Mortgage Underwater $30k After Almost 10 Years of Ownership!?

31 Replies

Hello BiggerPockets Community!

I really need some advice on whether to hold or sell my rental property. Here are the details.

In 2011 I bought my first home, a 1 bed + den, 1 bath condo for $227 000. I paid way too much and moved 1800 miles, couldn't sell the property due to no buyers at the price listed. Over the first 7 years of ownership, I attempted to sell 3 separate times, 3 different realtors, with no success, not even a single offer. I am now losing $535/ month with this property. Over the last 9 years, I lost an average of $300/ month. I'm at a point where I'm now a "motivated seller". After talking to a 4th real estate agent(#1 on rate my agent) they recommended to list it at $160 000. With average closing sale 90% of asking, leaves us at around $145 000 probable sell price. I owe $175 000 currently. Is it worth the $30 000 loss plus closing costs(estimated around $8500)? Emotionally it has also been taxing...

Any suggestions would be greatly appreciated!                                                                                                               Liam

**Not sure if this matters but I'm Canadian. I bought the condo in Edmonton, Alberta and moved to Hamilton, Ontario**

I am renting it out for $1500/ month. 


Condo fees $690, Management fees $150, Mortgage and taxes $1145, I put away only $50/month for repairs and vacancies which have been pretty minimally thankfully...

Never considered Airbnb. Figured with me being on the other side of the country, logistically that would be tough.

@Liam Kooyman

Give my Buddy Coleman a call. He’s an Airbnb specialist in Edmonton. I’d rather see you being profitable in a buyers market then to give it away.

colemanwashbrook at gmail.com

Or send me some details. I’m an Edmonton property buyer but I very causions with condos.

If the condo is only worth $140,000 today, that means it should have been worth less than $100,000 in 2011. How did you get tricked into paying 120% more than it was worth? 

I would rather lose $500 a month for the next five years than to give up $30,000 today. It's time to get creative and figure out how to rent this for enough to break even and stop the bleeding. AirBnB is one option. You can learn how to market and rent it from a distance. Find a good cleaner that can also handle little extras like checking people in and out for an hourly rate or a flat fee. Much cheaper than a full-time property management company.

you have to check zoning and the HOA rules to see if a short-term rental is allowed. There are extra costs to furnish it and get it marketed. But it might work if you put the effort it.

I dont know if you are near any hospitals or areas with employers, but another option is to rent it furnished. Not airbnb but longer term (30+ days)   the upcharge may be enough to get u closer to breaking even.  


@Nathan G. Airbnb check-in for a whole unit rental are usually done without the landlord on site, no need to pay hourly check-in personel. I am renting one next weekend (as tenant) and we were given a pass code which should work on that day. Im not even sure what time the code starts working, but I'm told if we use it early it's a $500 penalty. The entire transaction has been online, I have not talked on the phone with a live person nor communicated off script via email. This can be done from next door or a different hemisphere.

@Liam Kooyman would be interesting to see the other building comps. Perhaps try honestdoor which will give you a bunch of recent sales possibly or ask the agent to pull them

Obviously what is killing you is the obscene condo fees. Try to structure your mls ad to mitigate this. Such as list all the services the condo fee covers and itemize them as if you'd have to pay them anyway as separate items if it wasn't bundled into the condo fee.

Unfortunately most buyers will see this condo fee as a ball and chain. They’ll gravitate to newer units where the developer can advertise it with lower condo fees even if it is a temporarily low fee.

I’d advise dumping this and taking the loss. Can you sell it and write off the loss against say a good year in stocks? That’d soften the blow. You’d have to close the deal in a good year where you have investment income to report.

Alternatively wait another season as the economy could improve. What does a similar unit sell for new? Is there a chance this thing goes up in 2020? Your monthly loss isn’t that bad if it gains 600$ a month in value. If it isn’t gaining any value monthly I’d suggest selling it for what the market will bear. Your losses won’t reduce unless you the value goes up by the negative cashflow.

Finally can you refi into a cheaper rate loan? Is this even possible. Can you offer to seller finance this thing? Maybe offering a vendor take back loan you'd charge a higher rate than the bank and earn interest back over the years to mitigate the loss. To do that you'd have to come up with the loan amount at the close.

With more detail I can possibly make more suggestions.

@Nathan G. If you lose 500 a month for the next forever number of months that is still a bad option if the value doesn't go up. I guess the play is to lose 500 monthly until such time as the mortgage and closing costs is down to the selling price. Then you walk away at the close with zero.

Would the current renter be interested in buying it? Or a future one? Maybe a rent to own where the renter pays the HOA fee directly and you keep the mortgage for 2-3 years during the rent phase. Even if it does not convert to a sale, the renter paid the HOA fee for a few years...and you would come out better.

I would love to link this thread to all the people who are thinking about taking out a HELOC or borrowing against their 401K to get into real estate by buying a condo to rent out, or who are thinking that they'll just keep their condo that they're moving away from, as an investment rental property.

@Nathan G. This is what happens when you buy a place to live with no education or forethought; you ask your mortgage broker what you can afford and then buy something for more than that with a RE agent who is representing the seller also. Up until a year ago, I had no education in finances and real estate and in the last year have been furiously cleaning up my many years of financial mistakes.

@Mary M. another great suggestion that I will look into

@Sean Kollee thanks, I've never heard of honest door, I will look into it. I had a real estate agent do the comps and there arent any 1 bed + dens 1 bath that has sold in the last year. What he had to do was comp by sqft and because my condo is so large(1010sqft) all the sold comps that are similar are 2 beds 2 baths. The condo fees are atrocious.... they include all amenities including natural gas for the balcony. I think if I do put it on the MLS that listing all that's included in the condo fees is a good move. Current mortgage rate is at prime -1.1% so around 2.8% I believe. I've owned it for about 9 years and have only seen the price stagnate or go down. Doesn't help that I bought it for way too much either.

@Lynnette E.   I've asked the current renters about rent to own and they are not interested.

@Karen F. This is a great example of buying a home for way too much and having no exit strategy. A good example of what not to do when buying a condo

@Sean Kollee @Nathan G. Interesting ways to look at it. If I sell now and lose $40 000 right of the hop it would take me around 7 years to break even losing the $500/month I'm losing now. I calculated my mortgage to see where it would be at in 6 years I would be at a remaining balance of $130 000. My amortization is current at 19years 8 months from a 30-year. Hoping everyone here could point out other factors I'm not considering or the pros of cons of going both ways.


Also, Id really like to thank everyone for all the great suggestions for getting the rental income up!

Refinance it out into a lower payment. Even if that means putting some cash in you do not want to take a $30k loss. You only lose if you sell now eventually this should appreciate/pay down more mortgage.

Change your rental model. I would spend a few thousand to furnish it and advertise to executives, traveling nurses, and other furnished short term rental opportunities to minimize your loss or put your cash flow into the positive. Since you are across the country make sure you find a good property manager that can help you with that.

@Liam Kooyman a more sophisticated analysis of inflation and time value of money is likely to show the loss you incur in 6 years of 500$ monthly is far cheaper to you than losing $40k today.

The likelihood is inflation will make your condo worth a bit more in dollar currency but not purchasing power in 6 years. The payment of $500 in 6 years is worth say $400 today. The cheaper option appears to be holding this thing until you balance equity vs resale value.

My suggestion, which you may not like, is to buy a better rental in your hometown and self manage it. Your management cost is 150$ per month. If you can get a cashflow positive rental in your area then you can offset your loss on the Edmonton deal.

Finally have you considered a passive investment such as a reit. For example the northern prop. Reit earns about 8% paid monthly. If you invested the $40k loss instead of bringing $40k to close the condo sale in that company it would earn you $266 in monthly distributions. Now you are taking your unrealized loss (which you’d have to pay anyway) and turning that into a passive income source that covers half your monthly cash flow problem.

The bad news here is I can’t suggest something that isn’t doubling down your risk. You either a) but another rental, or b) invest in another asset class that has its own risk profile.

Finally the unknown is what I would call option c) you hold this condo and you get a cash call in terms of a special assessment or increased tax and fees, lose the tenant, need rehab investment etc. These will tip the balance into perhaps getting this place sold and walking away earlier to avoid further bleeding.

Agreed about the nature of realtors there are many bad agents that work against your interest in order to close the deal. Seems like this happened here along with bad luck/timing and a terrible liberal government that created this self imposed virtue signalling recession.

If you could do this over would you have allowed the unit to be foreclosed and walk away? If so you likely would have repaired your credit by now. Good on you for respecting your contract many would have dropped off the keys at the bank and told them to eff themselves. This has been a costly lesson and it is really unfortunate you’ve got to bear it.

New to the site. Improving your rental profile if possible makes a ton of sense. One observation that I’ve not seen mentioned above: you have $535 negative cash flow not a $535 monthly loss.  NCF is painful but, in large part, you are paying yourself the principal. This might make the pain more tolerable. 

Reno it doing big impact for low dollar items or if your handy do some of the work yourself to get the most you can.

Could look into new tenants when your lease is up and try to do a lease option or rent to own.

@Liam Kooyman

$600/month loss = 5+ years before you lose the $30k estimated if you sell. Edmonton is at a GREAT point in the cycle. It’s rebounding noticeably. Although I will caveat that by saying I can’t speak to the condo market specifically. This is buy time in Edmonton, not sell time. Expect the overall market to appreciate ~1.5% annually next year or two then should push 2% after that. Unless there are factors not mentioned in the original post (expected cash calls, poor management/ board, etc) or unless you’ve got a GREAT place to park the proceeds of sale that can outpace that $30k loss in the next 5 years, I would hold.