Transcript
Ashley Kerr (0:00)
What if the deal you already closed on is the one that's quietly draining your bank account every single month and you have no idea whether to hold on to it or you should just cut your losses?
Tony J. Robinson (0:10)
Today we're answering three real questions from the BiggerPockets forums that hit exactly where rookies feel the most pressure. What to do when your first rental is losing money from day one. How to estimate rehab costs without blowing your budget or over improving for the neighborhood. And how aggressive you can actually get on offers without burning every bridge.
Ashley Kerr (0:34)
This is the Real Estate Rookie Podcast. I'm Ashley Kerr.
Tony J. Robinson (0:37)
And I'm Tony J. Robinson. And with that, let's get into today's first question. So the question says, I recently used a VA loan to buy a condo two years ago for $440,000 at a 6.25% interest rate. Seeing rates fluctuate, I've refinanced to 5% and brought my monthly payment down to 2955 plus 350 for my HOA, totaling 3350. Now I have to relocate for work and I contact a couple of property managers who estimated I could rent it out for around 2,900 bucks per month. That's negative cash flow every single month. It's in a really nice neighborhood, gated, great communities, everything. I'm wondering if anyone has been in a similar situation, should I hold on and eat the loss or sell and redeploy the capital? What would you do? That's a great question. I think there are a few things to consider here. I so, you know, this is one of the questions that I always ask is like, hey, what are your goals when it comes to real estate investing? And while I, you know, obviously a negative cash flowing deal is not anything that anyone wants, but what if this is in a neighborhood where appreciation is going to rapidly outpace the the rest of the country? And even though you're putting in a couple hundred bucks, maybe the, you know, the first several years, in five years from now or seven years from now, maybe rents have gone up exponentially and now you're making money every month, but you've also got that added benefit of the loan pay down and the appreciation over that time as well, and maybe the couple hundred bucks you're putting in to cover that shortfall is well worth it over the next five years when you tackle an appreciation and the increased rent growth. So I think just looking at it, not just from like, hey, what does it look like today but how does this look long term and what are My goals with this property and what are my goals with real estate investing might give you a slightly different perspective. And then I think the other thing I'd focus on too is you just looked at one strategy like, like what if you maybe look at some of the other strategies that exist to maybe supercharge some of the cash flow that's happening here. What if instead of renting it to a traditional long term rental tenant, what if you did something like, like rent by the room?
