Renting at a Negative Cash Flow vs. Selling for a Loss
The perfect scenario in real estate is when you always invest for positive cash flow and own a rental property that pays you every month. However, even if you buy a property with positive cash flow, it does not mean that it will always be like this. Unfortunately, market conditions change, and property with a positive cash flow can start producing a negative cash flow at some point. A negative cash flow can be either a temporary or permanent situation, so you have to decide what is better and more beneficial for you — to keep renting at a negative cash flow or to sell your property for a loss.
Should You Keep or Sell a Property With a Negative Cash Flow?
You should understand when it is worth keeping a negative cash-flowing property. You should keep it if your situation qualifies for any of the factors described below.
Possible Growth in the Future
You should definitely keep the property if there is a chance of improvement in the future. A chance of improvement means that you will be able to increase the value of your property or rent in the future. In order to know if the improvement is possible, you should always keep an eye on the upcoming trends in real estate that can affect the overall market.
A Negative Cash Flow Today Can Become Positive Tomorrow
Yes, your cash flow is negative today. However, is it going to be the same tomorrow? Everything can change, and if there is a possibility for appreciation, it is better to keep renting your property and see. You need to remember that there are no properties that appreciate all the time and never lose their value.
It is also important to know that having a negative cash flow is absolutely normal, especially if you know where as a homeowner and investor you are heading. There are thousands of properties with a negative cash flow in the United States, and not all of them are a bad investment.
When Should You Sell a Property for a Loss?
Sometimes, selling is the best option for properties with a negative cash flow. Here is a list of reasons why it may be better to sell your home with a negative cash flow than to keep it.
High Monthly Costs
Owning a property is always associated with many expenses, including monthly mortgage payments, insurance, utilities, maintenance costs, and others. If your monthly costs are higher than the cost of your rent, then you are operating at a loss. Also, you should keep in mind that monthly costs are likely to increase, especially your maintenance expenses and property taxes.
Rental Income Is Not Always Guaranteed
Your rental income depends on many factors, including supply and demand in the area where your property is located. There are many things that can increase or decrease rents, such as the number of rentals available, a large local employer leaving the area, and others. This means that you cannot depend on a steady rental income all the time.
Sell Your House Fast to Frank Buys Houses
If you decide that selling a home is a better idea than continuing to rent it with a negative cash flow, then it is better to sell it to a cash buyer or home investor. One of the main benefits is that you can sell your house fast, and you won’t need to waste time with cleaning or repairs. Home investors purchase homes as-is.
If you own a home in Stockton, CA, or any other surrounding area, contact Frank Buys Houses — a team of experienced local home investors buying homes in any condition and under any circumstances. We buy houses in Stockton, CA, and other nearby towns, and we pay you cash. If you want to sell your house fast, Frank Buys Houses is here for you. When we buy houses, we pay you cash, and we make the home-selling process as easy and simple for you as possible. Visit our website or give us a call for more information.