losing more than $2,500 a month.

$2,500 x 12 months = $30,000.

If your property is appreciating $30,000 annually, you might be okay and this might be a 0% investment.

If the property is losing value, you are losing money in cashflow and appreciation(double whammy).

I would consider selling the property if appreciation is not atleast the cash-flow amount.