Breakeven Strategy for Studio Condo Rental in NYC – Need Advice on Options!

[Augustine Chang]

Hi BiggerPockets Community,

I’m looking for advice on breaking even or generating positive cash flow with my studio condo in Prospect Heights, NYC. Here’s the situation:

• Purchase Price: $540,000
• Down Payment: 20%
• Mortgage Rate: 7.125% (30-year fixed)
• Monthly Expenses (Mortgage, HOA, Taxes, Insurance): $3,706
• Realistic Max Rent: $3,000

As you can see, I’m currently short $706/month even with max rent. I’d love to hear your thoughts on strategies to achieve breakeven or positive cash flow in the long term. I’ve considered the following options:

1. Leverage Tax Deductions:

Claim tax deductions for mortgage interest, depreciation, HOA, insurance, and property taxes. I would need to consult tax consultant for this however I expect to reduce my effective costs by ~$1,495/month (based on a 32% tax bracket).

2. Pay Down the Loan Faster:

I’m considering applying $40,000 annually to the loan principal. Since I have a fixed-rate mortgage, I understand this wouldn’t lower my monthly payment but would shorten the loan term by reducing the principal faster. Alternatively, I could explore loan recasting, where the lender recalculates my monthly payment based on the reduced principal, keeping the original loan term intact. With a recast, my monthly payment could drop, improving cash flow.

3. Refinance with Rate Buy-Down:

Pay 2 points ($8,640) to lower the mortgage rate to 6.625%. This would reduce my monthly expense to $3,568, saving $144/month.

Questions for the Community:

1. Which of these options do you think makes the most sense for a long-term rental in NYC?
2. Are there other strategies I should explore (e.g., short-term rentals, furnishing, home improvements)?
3. Would you sell and reinvest elsewhere given these numbers?

Appreciate any advice or insights you can share!