Renting at a Negative Cash Flow vs. Selling for a Loss

You have a property that costs you $2,000 a month. But you can only really rent it out in your area for $1,500 a month. Should you continue renting it at a negative cash flow, or should you sell the property at a loss?

It’s a common enough situation. It usually happens when a bubble bursts in an area, leaving you underwater. But there’s good news. You can always sell your house fast. Let’s take a look at what you might want to do in this situation.

The Merits of Keeping Your Property

If you believe that your property is going to grow dramatically in equity within the coming years, you might be inclined to continue renting it at a loss. Renting a property at a loss of $10,000 a year makes sense if you think that your property is going to gain $50,000 in value within the next year.

But it’s also about cash flow. Can you actually survive if you’re pumping money into the rental? Could it leave you vulnerable? What if it means that you don’t have extra cash for emergencies, so you need to take out expensive loans?

A lot of times, people try to keep a property they’re underwater on because they’re afraid to sell it for a loss. And that does make sense. But what if the property loses value instead of gaining value? What if the smartest thing to do is get out now?

Selling for a Loss

Mortgage lenders can do something called a short sale. That means they can make it possible for you to sell your house fast for less than you owe. You might owe $150,000 and sell for $125,000. They’re taking a loss of $25,000, but they’re forgiving it. Once that loss is forgiven, though, you need to be aware that you are going to need to pay taxes on the difference.

Still, if your house is lowering in value, you may want to get rid of it early. Otherwise, you could end up saddled with a house that’s worth less and remain at a negative cash flow. At Purple Mountain Holdings, we buy houses in any condition. We can help you sell your house fast so you can stop worrying.

Choosing the Right Option for You

It isn’t always possible to predict the market. Maybe rents will increase. Maybe property values will go up. But they could also go down. It’s important for you to look objectively at your own financial situation before you make a decision. Think about whether you can stand to be at a negative cash flow for long. Compare how much you’ll lose by renting compared to just selling at a loss.

And don’t forget that you don’t need to hire a real estate agent and put your house on the market. You can sell your house fast with a cash buyer. A cash buyer can give you a fair offer for your house in as-is condition with no repairs needed. Many of them will even make an offer on a house that already has a renter there.

Cash offers are great because they close fast. No more paying the mortgage. Cash offers aren’t unpredictable because they aren’t relying on a mortgage loan, and they’re often more than you would get otherwise because there aren’t any real estate agents to pay.

Whether or not you decide to keep your house, you need a plan. Take a look at what your financial situation is and project it out for the next few years. This will tell you whether it’s really feasible to continue to own your home. In the meantime, one of the best things you can do is contact Purple Mountain Holdings for a quote. At Purple Mountain Holdings, we can make you an offer on your property, so you know exactly what you’re getting for your home. We buy houses in any condition — no repairs asked for or necessary. Give us a call to schedule a walkthrough and receive your no-obligation cash offer.