Investor · Baltimore, MD · Member since 2016 · 36 posts · 8 votes
Hello,
I'm in a tough situation and need your suggestions: I purchased a property (Loft) in Downtown San Diego 2016 and recently got transferred overseas for work--I'm scheduled to return to San Diego in 2020. Since purchased, the property has appreciated $110K not taking account of the post purchase remodel of the kitchen and bathrooms. Considering how much I pay in mortgage, HOA, insurance, tax, and how much it may rent it for, I'm looking at an $800 negative cash flow per month (while rented). The property is beautiful and in a very desirable location--a block away from Petco Park and a few from the Convention Center. With rising interest rates, I'm not sure I'd get the same deal in the future.
STRs is not an options due to recently passed laws.
Can I afford the negative cash flow? Yes, but its still $800 a month.
I'm a very optimistic guy and I sometimes tend to focus on the upside on things such as the continual uptrend in home value and rent prices. Want to get your honest opinion and wisdom on this. I've read previous posts but they're not as unique as my case. Here is a link in case your interested in taking a look: LOFT
Investor · Baltimore, MD · Member since 2016 · 36 posts · 8 votes
8y
@Michaela G. Exactly thanks for bringing that out Michaela. This is why I'm not so keen on selling just yet. And like some people stated in previous comments, individuals that sold in 2006 are regretting it now, it's California all logic goes out the window.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
8y
Dang, the location...perhaps check what furnished rentals go for, corporate rentals/nurses/doctors. You know it is going to suck if you pay more later even with factoring the neg $800 math, sales cost, interest rates etc...
I followed the link on your original post. Go down to price history on the Zillow ad. It seems you've put this up for rent many times, and for many varying rents. So why bring this up?
Investor · Baltimore, MD · Member since 2016 · 36 posts · 8 votes
8y
@Josh Lyons Great points Josh. I looked into refinance for a lower monthly mortgage payment but the banks tell me my current deal is better (that's with an 810+ credit score). The only other improvement left is to rent with the keys to a Lamborghini.
Investor · Baltimore, MD · Member since 2016 · 36 posts · 8 votes
8y
@Russell Gronsky Outstanding post Russell thanks for your ideas. I am planning on returning to the property when I relocate to San Diego in 2020. Your idea to do a cash out refi and buy a 4-plex unit is genius. Great point that cash flow is only 1 of the advantages RE offers, had to google the other ones. Way to educate man, thanks.
Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes
8y
@Cody L......you misinterpreted post.....its a question....not a statement...... what are the numbers and why is the cash flow negative? Is you P&I sky high....HOA killing you....insurance....
Not..... oh, negative cash flow isn't a bad thing, relax.....
Realtor · WV · Member since 2018 · 454 posts · 310 votes
8y
I agree with most of the other posts that if you really want to live in the condo again one day, and it isn't too far down the road then keep the property. Otherwise sell it now and get rid of the negative income. If you have lived in it for 2 out of the last 5 then most likely you will avoid capital gains anyway. Otherwise you have 110k of equity but can write off your improvements and the cost of selling so the hit will be minimal. You can always use that profit to invest in areas that are less expensive so have a higher rental upside.
@Michaela G. "it's California all logic goes out the window."
In my opinion, all logic goes out the window, till it doesn't. There are still limits on what people can pay because there are limits on what people can repay. I think we've already gone above insanity levels. People just continue to buy at these prices due to the greater fool theory. I wouldn't want to be investing here (at todays prices) and be the one w/o a chair when the music stops.
That said, I do own a home here and I'm putting about $300k into it. I own it free and clear (which is dumb from a dead equity standpoint but such is the life of an RE investor trying to put debt on 1-4 family). I hope my bias that stems from WANTING to see prices fall isn't impacting my opinion on if they will or not.
Here is my 'test' when I'm considering selling: If I were drugged, and woke up one day to find out I sold the property and the cash was now in my bank, would I try to use that cash to buy the property back?
Meaning, if you DIDN'T own the property and had whatever cash you would have in the bank if you sold, would you go out and try to buy this property? Not likely. So sell it.
This is smart. I've asked myself the same thing a couple of times an it usually clears things up.
Investor · Austin, TX · Member since 2014 · 248 posts · 181 votes
8y
if you can sell and get a check at the closing table, I would definitely sell. $800/mo is almost $10K year. Take the equity and invest in something that would make money-- not lose it.
Atlanta, GA · Member since 2017 · 63 posts · 12 votes
8y
@Ben Payano
Seems like your personal financial situation, timeline and goals are important factors of this decision.
If you are early-to-middle-aged, the $800 is manageable, keep it. You are in San Diego.
If you are older and closer to retirement, probably sell, reinvest what you want into cash flowing properties.
If you are financially independent, this probably doesn’t matter much either way.