Should I sell?

Question

I’ve had one rental for almost 2 years. It’s 2.5 hours from my home. My daughter was managing locally but she moved, now my partner and I are struggling to do it.

It’s a 5 bed/3bath house that we rent by the room as medium term rental (can’t do STR because of the local laws).  The medium term market has been flooded in that area since we bought. We now regularly have at least one room vacant.  It’s losing around $1000 or more per month.  It will need a new roof and new HVAC in 7-10 years. I’m thinking I should just let it go. I could remove all the furniture and rent LTR but I think it will still be losing some money every month.  It’s had a lot of problems from the start, including a main Sewer line go bad (even though the inspection was good).  That on top of some destructive tenants.

I know, I should never have bought it. I don’t need a lecture or sarcasm- believe me I’ve beat myself up for this mistake enough.

I’m afraid the prices will start to drop next year and the ongoing repairs will cost me more losses over time.  Thanks for any insight or experience!

Laurel Loomer · Answer

Thanks, Alan! I was expecting people to pile on here like they do on every other platform, but everyone is so supportive. :)  I have been contacted by a couple of people through this forum for management services or sales. So one way or another, I will get it rented fully or sold. Whew!

Bonnie Low · Answer

Hi, Laurel - don't beat yourself up too much. We all have investments that don't work out and when your situation changes, it can change everything. Do you feel like it's the property itself that just doesn't work as a MTR (rent by the room can be very difficult) or is it the switch in property management that is really troubling you? Where or how are you marketing it? If your property is listed somewhere like Airbnb or Furnished Finder you should post it here so people could take a look and make some suggestions for you. I'd hate to see you continue losing money or to sell it at a loss if there's any way to turn it around. People here have good ideas and experience so I encourage you to share.

Jeff Zimmerman · Answer

sorry to hear that, is your property in Fresno?  that's where the managers are they I can refer to

Jeff Zimmerman · Answer

sorry to hear about your struggles Laurel, have you consulted with local manager for MTR?  I wonder if they can give you some ideas to get higher rents and make it worth it for you to keep.  We have a few good ones locally that I've sent clients to before and they've been a big help.

Sometimes it's better to just cut your losses if you are in a situation where there doesn't' seem to be a way out and call it a great learning experience. But other times it can be saved. I'm curious, when you say that its losing $1000/month, is that just because of the debt or is it losing $1000/month on the NOI?

Alan F. · Answer

Hi Laurel, no judgment here, I've lost $ investing & feel your pain. I had a 5-3 in Fresno that I dumped years ago & did MTR during pandemic....it's challenging. I'm guessing 2.5hr away from Sac? So I don't know exactly what town. Sac itself is still in demand because bay area people moving there. I believe there's still appreciation to be had there, some of the tertiary markets wont appreciate as well. Try to carefully examine the market where it's at because maybe it's appreciated more than 1st glance.

Luckily 7-10 out on those repairs isn't too bad.

Maybe its possible to expand the MTR marketing to get more people? Idk if its nurses, blue collar? But maybe you're able to get more tennants.

We'd need more data to really understand the big picture. Just like others said present it as best as possible. Also if you sell...its not a failure, its learning and your not alone. Sorry for the idle words, it still stings, I know.  I sincerely wish the best for you.

Andrew Freed · Answer

@Laurel Loomer - The key to reaching financial independence is adding assets to your portfolio that add cash flow, not remove cash flow. It sounds like this will be $1k negative each month hence it is hurting your chances towards financial freedom. I would recommend selling it to remove this aligator from your portfolio. Hopefully you can exit it with a little cash in your pocket. Good luck!

Noah Laker · Answer

Hey Laurel :,) I am a local real estate broker and investor, and I manage over 100 STR/MTR properties. The first thing I would do is search for opportunities to optimize cashflow and increase the revenue so you aren’t forced to sell. If that doesn’t work, and you’re forced to sell, then make sure to set yourself up for success by presenting the property in its best light. At least then you’ll be selling for top dollar and you can possibly reinvest elsewhere, or sit out until interest rates / economy improve.

Laurel Loomer · Answer

I put $85k down.  It may have appreciated around $40k (hopefully). I won’t get back everything I’ve put in, but I’m hoping to get back my down payment.

Jake Andronico · Answer

@Laurel Loomer

I'm sorry that's happening to you. $1,000 per month or more in losses is pretty steep.

What kind of equity do you have?

Should I sell?

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