Sale at a $50k loss at purchase price or in repairs? In a -$100k hole

[Mark Brown]

Long story short I purchased a home in an overinflated environment for $500k. I got the 5% downpayment from a HELOC.

The mortgage and hold cost is a lot for me (over $4k). 

I struggled with getting property manager since I'm remote and low-renting tenants. It's a multifamily.

Even with perfect rents I'd be at a cashflow deficit of about $1500 a month. I didn't get my disclosure on final monthly PITI until 1 week before closing so I was well pass due diligence.

I decided to list the house. Now that I'm showing it people are complaining about it's condition. Which is better in my situation - doing repairs myself (possibly $50k) and increase the likelihood of selling (not incurring holding cost of interest on HELOC and PITI on 30 yr/mortgage). Or do I reduce the listing price by $50k? Either way I've loss close to $50k already in holding cost, fees, and withdrawal from HELOC for downpayment.

The problem is I could list for $50k lower and still not get offers in its current condition. I have 0% equity since I just got the home.

[Mike Fingleton]

Hey Mark,

I’ve been there....stuck with a property that felt more like a money pit than an investment. Given your situation, it sounds like you’re facing a classic investor dilemma: do you throw more money at repairs to sell at a higher price, or do you cut your losses and drop the listing price? Let’s unpack it.

Market context

I’ve been working in the Phoenix and Austin markets for 20+ years, and while each is different, both are currently going through some fluctuations. In Phoenix, the inventory is tight, and that’s been propping up prices, even in a cooling market. In Austin, a lot of sellers are finding themselves stuck, too. Buyers there are taking their time and negotiating hard. So, if your place isn’t pristine, it’s going to sit on the market longer than you’d like.

Repair vs. Price Cut

Here’s the thing: spending $50k on repairs might help if it significantly changes the condition and appeal. But be realistic....what are the key issues that have people turning away? If it’s just cosmetic, like a fresh coat of paint or minor fixes, it’s probably worth it. But if you’re looking at structural repairs, that money might not get you back the return you’re hoping for.

One of my good friends had a duplex in Phoenix that seemed like a lost cause. He didn’t want to pour more money into it, but it also wasn’t selling as-is. He ended up partnring with another investor who was willing to front the repair costs, and they shared the profit on the sale. It wasn’t a perfect scenario, but it allowed him to walk away without losing his shirt. Maybe something simlar sitation could work here?

Alternative Options
If a straight price cut doesn’t feel right, consider creative financing. Seller financing or even partnering with another investor to share the repair costs could attract different buyers. I’ve seen this work for niche investors who are more focused on cash flow potential than buying turnkey properties.

Hope this helps bring some clarity. Don’t hesitate to reach out if you want to brainstorm more!

Jasper, the Pat Boukhaled investor team,

Turning investment visions into reality in Phoenix, AZ - ranked #1 for residential real estate growth and opportunity by PwC.