Got my first rental with negative cashflow

[Pavlo Mashchak]

I got my first rental with negative cashflow last year.

Property price 241k, loan balance 232k 

Tenant pays rent 1,800$

monthly payment 2,050$

Spent 5,000$ on improvements.

Property appreciated from 241k to 255$ this year.

I am not sure whether I should sell it this year or keep for appreciation purposes?

Please somebody experienced help with numbers.

Thanks

[Charles Granja]

I mean, I'm seeing a large annual cashflow loss on this, but depending on market dynamics, you could come out ahead? You should probably place more equity in this deal and refi once rates drop or sell it if you can't take the cashflow losses. I personally don't like this transaction, but everyone has a different risk tolerance. if you can aggressively raise rents and the market appreciates you are fine.

For your assumptions the red flags that I'm seeing:

0% vacancy should be higher unless your a PM and are experienced, even still.

0% for management fees, are you a property manager? Otherwise it should 10-12% (it depends but if you add the leasing fee and weight it across 36 months then it will be more accurate than the flat fee)

I'm not seeing 100-150$ per month for maintenance and I'm not seeing any similar amounts for capex reserve.

Don't pay for utilities unless you have to for some reason.

PP: 241k

Closing costs: 3% is ~7.25k

1-month vacancy: 1.8k

Leasing fee: 1.8k

Improvements: 5k

Are you all-in for around 257k?

If you sell at 255k for 6-8% it will cost 15-20k for sale. 

If you sell now its a 15-25k loss unless you do FSBO, then the loss is smaller.

If you don't sell you may be negative around 4-6k each year depending on the capex timeline/maintenance issues. If you have a turnover before the 3-year mark the cashflow loss will be greater.

I don't know what underlying assumptions you used, but try to raise rents to 2k next year if possible.

You are cashflow negative because you didn't place equity into this transaction and the market is tough right now. Best of luck.