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Updated over 8 years ago, 09/02/2016
Should I sell my fixer-upper or rent it out?
Hello folks! I hope this is the right forum for this question.
I am looking for a little advice. I bit off more than I could chew with the fixer-upper I bought 2 years ago. We have been living with the house as-is, and a found a number of additional problems with it. So, if we were to sell it as-is we would lose about $15K on it, since the price we paid didn't reflect those additional problems. That idea puts a sour taste in my mouth.
Or, we could rent it out and fix it slooowly with the cashflow. This is pretty much a holding tactic until inflation catches up to our purchase price and we can break even by selling.
I would not have bought this to be a rental property, since the numbers don't make sense.
The risk of renting it out is that the house condition continues to worsen faster than we can afford to fix it, or yet more problems are found. This house needs a new septic system, foundation, siding, roof, and there are mice in the walls despite all the poison I've put out, etc. etc. I should have run away screaming when I saw this house! But we bought it for the property, a rare 2 acre parcel close to town.
What would you do?
Some numbers for your perusal:
Purchase price: 70k
Land value plus shop 35k
Money this house could easily eat before all is said and done in fixing it $70K
Value if we poured $70K into this house $120-130K today
Value as-is $55K
Rent the house could fetch if we dropped $5K into it $800/mo
Existing mortgage $622/month piti
Could refinance to a piti of $500/month
I ran a scenario where, if I dropped $10k to stabilize the condition of the house and $25k to convert the garage to a studio apartment (rent for $300), it would be around 10 years before I could break even.
Thanks for any advice or insight you can offer as you play the what-if game with me.