Does it ever make sense to sell at a loss.

Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes

2y

Does it make sense to get money out of a poor performing investment to enter into a better performing investment if the sale results in a loss?

I have a duplex with $70k invested into it OH. Way too much money put in repairs. The property was supposed to be for cash flow and the neighborhood doesn’t appreciate. Cash flow is $390/mo or 6.6% return. With the way interest rates are and the rural neighborhood it’s located at, I think it will be difficult to sell and get all my money back.

I might only get $50k out of my $70k investment.

I have an investment group I work with that does successful flips with 20% return over 3-4months.

If I do one flip with $50k added to my fund for flipping I could make 20% on that $50k. I would make $10k. This is more than the $390/mo I’m making in the original $70k.

However adding the $10k profit to $50k puts me at $60k. I still need to do one more flip over 4 months to get back to the $70k I had.

The duplex I own with $70k invested seems like every month there's a new big repair and it's an old property. This is why I want out. I was originally supposed to have a 10%-12% ROI but now it's 6.6% because I keep having to put more money. And I can only sell it for so much because it depends on the rents. So everytime I put more money into it I think that I won't be able to get it back in the event that I sell. Makes me think it's better to get out now. I have a mortgage at 9% DSCR too.

Sometimes, it does. You have to look long term at opportunity costs and frustration.
Don't believe the old adage that "we lose money on every transaction, but we'll make it up in volume".

0 Reply

Jay ThomasPro Member

Real Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes

2y

Selling your underperforming duplex for a better investment opportunity seems like a smart move. With a mere 6.6% ROI and ongoing repair costs, it's evident the duplex isn't yielding well. Your investment group's successful flips boasting a 20% ROI in 3-4 months present a more lucrative option. Selling the duplex for $50,000 and putting it into a flip could potentially earn you $10,000 in a shorter timeframe. Though there's always a market risk, your confidence in the group's track record is key. Consider tax implications for gains or potential deductions for losses, transaction costs, and the time it takes to execute the switch. While selling your duplex and diving into a flip appears wise, consulting with a financial advisor is advisable for tailored guidance.

[email protected]832-889-5607

2 Reply

Joe VilleneuvePro Member

Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes

2y

The answer is simple. It ALWAYS makes sense to dump it, ASAP. The property has negative CF and isn't appreciating. What are you waiting for? Every month you gold onto this dog, you are just losing more money. You gave the reasons why in your post. You're not going to recover your losses in this property, but you can in your next one. The longer you wait, the more losses you have to recover.

5 Reply

Tim VandenToorn

Real Estate Professional · Rockford, MI · Member since 2015 · 301 posts · 138 votes

2y

Are you saying you purchased a duplex for 70,000 or that you have a duplex and you put 70,000 into upgrades and capital improvements? How long will the flipping relationship last? Most flippers don't want to give away 20% for very long. Your duplex although not performing as strong as you want, it will be around long after the flippers move on. Flipping is getting harder and the margins are smaller in most markets. I would strongly consider holding, and coming up with the cash to invest in the flipping business another way.

1 Reply

Bob S.

Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes

2y

Quote from @Mike Boss:

Does it make sense to get money out of a poor performing investment to enter into a better performing investment if the sale results in a loss?

I have a duplex with $70k invested into it OH. Way too much money put in repairs. The property was supposed to be for cash flow and the neighborhood doesn’t appreciate. Cash flow is $390/mo or 6.6% return. With the way interest rates are and the rural neighborhood it’s located at, I think it will be difficult to sell and get all my money back.

I might only get $50k out of my $70k investment.

I have an investment group I work with that does successful flips with 20% return over 3-4months.

If I do one flip with $50k added to my fund for flipping I could make 20% on that $50k. I would make $10k. This is more than the $390/mo I’m making in the original $70k.

However adding the $10k profit to $50k puts me at $60k. I still need to do one more flip over 4 months to get back to the $70k I had.

The duplex I own with $70k invested seems like every month there's a new big repair and it's an old property. This is why I want out. I was originally supposed to have a 10%-12% ROI but now it's 6.6% because I keep having to put more money. And I can only sell it for so much because it depends on the rents. So everytime I put more money into it I think that I won't be able to get it back in the event that I sell. Makes me think it's better to get out now. I have a mortgage at 9% DSCR too.

Where in OH? If Cleveland I may buy it

0 Reply

James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

2y

Quote from @Mike Boss:

Does it make sense to get money out of a poor performing investment to enter into a better performing investment if the sale results in a loss?

I have a duplex with $70k invested into it OH. Way too much money put in repairs. The property was supposed to be for cash flow and the neighborhood doesn’t appreciate. Cash flow is $390/mo or 6.6% return. With the way interest rates are and the rural neighborhood it’s located at, I think it will be difficult to sell and get all my money back.

I might only get $50k out of my $70k investment.

I have an investment group I work with that does successful flips with 20% return over 3-4months.

If I do one flip with $50k added to my fund for flipping I could make 20% on that $50k. I would make $10k. This is more than the $390/mo I’m making in the original $70k.

However adding the $10k profit to $50k puts me at $60k. I still need to do one more flip over 4 months to get back to the $70k I had.

The duplex I own with $70k invested seems like every month there's a new big repair and it's an old property. This is why I want out. I was originally supposed to have a 10%-12% ROI but now it's 6.6% because I keep having to put more money. And I can only sell it for so much because it depends on the rents. So everytime I put more money into it I think that I won't be able to get it back in the event that I sell. Makes me think it's better to get out now. I have a mortgage at 9% DSCR too.

If you want out, just pull off the Band-Aid and get out my man. Rentals aren't for everyone. The people who make rentals like what you described work are the minority. It's a tough business for sure.

2 Reply

Scott E.

Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes

2y

Yes it probably makes sense to sell this at a loss.

Also, don't expect to be able to consistently get those big returns with that investment group. You'll win some, you'll lose some. There's no way that they will consistently bring you a 20% return every 3-4 months.

4 Reply

Zachary Ware

Member since 2022 · 405 posts · 455 votes

2y

If you can make a better return by putting your money into something else, it makes sense to sell even at a loss.

0 Reply

Timothy Howdeshell

Investor · Fresno, CA · Member since 2016 · 222 posts · 237 votes

2y

@Mike Boss I don't really need to read the post to know that the answer is yes. Selling at a loss may make sense for tax loss harvesting, and/or because you believe that the returns elsewhere will make up for the loss. You may also want to sell for emotional or lifestyle reasons as well, all of which are valid. Maximizing financial return in a vacuum is not always optimal.

I did read the post though and unfortunately I don't thing that you'll be able to generate higher returns to compensate. Here's why:

1. If you flip, the profits will be highly taxed, meaning your 10k return = 7k. You're still at a 13k loss and need to do this 2 more times to break even, not 1. 3 "20% return flips" in 1 year to get to square 1.

2. Passive losses (capital loss on sale) cannot count against active gains (flipping). So now you have a capital loss + highly taxed income.

2. The 6.6% return you're getting now is probably offset by depreciation meaning it's relatively tax free. This is worth 10k of pre-tax money.

3. Flipping is highly risky. I'm not sure what kind of repairs you're needing to make on the property, but assuming they're done correctly you should have a break.

4. Theoretically, this is the worst this property will perform as: rents increase, you refi your mortgage (hopefully eventually), and your CAPEX/repairs are good for a while.

All in all, I wouldn't recommend your proposed strategy. If you feel that flipping 3 houses is a certainty to make money, keep your current property and flip as well. Raise money if you're short.

Best of luck!

0 Reply

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

2y

Quote from @Mike Boss:

Does it make sense to get money out of a poor performing investment to enter into a better performing investment if the sale results in a loss?

I have a duplex with $70k invested into it OH. Way too much money put in repairs. The property was supposed to be for cash flow and the neighborhood doesn’t appreciate. Cash flow is $390/mo or 6.6% return. With the way interest rates are and the rural neighborhood it’s located at, I think it will be difficult to sell and get all my money back.

I might only get $50k out of my $70k investment.

I have an investment group I work with that does successful flips with 20% return over 3-4months.

If I do one flip with $50k added to my fund for flipping I could make 20% on that $50k. I would make $10k. This is more than the $390/mo I’m making in the original $70k.

However adding the $10k profit to $50k puts me at $60k. I still need to do one more flip over 4 months to get back to the $70k I had.

The duplex I own with $70k invested seems like every month there's a new big repair and it's an old property. This is why I want out. I was originally supposed to have a 10%-12% ROI but now it's 6.6% because I keep having to put more money. And I can only sell it for so much because it depends on the rents. So everytime I put more money into it I think that I won't be able to get it back in the event that I sell. Makes me think it's better to get out now. I have a mortgage at 9% DSCR too.

It seems you are going to make mistake twice.
1. you don't do enough due diligence on the repair cost of very cheap cash flow home. It's known that rural area out of area somwhere would not appreciate simple because there's no demand.
2. then again you believe there's opportunity to make constant 20% from all flipping

you would lose money twice. You can sell but don't do flips yet as seems you don't understand the risk involved and how to mitigate from the risk.

2 Reply

David Dachtera

Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes

2y

@Mike Boss,

We have the expression, "cut your losses". That may apply in this case.

My $0.02 ...

1 Reply

Travis TimmonsPro Member

Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes

2y

First of all - shocker that a new out of state investor got into a low cost duplex in Ohio that is not panning out. I'm sure that you likely found someone on BP selling you on this being a good idea. If that was the case, that sucks. You cut the check and you are an adult, but that sucks.

Secondly, you have done repeated flips at a 20% return with an investment group OR you have someone selling you on that idea? There is a big difference. Making 20% on your cash every quarter is not realistic.

It sounds like doing what someone else told you was a good idea is how you got into this mess. And now you're just doing what someone else is telling you again by wanting to invest money with this "investment group."

Take a step back and figure out what you actually know. What is your subject matter expertise? You need to stop chasing other people's ideas and educate yourself enough to come up with your own. Or just throw your cash in an index fund and forget it is there.

6 Reply

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

2y

cutting the loss is easy, what is difficult is learning from the first mistake. Education is expensive.

I mean, everybody knows rural property in Midwest would never have appreciation or it would be laggards, so lot of key basic investment assumption is wrong before deciding to take this property.

Now if you say flipper would make 20% then you may lose everything by this assumption. I'm worried actually.

1 Reply

Peter W.

Member since 2020 · 351 posts · 329 votes

2y

The money is already lost whether you have realized it or not. The question is would you put 50k into this deal now as it stands or would you get better returns taking the 40k (transaction fees) into something else. If it’s bleeding money then you have to dump it. If it’s actually cash flowing at 6% that’s subpar returns but by the time you account for transactions fees it might be worth holding on to.

1 Reply

Alfath AhmedBusiness Member

Real Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes

2y

Quote from @Mike Boss:

Does it make sense to get money out of a poor performing investment to enter into a better performing investment if the sale results in a loss?

I have a duplex with $70k invested into it OH. Way too much money put in repairs. The property was supposed to be for cash flow and the neighborhood doesn’t appreciate. Cash flow is $390/mo or 6.6% return. With the way interest rates are and the rural neighborhood it’s located at, I think it will be difficult to sell and get all my money back.

I might only get $50k out of my $70k investment.

I have an investment group I work with that does successful flips with 20% return over 3-4months.

If I do one flip with $50k added to my fund for flipping I could make 20% on that $50k. I would make $10k. This is more than the $390/mo I’m making in the original $70k.

However adding the $10k profit to $50k puts me at $60k. I still need to do one more flip over 4 months to get back to the $70k I had.

The duplex I own with $70k invested seems like every month there's a new big repair and it's an old property. This is why I want out. I was originally supposed to have a 10%-12% ROI but now it's 6.6% because I keep having to put more money. And I can only sell it for so much because it depends on the rents. So everytime I put more money into it I think that I won't be able to get it back in the event that I sell. Makes me think it's better to get out now. I have a mortgage at 9% DSCR too.

Where city in Ohio is this in? Generally, I recommend investing and flipping/rehabbing in Columbus. It is where I do all of my business and have made multiple 6-figures doing flips.

I recommend you find the right agent that brings you the right deals in C+ locations turning to B-. Those are the best flips.

Yes, it is okay to exit with a loss. It is a learning experience. You should have known and done more research on the neighborhood before taking on a flip in a neighborhood that does not appreciate.

[email protected]614-802-5698

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2 Reply

Alfath AhmedBusiness Member

Real Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes

2y

Quote from @Travis Timmons:

First of all - shocker that a new out of state investor got into a low cost duplex in Ohio that is not panning out. I'm sure that you likely found someone on BP selling you on this being a good idea. If that was the case, that sucks. You cut the check and you are an adult, but that sucks.

Secondly, you have done repeated flips at a 20% return with an investment group OR you have someone selling you on that idea? There is a big difference. Making 20% on your cash every quarter is not realistic.

It sounds like doing what someone else told you was a good idea is how you got into this mess. And now you're just doing what someone else is telling you again by wanting to invest money with this "investment group."

Take a step back and figure out what you actually know. What is your subject matter expertise? You need to stop chasing other people's ideas and educate yourself enough to come up with your own. Or just throw your cash in an index fund and forget it is there.

Let's not bad-mouth Ohio. Columbus is one of the fastest growing cities in the midwest. By no means is it like the west coast or east coast states; however, appreciation, population growth, and rent growth have been through the charts here.

[email protected]614-802-5698

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1 Reply

Jeremy GiffordPro Member

Member since 2022 · 7 posts · 4 votes

2y

Exiting a low-yield investment can sometimes be the best course of action, particularly if it's causing financial strain and the market shows no signs of appreciation. However, ensure that you've thoroughly vetted the alternative investment for viability and sustainability. It's not just about the numbers; it's about the quality of the investment and peace of mind. If flipping houses with your investment group presents a more solid and stress-free return, it could very well be the smarter path to financial growth.

2 Reply

Travis TimmonsPro Member

Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes

2y

@Alfath Ahmed it's not that Ohio is a good or bad place or market. It's like anywhere else - has its good, bad, and in between. If you know what you are doing, you can be very successful there. It's the over-representation that exists on BP from the Ohio contingent.

I hop on the forums a few times a week to try to answer questions and help new investors. This is probably the 5th or 6th out of state investment that I have seen in recent months in Ohio that did not go well for a first time investor.

Real people buy actual bad deals based on contacts and advice they get on this site. Should they be smarter? Sure, but they're not. This forum has a bad habit of preying on people that don't know any better and then blaming them for listening to them in the first place. That's what I was addressing - not the investment prospects of Ohio.

5 Reply

Samuel DioufBusiness Member

Real Estate Agent · Columbus & Cleveland, OH · Member since 2023 · 1k+ posts · 1k+ votes

2y

It depends if you bought the property in Cleveland or Columbus

[email protected]614-662-1652

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1 Reply

Alfath AhmedBusiness Member

Real Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes

2y

Quote from @Travis Timmons:

@Alfath Ahmed it's not that Ohio is a good or bad place or market. It's like anywhere else - has its good, bad, and in between. If you know what you are doing, you can be very successful there. It's the over-representation that exists on BP from the Ohio contingent.

I hop on the forums a few times a week to try to answer questions and help new investors. This is probably the 5th or 6th out of state investment that I have seen in recent months in Ohio that did not go well for a first time investor.

Real people buy actual bad deals based on contacts and advice they get on this site. Should they be smarter? Sure, but they're not. This forum has a bad habit of preying on people that don't know any better and then blaming them for listening to them in the first place. That's what I was addressing - not the investment prospects of Ohio.

Intel is investing $20 billion in Columbus with a project of $100 billion over the next 10 years. Amazon is investing $3.2 Billion right next to Intel. Google is building 2 new data centers.

Lot's of new startups are coming to Columbus.

Yes, you are right that anywhere has the good, okay, and the ugly. However, it depends on the team that an investor chooses. I made multiple 6-figures this year from just my rehabs not to mention the brokerage side of things.

All of my investors have also been very successful. They found their core-4 and I was able to provide them with the shell to develop their own teams and create their own funnels.

[email protected]614-802-5698

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3 Reply

Ned J.Pro Member

Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes

2y

6.6% ROI, plus loan pay down, tax benefits etc etc, aint so bad into todays market... your interest rate sucks. Not a home run investment, but decent

Beware the "oh I can make 20% on a flip every 3-4 months"..... good luck with that

4 Reply

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

2y

Quote from @Travis Timmons:

@Alfath Ahmed it's not that Ohio is a good or bad place or market. It's like anywhere else - has its good, bad, and in between. If you know what you are doing, you can be very successful there. It's the over-representation that exists on BP from the Ohio contingent.

I hop on the forums a few times a week to try to answer questions and help new investors. This is probably the 5th or 6th out of state investment that I have seen in recent months in Ohio that did not go well for a first time investor.

Real people buy actual bad deals based on contacts and advice they get on this site. Should they be smarter? Sure, but they're not. This forum has a bad habit of preying on people that don't know any better and then blaming them for listening to them in the first place. That's what I was addressing - not the investment prospects of Ohio.

usually, when the investment is going south, people is suddenly quiet.

that is why in BP these days nobody bragging about how many doors they have LOL

1 Reply

Travis TimmonsPro Member

Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes

2y

@Alfath Ahmed you can stop copying/pasting these chamber of commerce stats about Columbus. We've all seen them 1000 times. It's not a boom town. It's fine. It's a growing midwestern city. Intel is a company whose stock is down 16.5% over the last 4 years while the S&P is up 65%. Google, Amazon, and Meta are investing all over the US. Cool.

You can cherry pick stats about any city. I'll take a swing at my market. Houston metro is the 27th largest economy in the world (just behind Belgium and ahead of Nigeria, in case you were wondering), has more small business job growth than any other city in the US, and since I moved here 13 years ago has grown by 1.7M people in the metro area. I don't know how big Columbus is, but common sense suggests that Houston has added the approximate population of greater Columbus in 13 years. Awesome. Who cares? Nobody is asking. People want to know how to underwrite their first deal or how to go about avoiding common mistakes. They can do a google search for stats and facts.

Stop selling, stop acting like everything is easier than it actually is, and do the blocking and tackling of helping green and naïve investors. I really am happy for your success. I'm not being condescending or patronizing. And the entire weight of this issue does not fall on you. I don't know a thing about you, but even you have to admit, there are a bunch of Ohio lurkers on here that seem more interested in grabbing their next commission check than actually helping people figure out how to navigate and succeed in today's market.

8 Reply

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

2y

ya we really need to make biggerpocket place for investor so we could all have good informed decision.

1 Reply

Cody L.

Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes

2y

Quote from @Mike Boss:

Does it make sense to get money out of a poor performing investment to enter into a better performing investment if the sale results in a loss?

I have a duplex with $70k invested into it OH. Way too much money put in repairs. The property was supposed to be for cash flow and the neighborhood doesn’t appreciate. Cash flow is $390/mo or 6.6% return. With the way interest rates are and the rural neighborhood it’s located at, I think it will be difficult to sell and get all my money back.

I might only get $50k out of my $70k investment.

I have an investment group I work with that does successful flips with 20% return over 3-4months.

If I do one flip with $50k added to my fund for flipping I could make 20% on that $50k. I would make $10k. This is more than the $390/mo I’m making in the original $70k.

However adding the $10k profit to $50k puts me at $60k. I still need to do one more flip over 4 months to get back to the $70k I had.

The duplex I own with $70k invested seems like every month there's a new big repair and it's an old property. This is why I want out. I was originally supposed to have a 10%-12% ROI but now it's 6.6% because I keep having to put more money. And I can only sell it for so much because it depends on the rents. So everytime I put more money into it I think that I won't be able to get it back in the event that I sell. Makes me think it's better to get out now. I have a mortgage at 9% DSCR too.

Pull the plug brother. Not all investments work out. Chalk it up to the cost of education. It was a cheap lesson all things considered. There are a lot of people out there taking some massive losses.

You'll do better on the next one.

1 Reply

Does it ever make sense to sell at a loss.

Does it ever make sense to sell at a loss.

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