Should I sell or find new tenant and rent out

Question

Home value is 325k - 350k

Purchased at 160k and refinanced last year at 2.75% and still paying off closing costs for another year

Current Loan balance $108000

Current mortgage $869

Rehab needed $15000

Rental income estimated $2000-$2350

Due to bad management and tenants, I have lost over $15k over 8 years

Tenant was delinquent since February and finally left, but the home needs now work. It is in a great city and neighborhood in Cordova TN. Large single-family home 5 bed and 2.5bath. Realtor says homes are now staying on the market longer than before and dropping in value a little due to interest rates increasing and inventory slightly increasing. I got an offer for 325k cash as is. How should I be looking at this?

Thank you and appreciate any advice.

Drew Sygit · Answer

@Evan L.

Some observations:

1) You state you lost money cashflow-wise, but how much did you make in appreciation?

2) Property values have been increasing faster than rents. So, could be time to cashout of this Class A property to reinvest in Class B for more cashflow

3) You've got a lot of equity sitting doing little. Dependig on your goals, may be time to redeploy it.

4) Find a better PM company

if you decide to sell and are looking to redeploy your funds, you might want to follow the "Deep Dive" series we're doing on our BiggerPockets blog about Metro Detroit cities, City of Detroit Neighborhoods and comparing Metro Detroit to other hotspots investors usually consider:

https://www.biggerpockets.com/...

James Wachob · Answer

Evan, a good property management company would, at minimum, provide profitability reports of your properties quarterly. A great PMC would proactively recommend increasing rent based on area comps, what upgrades to a property should be done between residents to boost that rent rate and if selling one property for 3 smaller investments would be more lucrative.A property Performa should be the baseline to return to for regular review. Is your current PMC following through with their original obligations? Is the property nickel and diming the profits because band aids are put on wear and tear items (HVAC, Leaking roof, rodents etc.), loss from poor applicant requirements, residents who do not respect the property, a slow eviction process, long term vacancy? A great PMC should be providing these answers with solutions before you come to them with questions. $15,000 is a good one time expense for a once in 10yr property upgrade and or renovation.

Evan L. · Answer

What area and type of property in ohio do you suggest?

Steven Foster Wilson · Answer

Id sell and come to Ohio to find a more turnkey, cashflow-oriented property.

Terez Jones · Answer

Hi Evan...if you decide to keep your investment property or sell it and invest in another - I would be more than happy to talk to you about Property Management Services in Memphis.  At Evernest, we have the infrastructure, the man power, industry knowledge and core values to help you grow your investment doors.  I hope to talk to you soon.

Evan L. · Answer

Hi Justin,

thanks for the tips. I had two properties in the Memphis area, sold one last year and planned on holding on to this one long term and was able to get a good refinancing rate. But reasons that I'm considering selling it now is getting an offer above as is appraisal for 325k, the price on another rehab if I rent it out again, and realtor suggesting that he thinks its better to sell as homes in this price point as starting to go down.

Steve Donovan · Answer

Hello @Evan L.  I think your best option would be to sell and reinvest your proceeds into a different property.  You may want to look at other markets that offer better returns, and make sure to fully vet the turnkey provider or property manager you choose to deal with.  All the best to you in your investing future!

AJ Singh · Answer

@Evan L.

Cordova is a good neighborhood to have a rental. your tenant was not properly screened.

One option is You can sell and move the money to a 3plex or a 4plex in riverside or san bernadino county as a1031 exchange

i would keep the rental and find a better PM. we have rentals in memphis since 2016 and cordova gives great rental yield and stabilized tenancy for our properties

Shoot me a DM if you want out PM referral

Justin Rademacher · Answer

Not being in CA but having experience in the rental market side of the real estate industry I would say that it all depends on your goals. If you can generate close to the 1% rule on the property, you should be cash flowing very nicely per month. That being said, the loss you have seen seems to be two fold. 1. Obviously you had bad experience with the tenants 2. The property management company seems less than ideal.

Before you decide to sell ask yourself your goals. Are you still wanting the long term investment or would you rather employ your exit strategy now? If you would still like the long term option. I would interview reputable property management companies. Ask them for references and ask them key questions like their occupancy rating, location they primarily focus on, and fees.

Nationwide avg. fee is about 10%. I have negotiated with numerous PM companies for 8% under the promise that they would be the only PM company I use in that area providing that they place good tenants and quick.

Hope this helps a little

Evan L. · Answer

I've had a string of bad tenants, one bankruptcy, and the next two did quite a bit of damage to the property. I think bad luck was a factor as well as the house being very large, a lot of things can break and need maintenance.

Should I sell or find new tenant and rent out

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