My father has an old single-family home he purchased at the height of the real-estate bubble. He lived in the property for about 5-years, refinanced to 3.25%, purchased another brand new home designed to his taste, and rented out the first home.

He loses about $250 a month between the rent and actual mortgage and has been making up the difference every month out of pocket.

Since he did purchase at the height of the bubble it has taken some time for the current value of the property to catch up or equal what he owes; it's almost there another 3 years and it will be about even.

Should I advise my father to sell the property now and pay the $15k loss on it at closing?

Should he wait 3 years and break even?

Or should I tell him to just keep renting it for the next 10-15 years?

If he keeps it for another 10-15 years he will be sitting on $100k equity from his first home and his new home is on its way to have another $100k in equity. Both homes are in an area where value of the homes are going up. It would be nice for him to be able to cash out and move out west and buy a house without a mortgage.

He can easily afford the $250 a month. What should I tell him to do?

  • Really, I don't think you should take advice from people on this site on whether to sell or keep an investment property. With the amount of information you have provided no one can make a proper recommendation for you, and if you make the wrong decision based on someone's biased recommendation, what would you do then? That is why financial advisors exist.
    – Victor
    Feb 7, 2015 at 21:14
  • These sort of sites help to get an insight (or perspective) that someone on their own might have missed. I find it useful to look at things from various angles. It's usually good practice in all sorts of problems. I've found many so called "experts" in their field only know so much and they usually have a cookie cutter answers for various sorts of clients. I see this all the time in the software development environment. Feb 7, 2015 at 21:22
  • 1
    Well if you want a better answer you will need to divulge a lot more information than you have. You are basically just going to get people's biased opinions.
    – Victor
    Feb 7, 2015 at 21:46
  • An important point is it is absolutely impossible to guess the future "price" of the house. It's easy to feel confident in a guess about which way property will go in a given market, but it's just a guess, sadly. If only we could "know" !
    – Fattie
    May 3, 2016 at 14:44
  • @JoeBlow My recommendation to my father was that at some point it will be paid off or mostly paid off, so might as well keep it and rent it out. May 3, 2016 at 14:49

3 Answers 3


How is the current mortgage payment broken out? I have a mortgage on a rental property with a payment of $775, but $600 is principal. If I were at breakeven on a sale or a bit underwater, I'd be better off just holding still, the tenant paying the loan down over $7000/year.

You question is a good one, but a good answer would require more details. A bank may not agree to a short sale on an investment property, especially since there's a second property to go after. I'm not making a judgement, just saying, it's not a slam-dunk to just short sell it.


And he has to pay for it every home repair and every month the property sets empty. His loss each month is not $250, but probably closer to $500. In generally you need to clear at least $200 ABOVE PTI (principle, taxes and interest) to cover repair and the like to property.

From your post, it sounds like your dad was forced into the land-lord business by the recession. Unless he plans to hold the property until its rental value has increased by $500 a month, he should consider selling it and writing-off the loss. Losing money bit by bit on a house isn't a tax write-off event. Selling a property for less than you bought it for generally is.

FYI, I got the $500/month loss by assuming that repairs/emptiness/etc will cost you about $200 a month, and added $50 for your dad's time managing the property.


Sell the house, in the scenario you describe he is using the property as an investment with a $250 per month buy-in. This investment doesn't make a return right now and when you add in the cost of dealing with the tenant (even if he doesn't have those cost now, he will when they move out)he is out of more than $250 a month and he has no direct knowledge that the value will definitely increase. He would be better spent selling the house and putting the funds into an investment, even a risky investment. It will have less maintenance cost associated with the risky investment than the rental property.

Besides sitting on the property for 10-15 years would cost him 30-45k plus the cost of re-renting the house when empty.Not to mention the inevitable increases in taxes over that time which will either increase his deficit or eat up the rent increase he is able to charge.

Don't take the loss on the sale, just short sale it and take the money and invest!

One last thought... An alternative is to creatively finance a sale (take payments from a buyer until they can buy outright) that will cover the FULL mortgage and get him the price he needs. You can look up owner financing to find out more on how to do this.

Hope this helps!

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