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# Mike Heayn: Should you hold a losing property or sell it in a down market?
- URL: https://www.smdp.com/mike-heayn-send-comments-to-editor-smdp-com-real-estate-101-20070627/
- Published: 2007-06-27T15:00:00.000Z
- Updated: 2026-10-25T00:18:09.000Z
- Author: Guest Author
- Tags: Opinion, Santa Monica, #archive-import

DO YOU TAKE A LOSS ON A PIECE OF REAL estate or hold it and have a negative cash flow in a down market? Many investors will tell you to sell the real estate and take the loss. Usually that would be the best alternative, but what if you held onto it. Would it make sense? Below is an example where holding the property could make sense.

You purchased a single-family home to live in for $750,000\. At the time of purchase, you locked in a 30-year loan with a rate of 5.50 percent. The loan amount was for $600,000 or 80 percent of the purchase price. The monthly payment including property taxes and insurance comes to approximately $4,290\. However, you were given a job offer in another state, which you cannot refuse. Now you have to decide what to do with the home since values have dropped 30 percent making your home worth $525,000.

You have two options — sell or rent the home. You could sell the home and take a substantial loss or take a monthly loss by renting it. Market rents for the house are $3,000 a month. If you rented the home, you could cover a large percentage of the mortgage payment leaving you with a negative cash flow of $1,290 a month. Over the course of a year, if you decided to rent your home, you would pay out of pocket $15,480\. That is no small amount of money, but what about the alternative — selling the home.

With a value of $525,000 and realtor fees of five percent you would have to bring a check for approximately $101,250 to closing to payoff the existing loan and fees. Losing $100,000 is significant to most people. The question becomes one of affordability. Do you want to have to deal with a rental property that is bleeding money each month or just cut your losses upfront?

In this scenario it may be beneficial to wait and see where the real estate market goes. If you sell the home, you are out $100,000 and cannot recapture it, but if you hold onto the property, you are only losing $15,480 a year. It would take you over six years to lose $100,000, which is a significant amount of time for a real estate market to rebound. Of course, the other thing to remember is appreciation.

If the property declined in value to a point of $487,500 or 65 percent of your purchase price over the next year, but began to appreciate at eight percent, the following six years you would have a property that was worth $773,600 or $23,601 more than you paid for it. This is assuming the market rebounds.

As you can see, selling may not be the best option when dealing with a piece of real estate. Time usually corrects a decline in value; the issue becomes your ability to carry the property if needed. A negative cash flow can hurt and some people would rather cut their losses, but before selling think about all the possibilities.

MIKE HEAYN is a Commercial Loan Consultant at Washington Mutual. He 310-428-1342.

*Originally published in the Santa Monica Daily Press print edition on June 27, 2007.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/062707.pdf?ref=smdp.com)