Exit Strategies for a Negative Cash Flow Rental

When you're in a hole, stop digging.

Or at least that’s what they say. But what if you knew you were digging a hole and did it anyway?

That’s basically the situation I’m in with my condo.

Every month, I need to pay $1,200 towards one of my Boston condos because the rent doesn’t cover the mortgage.

Yet… I haven’t sold it.

Despite the negative cash flow, I still believe there’s a case for keeping it. I’m betting on appreciation, loan paydown, tax benefits, and the upside of the area over time. I also bought the condo knowing that I’d need to supplement the mortgage. But when a property bleeds cash every month, conviction alone isn’t enough. At some point, you have to pressure-test the alternatives.

So that’s what I’m doing here. These are the paths I’ve seriously considered leaning into.

Real estate isn’t always about what a property does for you this year. Sometimes it’s about what it looks like in five or ten years. If rents keep rising and the neighborhood keeps improving, the gap between income and expenses could narrow on its own.

That’s how I viewed this property from the start. I never bought it expecting immediate cash flow given the interest rate environment at the time (2023). I bought it as a 10+ year bet that would pay dividends later.

In the meantime, I treat the monthly shortfall almost like investing into a Vanguard account. It’s not like the money vanishes into thin air. I’m putting capital towards an asset I own and believe in on a long enough time horizon.

That perspective only works because my wife and I have the savings to support it. Right now, the negative cash flow is uncomfortable. Does it keep me up or stop me from getting a large Dunkin iced coffee? Nope. Even if we both lost our jobs and the property sat vacant, we have enough reserves to cover the mortgage for about a year.

Instead of waiting for rent growth and appreciation to close the cash flow gap, I could actively work towards breaking even by paying down the loan. There are two ways I could do that:

1. Dropping in a lump sum large enough to materially reduce the monthly payment.

2. Making higher monthly payments instead of just paying the minimum.

Both approaches would move the property closer to break-even over time. In theory, I’d be buying myself future cash flow. Here’s the catch… every dollar I put into this condo is a dollar I can’t use elsewhere.

That same money could become a down payment on another property, fund a renovation, sit in reserves, or go into something with better cash-on-cash returns. So while paying down the mortgage would improve this property’s performance, it may not be the best use of capital.

The condo is about five minutes from Logan Airport and roughly ten minutes by train to downtown Boston. For short-term renters, that’s pretty ideal. Travelers, people who fly regularly for work, traveling nurses who want quick access to the city’s hospitals without the price point of renting downtown… I can see the appeal.

If the numbers worked, Airbnb, Furnish Finder, or equivalent could potentially outperform a traditional long-term rental and close the cash flow gap.

Creative rental strategies do have risk, though. First, I’d need to furnish the unit, which means putting more money into the property upfront. Short-term rentals technically violate HOA rules, although rumor has it someone else in the building gets away with it.

Even if it were allowed, Airbnb isn’t passive. It adds operational complexity, turnover, cleaning coordination, guest communication, and a different kind of management altogether. So while it could increase revenue, it could also create a whole new set of headaches.

Still, it’s one of the few options that could materially change the income side of the equation.

Then there’s the cleanest option of all: just sell it.

If I sold the property, I’d stop the monthly bleeding immediately. Selling would let me take that equity and use it as a down payment on another house hack or serve as a renovation budget on a live-in flip. 

And thanks to appreciation and loan paydown, I estimate I could walk away with about $60,000 on the investment. Not bad considering I originally put about $35,000 down.

The downside is obvious…I’d lose the potential upside. 

Sometimes the best move is cutting bait and sometimes the best move is holding your nerve while everyone else tells you to quit. If the area keeps improving, if rents continue rising, and if this condo eventually turns the corner, I’d no longer be there to benefit. Selling solves the short-term pain, but it also closes the book on the long-term thesis.

That’s the part that gives me pause.

This condo has upside, but it also loses money every month. 

I can hold and stay patient, pay down the mortgage, sell and redeploy the equity, or try a different strategy like Airbnb. Each path has a case to be made.

What would you do if you were me? Let me know if there are options I haven’t thought of yet!