1st Rental with negative cash flow
Member since 2026 · 1 post · 2 votes
1st Rental with negative cash flow
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Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes
7moEspecially being a Condo/HOA property, unless you are VERY well versed in the finances of the project, you should just sell. There are too many ways for the Condo Board to really wreck your cash flow and any safety net you might have. Their Reserve Funding Plan is critical, you must fully understand it, AND be comfortable that the numbers are even accurate.
As a retired former PM and Managing Agent for numerous projects over many years, trust me on this...
13 Replies
It sounds like you’re in a situation many homeowners run into when they turn a primary residence into a rental. The numbers aren’t ideal for cash flow right now, but there are still several ways to approach it strategically.
You’re definitely not alone—this situation happens quite often when someone buys with a primary residence loan and later has to move for work. The good news is that negative cash flow doesn’t automatically mean it’s a bad investment long-term.
A few things to consider:
1. Look at the full investment picture, not just monthly cash flow.
Even if you’re losing around $400–$450 per month, your tenant would still be paying down your mortgage principal each month while the property potentially appreciates. Over time, that can offset short-term negative cash flow.2. Rental estimates can vary.
Before locking in the $2,900 number, check multiple sources like rental listings and recent comparable leases in your neighborhood. In strong amenity communities or gated neighborhoods, sometimes the difference between $2,900 and $3,100 comes down to marketing, timing, or including furnishings.3. Consider self-management if possible.
If the property managers were including management fees in their estimates, managing the property yourself (if you’re comfortable) could save 8–10% of rent and reduce the monthly loss significantly.4. Think about tax advantages.
Owning a rental property can allow deductions such as depreciation, maintenance, property management, and other expenses. Many investors find that the tax benefits offset some of the negative monthly cash flow.5. Rent growth may fix the problem.
If rents increase over the next couple years, you could move from negative to break-even or positive cash flow without changing anything.6. Last option: selling vs holding.
If holding the property long term doesn’t fit your financial plan, you could also evaluate selling versus renting. But if you’re in a desirable area with strong demand, holding often becomes the better play over time.A lot of investors start exactly this way—accidentally becoming landlords because of a move. Sometimes those first properties end up being the ones that build the most equity years later.
If you’re comfortable sharing, I’d also be curious what city/state the condo is in. That can make a big difference in rent growth and long-term value.
- Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes7mo
Condos don't make good rentals in the first place, negative cash flow on top, if you are vacant for a couple months, you'll start getting very agreeable to bad applicants just to get it rented. Now they start trashing up the place, or at least being rough with it, every corner, every wall, every carpet,.. dings and nicks. This can turn into a nightmare faster than you think. Sell it.
- 7moPeter MckernanBusiness MemberResidential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
The only way I would really hold this is if you can increase your cashflow simnifically each year, for example. This year $3,000 but you can raise rents $200-$300 next year and so on. If you cannot due to the market, and/or state laws/local laws. I would think about just offloading it and finding something where you are moving to.
The McKernan Group4.958 Reviews - Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 3k+ votes7mo
Interesting situation--refinanced at a lower interest rate and your monthly payment increased? SMH.
Sell and walk away to play again. This is not your inning--but you can still win the game.
- Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes7moI'm going to guess the HOA fees or insurance went up since the interest part is lower.
Quote from @Marc Winter:
Interesting situation--refinanced at a lower interest rate and your monthly payment increased? SMH.
Sell and walk away to play again. This is not your inning--but you can still win the game.
To the OP, in general I don't think condos are good investments, like the other commenters said, partially due to ever increasing HOA fees, HOA restrictions, special assessments that can be placed on owners (reserve fund is running low, some huge capital expense, etc). I do know several people in the San Francisco Bay Area who are renting out condos in a very pro-tenant city.
A couple of them bought in 2008 so they're doing well (great tenants so far) and one person I talked to recently bought in 2024, not sure how he's getting a good return in terms of monthly cash flow. I asked how him this is going and he owns a few condos and he said he screens the tenants carefully and has higher income tenants (not that this is foolproof) and does his own repairs (he's local but you wouldn't be able to check on your property frequently unless you hire a PM) and can afford the negative cash flow.
OP, you said you're moving for work related reasons, do you think you would move back in the near future? That might be one reason I wouldn't be quick to sell. If you can raise the rent significantly each year (any rent control laws where you are?) and market rate rents are climbing in this area, that'd be a factor to lean toward keeping. If you don't think you'll be moving back or would be financially tight, I'd lean towards selling.
Do you mind sharing what metro area/state this condo is located?
To the OP, in general I don't think condos are good investments, like the other commenters, partially due to ever increasing HOA fees, HOA restrictions, special assessments that can be placed on owners (reserve fund is running low, some huge capital expense, etc). I do know several people in the San Francisco Bay Area who are renting out condos in a very pro-tenant city. A couple of them bought in 2008 so they're doing well and one person I talked to recently bought in 2024, not sure how he's getting a good return in terms of monthly cash flow. I asked how him this is going and he owns a few condos and he said he screens the tenants carefully and has higher income tenants (not that this is foolproof) and does his own repairs (he's local but you wouldn't be able to check on your property frequently unless you hire a PM) and can afford the negative cash flow.
OP, you said you're moving for work related reasons, do you think you would move back in the near future? That might be one reason I wouldn't be quick to sell. If you can raise the rent significantly each year (any rent control laws where you are?) and market rate rents are climbing in this area, that'd be a factor to lean toward keeping. If you don't think you'll be moving back or would be financially tight, I'd lean towards selling.
Do you mind sharing what metro area/state this condo is located?
- Member since 2011 · 152 posts · 113 votes7mo
About 10 years ago, a couple I know who were looking to start investing in rental property told me they had found a property that they thought would be a good one to start with. I think it was a two unit, and it had a negative cash flow of about $50 per month. They thought they could handle that, and they thought it would be a good start for their portfolio. I asked them how many properties they could afford with a $50 a month negative cash flow. They didn’t buy that property, and now that they are millionaires in the rental business, they still bring it up from time to time that that was the best advice they got when they were getting started.
- Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes7mo
Especially being a Condo/HOA property, unless you are VERY well versed in the finances of the project, you should just sell. There are too many ways for the Condo Board to really wreck your cash flow and any safety net you might have. Their Reserve Funding Plan is critical, you must fully understand it, AND be comfortable that the numbers are even accurate.
As a retired former PM and Managing Agent for numerous projects over many years, trust me on this...
- Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes7mo
If its in a great appreciating area just hold it, if its in an area that is not seeing growth just dump it. Even though you are negative cashflow a few thousand a year assuming even 4% appreciation thats +$17,600 annually + mortgage paydown,
- Real Estate Agent · Temple, TX · Member since 2022 · 1k+ posts · 700 votes7mo
Hey man, sorry you're dealing with this. Accidental landlording with a condo is always tough because the HOA eats right into your margins. Before you decide to sell, check if that $2,900 estimate from the PM is actually accurate. Sometimes they lowball it just to get it rented fast with minimal effort. Look on Zillow or FB Marketplace to see what similar units are actually going for in your complex.
Also, if you can self-manage, you'll save that ~10% PM fee which will close the gap a bit. Don't forget the principal paydown and tax benefits—you might actually be breaking even on paper. But honestly, if it's going to stress you out every month to feed the alligator, it might be better to just sell and walk away cleanly. Good luck with whatever you decide!
- 7moDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
Quote from @Placeholder Placeholder:
Looking for advice, recently used Va Loan to buy a condo 2 years ago for 440,000 at a 6.25%. Total monthly cost with HOA was 3,330.
seeing the rates drop I refinanced to a 5% and dropped my monthly cost to 2,955 + HOA of 350. Totaling 3,350. I have to move due to work and contacted a couple property mangers who estimated we could rent it around 2900. making it a neg cash flow each month. It's in a really nice neighborhood l, gated amenities and everything.
I was wondering if anyone else has been in a similar the situation, recommendation on tips, and overall advice or general direction that a similar person has gone to come out on top?
Not sure what your expectations are, but Class A rentals usually don't cashflow for the first 3-5 years.
Your timeline may be even longer if you put 0% down on your VA mortgage.
Logical Property Management4.9465 Reviews You should check the reserve study before you decide.
The reserve study will tell you whether the HOA fee is stable or if there's an assessment coming that changes the math entirely. Ask the property manager or HOA for the reserve study. The key number is "percent funded."
Typically, under 30% means the building is significantly underfunded and an assessment is likely. Over 70% is healthy and that $350/month is probably stable.
Worth pulling 2-3 years of board meeting minutes too if you can get it. Any big repair votes or assessment discussions already in motion will show up there.
If the reserves are healthy, your sell vs. hold decision is really just the cash flow and appreciation math, like others here have laid out. If the building is underfunded, you need to factor a likely assessment into that math. Negative cash flow plus a $15-20K assessment notice in year 2 is a very different scenario than negative cash flow alone.
- 6moAshish AcharyaBusiness MemberCPA, CFP®, PFS · Sarasota, FL · Member since 2017 · 5k+ posts · 3k+ votes
If you convert it to a rental when you move out, the property would generally start being treated as a rental activity for tax purposes. That means you can begin deducting expenses like property management fees, repairs, insurance, HOA, and mortgage interest, along with depreciation on the building.
Even if the property shows negative cash flow, the tax result may look different because depreciation often creates a paper loss. Depending on your income level and participation in the activity, those losses may either offset other income or carry forward to future years.
The bigger question is usually whether the long-term appreciation and equity paydown justify holding it despite the monthly shortfall. Many first rentals start this way and improve over time as rents increase and the loan balance decreases.
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