Significant repairs to rental property vs selling for equity

[Jason Ellis]

Hi BP! 

I'm looking for some advice on a dilemma I'm having with one of my rental properties. I own a short-term rental in the Charleston area that is a really nice townhome. It cash flows well as a short term rental, but I of course took some losses during Covid like everyone else. My problem is that the townhome sits over a lake, and even though I got the insulation updated when I got new floors, apparently it wasn't good enough as the moisture underneath the home has damaged the subfloor. Contractors are telling me that the subfloor needs to be replaced. This will be a significant expense on an otherwise great property, or at least that's what the estimates I've received so far would indicate. My dilemma is that I have a good deal of equity in this property, over 100k in fact, because the value of the property increased significantly after I bought it. Considering how long it would take to recoup the losses from this repair through cash flow, I'm wondering if a better option is to sell the property and use the profits to buy 1 or 2 more, or maybe a multifamily. I recently moved to the Atlanta, GA area, and I've been wanting to get into this market, but I haven't been in position to do so. I do believe that the property could still cash flow if I decided to keep it, but I'm just wondering what other investors might do in a similar situation. 

Thanks in advance for your replies!

[Jason Ellis]

@Jaron Walling Thanks for the reply! I'm not suggesting selling the property as is. I plan to fix it either way. I'm just debating whether to fix it and keep it or fix it and sell it. I probably should have made that more clear in the original post.

@Tyrek Brown Yes those are the questions I'm debating right now. On one hand I could potentially do a lot with that equity. This property has cash flowed pretty well, but a good multifamily could potentially produce even better. But I could also screw it up lol...so maybe like Jaron said, sticking this thing out for the long haul is the better way to go. I'm not sure if this property will continue to appreciate at the rate that it has, but I don't yet know a great deal about the Atlanta market either. I just wanted to hear the thoughts of other investors and see if anyone else has had to make similar decisions. Thanks for your reply!