When is it Time to Just Cry Uncle on Your Costa Mesa Investment Property?

When is it Time to Just Cry Uncle on Your Costa Mesa Investment Property?

 

Have you been watching the value of your Costa Mesa investment property go down and wondering what you should do about it?

Upside Down Costa Mesa Home

It likely depends on what your goals are.  If you have lost value, are living in the home, can afford the payments, and it meets your needs, you’re one of the lucky ones, and you should probably just stay where you are.  Perhaps when you’re ready for your next home, your Costa Mesa home will have regained some of the lost value.

If on the other hand, your Costa Mesa investment property is underperforming, perhaps you need to look at it carefully.  For instance, let’s look at the following scenario.

  • You have equity in your home
  • But, it’s $250,000 less than it was in 2006. 
  • You put money down on the home, and you’ve made payments for several years
  • You feel that selling it would result in a loss.
  • It’s a rental, and you’re losing $600/month after your mortgage payment.

At this point in time, you may want to do a few things:

  1. Review rental rates and see if you can increase rates to limit the loss or make the property cashflow
  2. Sit down with your accountant and see if you need the loss for income purposes. 
  3. If you don’t need the loss and still can’t make it cashflow, it might be time to consider selling the property and reinvesting it in a better performing one.

Some people don’t want to “give up” and think that holding it might make more sense.  But, if you’re losing $7200 per year, you need to gain that amount in equity plus the amount that you lost when the market values fell, especially if you bought it for less than current market value.

So, when is it time to cry “Uncle” on your Costa Mesa home, when the loss on your investment property just doesn’t make sense any more.

One other thing to consider, if you lived in the property 2 of the last 5 years and sell it now, you may not have to pay capital gains up to $250,000/$500,000 of gain.  Please verify this with your accountant.

If you’re trying to decide if it’s time to cry “Uncle”, please give Christine Donovan a call at 714-319-9751 to set up your initial free consultation. 

This article does not provide legal or tax/accounting advice.  Please consult with the appropriate professional.

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