What to do with a rental property when you owe more than it’s worth

An owner who bought in Fort McMurray before the regional downturn, then converted the home to a rental, is left holding a property that may be worth less than the mortgage against it. That is a painful spot, and the decision is as much about cash flow and emotion as it is about arithmetic. This piece works through the options for an underwater rental: continuing to hold and rent in hopes of a recovery, selling and crystallizing the loss, and what each path means for taxes, debt, and peace of mind. It also touches on how a rental loss is treated differently than a loss on a home you live in. It is most relevant to accidental or reluctant landlords whose property has fallen in value, who feel stuck, and who want a clear-eyed way to weigh holding on against cutting their losses and moving forward.