There are number of articles that go further into the math, but for the sake of this I was making the assumption that the rent cover the mortgage (typically including interest and taxes). That may be optimistic. If the rent is $200 less than the mortgage, there’s still a $6K gain or more. And remember, I’m using 3% housing appreciation and not the 5-6% that’s more typical over the long term. If I had used those numbers, it could be closer to a 20K difference. The fact that it’s even close with the conservative numbers tells the story that I wanted to tell

I’m sure the properties won’t be a positive now, but I’m betting that with some income from them the bleeding would be cut to the point where it’s not a problem (if you are bringing in 150,000 a year). I have a property that I’m losing money on each month (probably about $200), but it’s better than selling in this market where I’d have to realize a $25,000 loss. Over time, I will be able to raise rates (with inflation) and turn it to a positive while my mortgage stays the same.

I should have added in negative carrying costs, but I wouldn’t expect those to be more than a couple of thousand a year. If your carrying cost losses are more than that, you seriously overpaid for the property. At that point you are probably going to have a tremendous loss in selling or choose the bleeding.

I personally prefer the bleeding because there seems to be likelihood that things will turn around if you can hold out long enough.

Sure, the article is making a rather silly point about 3% housing appreciation being equal to a 3% T-bill (as if any real-estate investor on the planet pays cash for investment property!), but properties that are likely costing a couple grand per month aren’t doing their net worth any favors.

Leverage only works if your asset – or at least your asset portfolio – can service the carrying costs. If it can’t, the negative carrying costs have to be figured into the overall return on the investment. And the “cost of money” is a problem: carrying costs are in current dollars, while profits are in deflated dollars that aren’t realized until you sell the property.

In your example, the $15K/year appreciation versus $1K/month loss likely translates into a fairly substantial actual loss if there’s much inflation at all.