BETWEEN A ROCK AND A HARD PLACE: WHEN YOUR RENTAL COSTS YOU MONEY EVERY MONTH

I get some version of this call every week now. A client bought a loft or a condo a few years ago, often as a rental, and the math has quietly flipped on them. The place is worth less than they paid for it. The HOA dues keep climbing. And every single month, the rent comes in short and they write a check to cover the difference. Then they ask me the question: should I sell it now, or ride it out until prices come back?

There is no painless answer. That is exactly why so many owners are stuck between a rock and a hard place.

How owners ended up here

Most of these purchases made sense on the day they closed. In 2021 and 2022, prices were climbing, money was cheap, and a downtown loft looked like a safe place to park cash. Then three things moved against owners at the same time.

First, prices came down. Lofts and condos in Los Angeles, especially downtown, are one of the softest segments in the market, and a place bought at the peak can easily be worth 10 to 20 percent less today. Second, HOA dues went up almost everywhere, driven largely by insurance costs that buildings pass straight through to owners. A dues bill that was $520 a month at purchase can be $675 or more now, and special assessments are landing on top of that in building after building. Third, anyone who bought with an adjustable rate mortgage has watched their payment reset higher, sometimes by a lot.

Meanwhile rents did not keep up. In many buildings they went the other way. So the gap between what comes in and what goes out gets wider every year.

What the monthly bleed actually looks like

Here is an example with round numbers, close to what I see on real files:

• Bought in 2022 for $699,000. Worth roughly $590,000 today.
• Rent coming in: $2,800 a month.
• Mortgage payment: $3,150 a month.
• HOA dues: $675 a month, up from $520 when they bought.
• Property taxes and insurance: about $720 a month.

All in, that is $4,545 going out against $2,800 coming in. The owner covers about $1,745 a month out of pocket, which is a little over $20,000 a year. To be fair, part of the mortgage payment pays down principal, so not every dollar is gone. But when you owe close to what the place is worth, that cushion is thin, and the cash still leaves your account every month.

Twenty thousand a year does not sound catastrophic until you stack the years. Three more years of holding is another $60,000 out the door, on top of the value already lost.

The question that actually matters

Most owners frame this as a waiting question: when will prices come back? I think that is the wrong question, because it treats holding as free. Holding is not free. Holding has a price, and you pay it monthly.

The better question is: what has to happen for holding to win? Take the example above. The owner is down about $110,000 in value and bleeding about $21,000 a year. If they hold three more years, the place needs to be worth roughly $760,000 just for them to break even with where they started, once you add the holding cost back in. That is close to 9 percent appreciation a year, every year, in a segment of the market that is currently moving in the opposite direction. I tell my clients honestly: I do not see downtown condo prices recovering like that anytime soon.

Selling is not painless either. That is the hard place. Between commissions and closing costs, selling typically costs around 6 percent, and you lock in the loss the day you close. There is no version of this where the last few years get undone.

When holding can still make sense

Sometimes it does. Holding is defensible if your rate is fixed and low, the monthly shortfall is small enough that it does not strain the rest of your finances, and you genuinely have a 10 year horizon. It can also make sense if the alternative is selling into the weakest moment for your specific building, for example right after a special assessment scare that will pass. And if your tenant is covering most of the payment and paying down real principal, time can slowly repair the position.

When selling is the honest move

Selling deserves a hard look when the bleed is growing instead of shrinking: an adjustable rate with more resets ahead, dues climbing every year, an assessment coming. It also deserves a look when the monthly check you write is crowding out everything else, or when you run the recovery math and realize you need a near miracle to get whole. A loss you choose today is a known number. A loss that grows $1,700 at a time while you hope is not a strategy, it is just a slower loss.

Run your own numbers here:

Run your three numbers

Before you decide anything, get three numbers on paper. One: what the place truly costs you per year, all in, after the rent. Two: what you would actually net if you sold today, after commissions, closing costs, and paying off the loan. Three: the price you would need three to five years from now to break even, including everything you will spend holding it until then. If number three sounds realistic, holding may be right. If it sounds like a prayer, you already have your answer.

If you own a loft or condo in Los Angeles and you are having this exact argument with yourself, reach out through Loftway.com. We will run your three numbers together, on your actual building and your actual loan, and you can decide with clear eyes.