Are You Stuck In The “No Sell” Zone?

The “No Sell” zone.  It’s that place between what your investment property is worth and what it will take to break even on the sale.  You probably bought at the top of the market a few years back.  You may even have an adjustable rate mortgage getting ready to “adjust” which almost always means it’s going up.  (Yes, yes, yes.  I know about the LIBOR.)  You almost certainly bought on quasi-fundamentals.

“If the rents cover my PITI, I’m good.”

But you forgot to take into account other expenses your rental property would generate.  Ac/furnace maintenance.  Cleaning carpets.  Vacancies.  Roof repairs.  Lawn maintenance or painting.  Utilities when he place sits empty.

Now home values may have become flat in their growth.  Or even worse, maybe your investment property’s value has decreased 1%, 2% or even 4%.  (Hey, some real estate agents I know are working with folks who have lost 15%, 25% or more.  Quit complaining.)  The investment property is now costing you about $2,200 a year more to maintain that your rents just covering the PITI.  Now what do you do?

Selling is a tough proposition because of the real estate fees and high inventories.  You’d have to bring significantly more to the table than that $184/mo you are currently losing. 

My advice?  Hang tough.  Maybe for the next year.  Maybe for the next 5 years.  Let’s look at a horrible possibility.  A worst case scenario.  We’ll do that tomorrow.