Should I sell my Townhome (TH) in the DC Metro area?

During July 2004, I paid $355 K for my TH Springfield, Virginia (near DC). It's in a good neighborhood. I put $200,000 down and have a 30-year fixed rate mortgage. The home is losing value (it's now at $340 K). I'm concerned that its value will fall much further. And I may relocate after I retire (eligible in 6 years).

I earn rental income and am breaking even (actually losing, considering expenses). It took 6 months before I could find suitable renters. I am concerned that after the renters leave, I will not find new ones for awhile. My property is being managed - the expense is about 8.0% of the monthly rent.

1. Should I sell or hold onto my TH after the tenants leave and re-invest in stocks/mutual funds (my funds are currently earning about 10 - 20%)?.

2. Is there a way to lower my monthly mortgage payment because of the falling TH value?

3. Will the financial advantages of tax write-offs make it worth holding on to the TH? My income is in the six-figures.

Thanks.

First why do you not look into refinancing. If I understand you corrently you have about 35% to 45% equity in your TH. What you can do is look into a 3 or 5 year adustable rate mortgage. This way you can lower your payments and give yourself time to decide if you want to keep the property. It really makes no sense to have a 30 year mortgage if you do not think you will be keeping the home much longer. Once the adjustable rate is up, you can decide to sell or refinance, maybe even take out equity if you need to.
Second the interest rate is a great tax deduction. Especially since you do make 6 figures. I would talk to your accountant about this topic more, but from my experience as a account executive with one of the leading mortgage companies in the US the interest is a great right off to help reduce taxes yearly that you may owe or get more back. Investments are wonderful ways to build your net value.

Market change constantly. This year you may be losing as far as property value but the next year things could change. They could build up the area and raise your property value.

A rule of thumb used in the mortgage industry for people who rent out homes; 25% of the rent you collect is used to maintain the property. Make sure your rent is reasonable for what you pay in a mortgage and for the area as well. The least you should do is break even the best is if you can make some extra money and invest in more properties.

I hope this helps give you more to think about.