Hello,

Can anyone please give this first-time landlady some advice on this issue?

I bought a turnkey from Roofstock last summer. It is out of state and I have a PM to take care of it. It's supposed to cashflow about $100/mo. But there have been a lot of fixings and left me with negative cashflow. The major fix was on the gas line, one on tub drain, and a couple minor fixes like clogged pipe.

What should I do with this property? Should I keep it and hope it would cashflow this year or plan to sell it? What would be the worst thing that could happen if I keep having negative cashflow year after year? This situation makes me nervous about rental investment now. :(

Ok.  The worst thing that would happen is you would keep negative cash flowing...which adds up, and subtracts.  Think of it as having a job, that you pay the employer for the privilege to work there.  So you say you can cover it with your current job.  Fine, then let me reword what I just said.

It's like working full time, and making enough money so you can work a 2nd job...and pay that employer for the privilege of working there.  If that was the case, what should you do?  Probably quit the 2nd job...right?  So I ask you this, using that same thought process, what should you do with this rental?

Now, onto the property specifics.  I wouldn't buy any property that only has $100/month CF...and you're seeing why now.  That's not positive CF...that's negative CF, guaranteed to happen.

Any money you lost so far though negative CF is gone, and you'll never get it back, as long as this job property has negative CF.  If it starts to get positive CF, then in order to start making a profit, the first thing that has to happen is get all the negative CF back...from the new positive CF.  How long will that take?  How long and how far behind are you?

Don't fall in love with any property.  The property is just the temporary resting place for your cash/equity until said time it grows enough for you move it forward into exponential gains.  The longer you retain a negative CF property, the more negative CF you have to recover, the less money you have left to recover it with, and the longer it takes to actually recover it.  Cut your losses, stop moving backwards, and move forward.

@Supada L. What advice has your property manager offered on potential rent growth?  It might not cash flow this year but maybe when lease renewal comes up.  I would also take into consideration if there are reserves to continually deal with a negative cash flow situation over an extended period of time. 

@Joe Villeneuve Good analogy! And thank you for the advice. I would like to sell it and move forward, but I'm afraid I'd loose more if I sell this year because the house market in that area (Meridian, MS) is not great. I feel stuck. :(

@Michael Robbins I have not talked to my PM about the rent growth yet. I will keep that in mind when I call them next week. Thank you so much.

Originally posted by @Supada L. :

@Joe Villeneuve Good analogy! And thank you for the advice. I would like to sell it and move forward, but I'm afraid I'd loose more if I sell this year because the house market in that area (Meridian, MS) is not great. I feel stuck. :(

@Michael Robbins I have not talked to my PM about the rent growth yet. I will keep that in mind when I call them next week. Thank you so much.

 When will the market gain in your area?  You don't know, do you.  Let me ask a better question.  If you sell it in a down market, aren't you also buying in one?  That means the deal someone else gets on your property (cost wise), you will probably get when you buy from someone else's property.  It's all relative.

@Joe Villeneuve Good point. I'm not sure if I'm right about this, but I don't think I want to buy in that market again. I don't want to file state taxes in MS. I live in TX and there are some opportunities here as well.

Originally posted by @Supada L. :

@Joe Villeneuve Good point. I'm not sure if I'm right about this, but I don't think I want to buy in that market again. I don't want to file state taxes in MS. I live in TX and there are some opportunities here as well.

 ...and that is the logical path to take...that many don't.

Originally posted by @Joe Villeneuve :

 ...and that is the logical path to take...that many don't.

You approved that thought! I feel more confident now. =D Thank you so much!

@Supada L. I own a property as well which is just breaking even after all the expenses and I always wonder why I bought that property in the first place. But I feel I have learned a lot more from that investment so on the positive side, you now know the investment not to get into. Real Estate is a forgiving hustle I feel sometimes so keep calm and carry on :) 

It's not uncommon for a property to have a lot of repairs shortly after being placed in service. I wouldn't throw it down the well yet but would certainly be inquiring as to what you should expect in the future. (from the property manager, etc) Since you acquired it recently, I'd give it a bit more time before bailing out. But do it with the thought that you may need to. Regarding the taxes, if you're not making money, that's not really an issue anyway at this point...