Underwater on Property I would like to rent out after I move out!

Rental Property Investor · NYC · Member since 2024 · 52 posts · 17 votes

Tough spot, but not hopeless. Georgetown is a solid long-term hold. You're probably right about the long term appreciation.And you’re right that maintenance surprises make that monthly loss worse fast.
One option you didn't list: renting to an STR operator instead of a traditional tenant. Operators sign annual leases (often 2-3 years), furnish the place themselves, and maintain it to hotel standards since their income depends on reviews. Georgetown gets traffic from Austin overflow, corporate stays, and weekend visitors.
Not saying it’ll cover your full $2,827, but it’s worth running the numbers. An operator might get you closer to breakeven than a $1,900 LTR tenant would, and you’d have someone with real skin in the game taking care of the property while you’re not there.
This is actually my area. Happy to look at the specifics and give you a realistic take on whether it’d work for your situation. Shoot me a message if you want to dig in.

1 Reply

Alexander Stewart

OP

New to Real Estate · Georgetown Texas · Member since 2021 · 5 posts · 4 votes

9mo

I appreciate the reply. What are your thoughts on paying $35,000 towards the principle and refinance it?

I do not know much about STR operations. I see you are apart of the STR process. I would be open to learning more.

0 Reply

Dan H.Pro Member

Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes

9mo

That home is large cash flow negative when properly allocating for sustained expenses and vacancy. Your projection is far too optimistic.

Austin area has some of the worst appreciation forecasts in the nation. I invite you to google worst appreciating city forecast for 3 years 5 years, and 10 years. I like Texas lake country, but it has had a lot of new residential construction in that area.

If you only had closing costs to go from 6.75% to just above 6%, it could be worth it. There is no way that the savings can justify an expenditure of $30k to $40k. Note seeing you are projecting negative cash flow even after this refi, this cost will initially have no earnings to pay down that costs.

I recognize selling at a loss is undesired. However, the numbers tell me losing $30k to $40k one time is better than paying $30k to $40k to lose money every month for an unknown period of time.

I wish I had a solution that could magically make this a good investment, but numbers tell me it is not.

Good luck

5 Reply

Jules Aton

MD/DC · Member since 2024 · 1k+ posts · 1k+ votes

9mo

It would be helpful to get a skilled Realtor to assist with actual projections but I tend to agree with @Dan H. regarding sunk cost fallacy particularly since you have the funds to go to closing. While it is likely to have appreciated in 10 years so would $250 month + saved repairs in VTSAX or SP in a truly passive manner. The other thing to consider is that in my experience 10 years of renting generally requires fairly significant updates to continue attracting higher end tenants or sell.

1 Reply

Kenneth GarrettPro Member

Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes

9mo

@Alexander Stewart

I saw on the FF site there are other furnished properties renting between 3000-6000. A couple of 2 bedroom units were 3000-3900. Mid-term rental and or short term rental might be an option to cover your debt or at least most it. Of course, you will need to furnish it which will cost more money, but in the long run might help you out.

STR might also be the route to go. I usually do a combination of the two.

It would drive me crazy to take the hit of a loss of 30-40K. Maybe more when you add in closing cost.

Best of Luck.

0 Reply

G. Brian DavisPro Member

Investor · Hatboro, PA · Member since 2016 · 3k+ posts · 873 votes

9mo

With today's rents, refinancing by bringing cash in usually doesn't move the needle enough to justify tying up $30–40k, especially if you're still negative. If you believe in the long-term appreciation, the real question is whether you can comfortably carry a $150–250 monthly loss as a planned hold cost while you wait for rents and rates to normalize. Before selling at a loss, I'd also explore small levers like HOA-rules-permitting midterm rentals, employer housing, or optimizing lease terms to push rent slightly higher. If the negative cash flow is manageable and doesn't block future investing, holding for flexibility may be the least bad option — but I wouldn't force a large cash paydown just to feel better about the numbers.

1 Reply

Hamp Lee IIIPro Member
Real Estate Agent · San Antonio, TX · Member since 2019 · 1k+ posts · 832 votes
9mo
Quote from @G. Brian Davis:

With today's rents, refinancing by bringing cash in usually doesn't move the needle enough to justify tying up $30–40k, especially if you're still negative. If you believe in the long-term appreciation, the real question is whether you can comfortably carry a $150–250 monthly loss as a planned hold cost while you wait for rents and rates to normalize. Before selling at a loss, I'd also explore small levers like HOA-rules-permitting midterm rentals, employer housing, or optimizing lease terms to push rent slightly higher. If the negative cash flow is manageable and doesn't block future investing, holding for flexibility may be the least bad option — but I wouldn't force a large cash paydown just to feel better about the numbers.

Have you considered operating your home for transitional housing to homeless veterans (VA-VASH program), senior care, etc.?

With the $30-40K you have, you can furnish the home yourself or have an operator to provide care where they will rent your home.

In San Antonio, beds are provided between $600-900 and often have two per room if feasible. Just as an example. There are laws that limit the number of non-related individuals in a home.

Check out the First Friday Network on Facebook or run searches for transitional housing and senior care groups in your area.

The First Friday Network may help get you connected with someone in your area.
There are placement agencies for individuals in need of housing that help for various fees.

You can operate as an unlicensed provider, but you would not be able to handle any medical needs. You would be more like a boarding house.

I hope this can lead you to another viable solution.
0 Reply

Alexander Stewart

OP

New to Real Estate · Georgetown Texas · Member since 2021 · 5 posts · 4 votes

9mo

Solid points from everyone. I appreciate you taking the time to post a reply with your perspective.

I struggle with taking a 20-30k loss on selling the property rather than placing 30k into the property and take the risk to keep it as a rental. Unsure what we will do as I have a year to make the decision. I would stay however the military will move us.

0 Reply

Benjamin AakerPro Member

Rental Property Investor · Brandon, SD · Member since 2015 · 1k+ posts · 1k+ votes

9mo

You need to consider what is your long term strategy. Are you planning to be a real estate investor, or is this a side project? Unless you are in the long game, you should sell, even if for a loss, and move on. It'll save you much more money and headaches.
If you are in it for the long haul and you have personal income to subsidize, you can consider holding on to it. Remember, this will be building equity. If you can hold it and hopefully have a significant drop in interest rates, you might be able to right the ship. You could also do some other creative investing strategies as other commenters have said. Only consider these if you want to put in the time - these essentially trade time for money - but don't do it if your heart isn't in it.

0 Reply

Celine Crestin

Real Estate Broker · Austin, TX · Member since 2022 · 89 posts · 93 votes

9mo

I totally understand your situation - I used to live in a property like yours in Georgetown myself. For my clients in your shoes, the best bets have ended up being leasing it out at a loss (if you really have to move and need a solution) OR potentially a subject to deal (not for everyone). I would not recommend selling at a loss and unless you plan to hold for 5+ years most likely the refinance also won't make sense.

Simple math - If you pay the loss of $500/month ($6k/year) while holding the property as a rental, it would take you over 5 years just to break even on a $30k refi investment (because you'd still be operating with negative cash flow anyway). If you have the $30k - use it to cover the loss for the next year and reassess when the time comes. You could also use some of it to purchase a second property (as your primary) which would still be a better investment than refinancing IMO.

Happy to chat more about it and go over all your options in specific details for you if needed (Real Estate Broker and Licensed Mortgage Officer here in the Austin area).

2 Reply

Alexander Stewart

OP

New to Real Estate · Georgetown Texas · Member since 2021 · 5 posts · 4 votes

9mo

Thank you all very much for the new opinions!

1 Reply

James JonesPro Member

Investor · Collierville, TN 38017 · Member since 2017 · 815 posts · 599 votes

9mo

You’re thinking about this the right way, and you’re also being honest about the math, which matters.

A few key observations first:

• At $1,900–$2,000 rent versus ~$2,827 all-in fixed costs (mortgage + HOA alone), this property is structurally negative cash flow, not temporarily.

• Refinancing while underwater rarely fixes a deal unless rates materially drop and value recovers.

• Paying $30–40k just to reduce a monthly loss is not investing, it’s subsidizing.

Now the real decision framework:

Option 1: Keep and subsidize

This only makes sense if:

• You are comfortable treating this as a long-term appreciation play

• The monthly loss does not limit your ability to invest elsewhere

• You expect strong rent growth relative to expenses over time

If you go this route, minimize loss:

• Rent at the top of market, not “safe” pricing

• Self-manage initially to reduce drag

• Keep reserves tight and intentional

Option 2: Sell and redeploy

Emotionally hard, but financially clean.

• You cap the loss once

• You free up capital and bandwidth

• You avoid 10 years of hoping the math fixes itself

Many investors underestimate how powerful not carrying a bad deal can be.

Option 3: Improve economics without refi

Before injecting $30–40k, explore:

• Roommate or mid-term rental strategy (if HOA allows)

• Employer-backed or furnished rentals

• House-hack style repositioning if layout allows

These are operational fixes, not financial ones, but sometimes they bridge the gap.

The biggest mistake to avoid

Holding purely because “it should appreciate” while ignoring opportunity cost. Appreciation helps great deals. It does not rescue weak ones.

If this were my decision:

• I would not refinance into a guaranteed loss

• I would either operationally improve cash flow or exit clean and redeploy

• I would not sink fresh capital just to feel better about holding

There’s no failure here, only a decision about how disciplined you want to be going forward.

0 Reply

Alexander Stewart
OP
New to Real Estate · Georgetown Texas · Member since 2021 · 5 posts · 4 votes
9mo
Quote from @James Jones:

You’re thinking about this the right way, and you’re also being honest about the math, which matters.

A few key observations first:

• At $1,900–$2,000 rent versus ~$2,827 all-in fixed costs (mortgage + HOA alone), this property is structurally negative cash flow, not temporarily.

• Refinancing while underwater rarely fixes a deal unless rates materially drop and value recovers.

• Paying $30–40k just to reduce a monthly loss is not investing, it’s subsidizing.

Now the real decision framework:

Option 1: Keep and subsidize

This only makes sense if:

• You are comfortable treating this as a long-term appreciation play

• The monthly loss does not limit your ability to invest elsewhere

• You expect strong rent growth relative to expenses over time

If you go this route, minimize loss:

• Rent at the top of market, not “safe” pricing

• Self-manage initially to reduce drag

• Keep reserves tight and intentional

Option 2: Sell and redeploy

Emotionally hard, but financially clean.

• You cap the loss once

• You free up capital and bandwidth

• You avoid 10 years of hoping the math fixes itself

Many investors underestimate how powerful not carrying a bad deal can be.

Option 3: Improve economics without refi

Before injecting $30–40k, explore:

• Roommate or mid-term rental strategy (if HOA allows)

• Employer-backed or furnished rentals

• House-hack style repositioning if layout allows

These are operational fixes, not financial ones, but sometimes they bridge the gap.

The biggest mistake to avoid

Holding purely because “it should appreciate” while ignoring opportunity cost. Appreciation helps great deals. It does not rescue weak ones.

If this were my decision:

• I would not refinance into a guaranteed loss

• I would either operationally improve cash flow or exit clean and redeploy

• I would not sink fresh capital just to feel better about holding

There’s no failure here, only a decision about how disciplined you want to be going forward.
A fantastic write up providing a great deal of insight. Much appreciated! Truly I am leaning towards letting this property go in early 2027 prior to moving.
1 Reply
James JonesPro Member
Investor · Collierville, TN 38017 · Member since 2017 · 815 posts · 599 votes
9mo
Quote from @Alexander Stewart:

Quote from @James Jones:

You’re thinking about this the right way, and you’re also being honest about the math, which matters.

A few key observations first:

• At $1,900–$2,000 rent versus ~$2,827 all-in fixed costs (mortgage + HOA alone), this property is structurally negative cash flow, not temporarily.

• Refinancing while underwater rarely fixes a deal unless rates materially drop and value recovers.

• Paying $30–40k just to reduce a monthly loss is not investing, it’s subsidizing.

Now the real decision framework:

Option 1: Keep and subsidize

This only makes sense if:

• You are comfortable treating this as a long-term appreciation play

• The monthly loss does not limit your ability to invest elsewhere

• You expect strong rent growth relative to expenses over time

If you go this route, minimize loss:

• Rent at the top of market, not “safe” pricing

• Self-manage initially to reduce drag

• Keep reserves tight and intentional

Option 2: Sell and redeploy

Emotionally hard, but financially clean.

• You cap the loss once

• You free up capital and bandwidth

• You avoid 10 years of hoping the math fixes itself

Many investors underestimate how powerful not carrying a bad deal can be.

Option 3: Improve economics without refi

Before injecting $30–40k, explore:

• Roommate or mid-term rental strategy (if HOA allows)

• Employer-backed or furnished rentals

• House-hack style repositioning if layout allows

These are operational fixes, not financial ones, but sometimes they bridge the gap.

The biggest mistake to avoid

Holding purely because “it should appreciate” while ignoring opportunity cost. Appreciation helps great deals. It does not rescue weak ones.

If this were my decision:

• I would not refinance into a guaranteed loss

• I would either operationally improve cash flow or exit clean and redeploy

• I would not sink fresh capital just to feel better about holding

There’s no failure here, only a decision about how disciplined you want to be going forward.
A fantastic write up providing a great deal of insight. Much appreciated! Truly I am leaning towards letting this property go in early 2027 prior to moving.

Glad it helped, Alexander.
Sounds like a reasonable plan given the timeline.
0 Reply

Thomas TalbertBusiness Member

Property Manager · Austin, TX · Member since 2024 · 96 posts · 71 votes

9mo

Truly a tough situation but sadly not uncommon at this point in time in the market. We have had several clients come to us with similar issues and Stark reality is you are going to bleed now or bleed slowly.

Everyone above has given great commentary and all the math seems generally correct. What we have been telling new clients that are in this scenario is that leasing buys you time. If you sell you have to take that loss right now and there is no other option. If you lease it out you can bleed slowly in the interim but it allows you to jump on an opportunity that maybe has not presented itself yet.

Hope this helps!

[email protected]512-342-9566

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Chris SeveneyBusiness Member

Moderator

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

9mo

In six months you will be $40-50k underwater and if you have to drip $700/month without costs or vacancies you can figure you will end up spending $10-12k out of pocket a year as well. So it's a matter of do you want to spend $30k with one slash of the knife or by 1,000 cuts

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Carlos Marin

Realtor · Austin, TX · Member since 2024 · 23 posts · 15 votes

9mo

Medium term rental can be an option, but I am worried about HOA's policies. You can check the HOA papers and they might accept 3 month leases. Most of them ask for a 6 months minimun which would be harder but you can put it out there and see if you can get a tenant. It has to be furnished but you can get atmost double of what you get long term. If you need someone to manage it send me a DM. Good luck!

0 Reply

Ryan D.

Investor · Portland, OR · Member since 2026 · 67 posts · 35 votes

6mo

Dan is right. Youre not choosing between losing $30-40k or keeping the property. You choose between losing it once vs losing $600-800/month with no clear exit date.

At that burn rate the one-time loss catches up in about under 4 years — and then you're just adding to it.

0 Reply

Jesus RomanBusiness Member

Real Estate Agent · Houston, TX · Member since 2020 · 175 posts · 75 votes

6mo

Deploying $35k into an already underwater asset isn't the move here, especially in the current Austin market, which remains one of the shakier metros in Texas right now. You can absolutely put that capital to work in a better-positioned deal.

Here's the part people overlook: once a property hits the 7 to 10 year mark, you're entering the window where big-ticket capital expenditures start showing up. Roof, HVAC, water heater, appliances. On a 2022 new build you have a little runway, but it's closer than it feels. Any appreciation you've accumulated can evaporate quickly when a $12,000 to $18,000 repair bill lands.

Based on the numbers, you're realistically looking at 9 to 10 years before this property approaches cash flow break-even. When you spread that $30k paper loss across a decade it starts to feel manageable, but that framing ignores the opportunity cost. That same $35k you'd inject for a refi, plus the roughly $1,200 a month you'd be subsidizing, could be deployed into a deal that actually performs from day one. Over 10 years that's $140k+ in capital that worked against you instead of for you.

Hard advice, but the play here is probably to sell, take the loss, and redeploy into a market and asset that pencils from the start.

713-594-9124

0 Reply

Jordan MoorheadBusiness Member

Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes

6mo

Quote from @Alexander Stewart:

Hey everyone,

Asking for some guidance on a property I would like to keep however do not have positive cash flow if I were to rent out now. I am a novice in the rental property profession but am making it my focus on top of my wife and I both working full time jobs.

I currently live in and own a property in Georgetown, Texas north of Austin. I purchased the 2 bed / 2 bath 1330 SQFT townhouse in 2022. The intent was to live in for years, refinance and move out to make it my second rental property. My first property has positive cash flow (not a ton) but has paid for itself for 4 years and appreciated a bit.

Stats:

Purchased for $305,000 in 2022, 6.75% interest rate. Estimated current market value $280,000. based on a 3 bed/3 bath selling last month for $306,000 next door.
New build, first to live in it
Mortgage: $2,577
HOA: $250/mo
2 bed / 2 bath, 1330 SQFT.

Based on similar houses in my neighborhood, I could rent this for $1900-2000 a month.

Surrounded by a nice elementary, middle and high school within a few miles.

Lower home price for the area compared to the median.

I see property values truly appreciating in this region over the next 10 years. The local area continues to grow aggressively.

I will be moving around FEB/MAR of 2026 and would like everyone's opinion on how to move forward.

Option 1: Place $30-40,000 and refinance to operate at a smaller loss of $150-250 a month for the foreseeable future. This is assuming I can rent this property for $1900-2000/mo.

Option 2: Sell and take a $30-40,000 loss. Not ideal.

Option 3: I am hoping this is where this forum helps. Unsure what else I can do.

I understand I bought during a high interest rate time and a local Austin, TX bubble. However, I think this property will appreciate greatly if I can hold for 10 years.

Thanks all!

I would sell it and book the loss now. I don't see a great option here unless you can find someone to sub to it or do a lease w/option to buy at a higher rate. The value will go up over time but I can't tell you how long it will take to get to break even.

An alternative is lose $6-7000 a year for a few years and see what happens or rent it as an MTR or sub leased STR if the complex will allow it.

[email protected]512-888-9122

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Garrett CrosbyPro Member

Real Estate Agent · Los Angeles, United States · Member since 2021 · 392 posts · 162 votes

4mo

The military move changes the calculus in a couple of ways worth calling out. First, check whether your HOA allows MTR (60-90 day leases) — corporate and government contract workers in the Austin corridor are a legitimate renter pool and often get you $2,400-2,800 instead of $1,900 LTR. That alone could cut your monthly bleed significantly without the refi.

Second — don't inject $30-40K into this property in a refi. Everyone above is right on that. The math doesn't close enough to justify locking up that capital. Dan, James, and Ryan laid it out clearly: you're choosing between a one-time loss now versus a slow bleed for years. The refi just converts a slow bleed into an expensive slow bleed with less cash.

If you hold, treat the monthly loss as the cost of keeping the option alive — but only if it doesn't block you from investing elsewhere at the next duty station. That's the real opportunity cost question. If the $600-800/month bleed limits your ability to build at the next location, sell. If you can absorb it and still move forward, holding may buy you the rate environment change you're banking on. Feel free to DM if you want to run the numbers further.

[email protected]

0 Reply

Aaron Gordy

Real Estate Broker · Austin, TX · Member since 2012 · 1k+ posts · 1k+ votes

4mo

I would choose option 1. Sure you are losing a 150-250 per month for the 1st year. Its brand new and there will be very little maintenance costs if any. If he sees the property values appreciating in that submarket go for it then. Rents will rise with inflation and that 150-250 will turn into a positive in a few years. Its a buyers market too. Don't sell if you can help it. Real estate is a get rich slowly game.

If he sells at 280k then he will be out after closing costs and commissions of 7% then he will be down 40k.

I have been in similar positions. I have lost money when I sold out thinking that was the better option. I regretted it years later as the values tripled. I have also held on and rented it out and am glad that I did.

Real estate is cyclical. Don't sell on the down side unless you can help it or if its a huge tax writeoff and makes sense to do so.

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Underwater on Property I would like to rent out after I move out!

Underwater on Property I would like to rent out after I move out!

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