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If the rent the landlord receives is about 65% of the cost of maintaining the property (mortgage, taxes, insurance, maintenance, and so on), is it worth holding on if it’s projected to let’s say in 5 to 10 years break even and after that be at a profit until the mortgage gets paid off? Or do most landlords break even or make a profit from the beginning?

3 Thoughts on Is it worth renting out a property at a net loss so that in the future it can reach a profit?
  1. Reply
    insane draggin
    August 30, 2011 at 9:29 am

    We never take a loss. That doesn’t make sense. We always try to make some profit even if it’s a little. Some landlords break even but that is rare.

  2. Reply
    August 30, 2011 at 9:42 am

    The following assumes that you have a “legal” apartment
    (i.e., zoned and taxed by your local community, city, and/or State),
    as opposed to an “illegal” apartment
    (i.e., typically, in a home that is not so zoned
    and for which no taxes are paid):

    Very few landlords break even or earn a profit in the first year, unless your expenses are so high that you are able to make substantial deductions in that year’s tax returns, though you might go broke long before then!

    Generally speaking, it will take 3-5 years before your business will see a profit, as is the case with most businesses. Of course, if you bought a distressed or otherwise inexpensive property, then you might see a profit sooner. On the other hand, any zoning violations, complaints, utility or appliance failures, and other expenses may bankrupt you.

    In conclusion, without significantly more details, there is no way to give you a definitive answer. Check with your lawyer, zoning board, tax authority, insurer, property inspector, better business bureau, small business association, and . . . well, you get the idea! Fortunately, most of them won’t charge you anything for basic information and assistance (do not rely on web-based info, as it may be out of date).

    Good luck!

  3. Reply
    August 30, 2011 at 10:01 am

    It depends on your goals and resources. Are you willing to eat a loss for so many years? If it takes 10 years to hit the break-even then how many years will it take to make up the 10 years of loss? It could be 25 years before you actually will show profit. It sounds foolish to me.

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