It may be right time to sell flailing rental homes

Q: What should be done with my two rental properties that no one seems to want to rent? We’ve had previous tenants and evictions. I’m ready to sell the properties and cut our losses, but my husband doesn’t want to sell at a loss, even though the value of one property is half of what we paid 10 years ago.

A: Someone once told us the test is to think about whether you’d buy the investment in question now. If the answer is yes, then keep the two properties.

On the other hand, if you would not buy the rentals today, you’re probably looking at an investment you should get rid of. Investors have a tendency to keep bad assets for too long hoping that they’ll turn around.

The rental properties are a loss for you if you can’t rent them. It you sell them, you can stem the losses and use the money elsewhere. You might want to go over your federal income taxes and see whether the loss from the sale of the properties would offset any profits or gains from other investments.

But before you make a decision, you and your husband will have to walk through the investment picture. First, figure out how much you get from renting the properties and how badly they hurt when they are not rented.

Next, decide what you and your husband expect from the area real-estate market.

If neither of you feel good about the prospects, you might be right that selling is the better option. If you both agree that the market will improve, there may be good reason to hold onto these properties.

But if you can’t rent them and the values have halved, you might be kidding yourself if you think the investment will recover.