Did I make poor investments?

by Jufeng
(Ottawa)

Hi Tom,

I currently have two rental properties. One condo and one town house. The condo is 60% leveraged and the townhouse is 100% leveraged. The condo is just break even (possitive cash flow if not for the condo fees) and the town has a negative cash flow of $150 a month. I bought the condo in 2009 and the town in 2010. Both properties are in reasonably good neighbourhoods.

After reading your articles, I feel that I made poor investments on both of these properties because neither earn positive cash flows. Do you think I should get rid of them?

Thanks,
JF

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May 23, 2012
Thanks for your answer
by: Anonymous

Thanks for giving me your opinion. It's very helpful. I have no difficulties carrying these two properties, and so, I will keep them, but I guess if I buy another one, I will have to make sure it's cash positive. As you said, it will get too expensive if I have too many negative cash flow properties.

Thanks again

JF

May 23, 2012
RE: Did I Make Poor Investments?
by: Tom Karadza

We wouldn't look at it that way. We definitely prefer to have positive cash flow properties because they're easier to carry should times get tough. But even on these you're gaining equity each month and likely over the last few years you've enjoyed appreciation.

So don't feel that way. Perhaps going forward you don't want another 5 that are negative $150/month though... that gets expensive.

The costs are high to get rid of them (mortgage penalities, realtor fees, legal fees etc.)... if you can manage them as is and they're in good areas (as you mentioned) we'd hold them. Tough to give you a detailed answer without knowing more about you and the properties but that's our 2 cents!

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