Should I keep trying to sell?

Question

Hi BP community,

I'm new to BP and would love to get some advice from the community. I bought an investment property in 2006 for $103.5k and rented the property with a cash flow of ~$175/month until the summer of 2015 when a particularly problematic tenant finally left. I did some repairs and then put the house on the market in December 2015 and it is still on the market 13 months later. I now have it priced at $94.9k

It is in a small town in North Carolina over 2 hours from where I live currently where the real estate market is pretty depressed, and I was thinking that selling the house now would keep me from having to invest in additional repairs and maintenance as the housing market continues to decline.

However, I have been carrying a lot of additional utilities costs for the last year in addition to the mortgage and taxes, and I need to figure out how to either 1) get out of the property sooner rather than later, or 2) make money on the property by turning it back into a rental.

I'm not opposed to being a landlord - I have a vacation rental that I rent consistently through Airbnb & VRBO, but this depressed real estate market and difficulty finding quality, long-term renters is a completely different situation for me!

I welcome your advice, questions and ideas,

Dana

Zachary Schneider · Answer

Should You Renovate and Rent?

The first question you need to answer in regards to renovating the property and converting rental unit is: are the margins there? What is the extent of the needed repairs, and how high are the estimated expenses? Can they be mitigated by taking on some of the work yourself? In the thirteen months since you have stopped taking on tenants, have the rental rates decreased? Have vacancy rates increased? Are there any other new expenses?

Your original cashflow of $175/month is a relatively thin margin. If you have significant new expenses, and/or if your cashflow potential has decreased, you might find yourself barely in the black -- or even taking a small loss each month!

If you haven't already, you should run the numbers on your property again to determine whether or not you can even afford to make the necessary repairs without turning the property into a loss, and if so, whether you have enough positive cash flow left over to even make it worth the trouble.

At the end of the day, the wisest move might ultimately be to sell your property, even if you have to take a loss on it.

If You Need to Sell

Are you working with a real estate agent on that sale, or have you been listing as FSBO? With a depressed local real estate market, you may need a more aggressive strategy than what has been employed so far. If you're not working with a realtor, I might recommend seeking a local real estate agent or team who knows the market well and has experience selling distressed properties. They may be able to help you put together a plan for marketing your home towards other investors, even. If you are already working with a realtor, it might be time to consider looking for a fresh set of eyes. \

As the poster before me mentioned, you might also be able to sell it at auction, but I'm afraid I don't have enough experience to comment on that either way.

Unfortunately, that's about all the insight I can offer. I'm still pretty new to this game, and lack the experience to speculate about a real estate market I'm not familiar with!

Chris Puckett · Answer

Hey @Dana O'Donovan, had a similar experience in Salisbury, NC a few years back before the housing market rebounded. I took a bath on that house because of insurance. Insurance on a vacant property is outrageous. I eventually sold it at auction, had to pay $3,000 at closing just to walk away from it.

I'm of the belief to cut your losses soon as possible because the cost do not stop. Just my experience. Best of luck.

I'm of the belief to cut your losses soon as possible because the cost do not stop.  Just my experience.  Best of luck.

Adam Schneider · Answer

@Mike Mead 6 p.m. tonight at Prime in R.M.  https://www.meetup.com/Rocky-Mount-Landlords-Meetu...

Mike Mead · Answer

where and what time is the Rocky Mount meetup? I'd like to meet some of the local investors here.

Dana O'Donovan · Answer

@Adam Schneider - I wish I could make it to Rocky Mount for the meetup today, but I have to work! Any other ideas for finding potential investors in the Rocky Mount area? Thanks!

Brian Gibbons · Answer

Hi Dana,

experienced investors in North Carolina understand the laws in NC re lease purchase and lease options

http://law.onecle.com/north-carolina/47g-option-to...

Adam Schneider · Answer

@Dana O'Donovan We are having our first ever Rocky Mount REI MeetUp on the 18th of January! Why don't you make the trip, bring some flyers, and see if you can find an investor who may want that property?

Dana O'Donovan · Answer

@Adam Schneider & @Max Maxwell It is in Rocky Mount, NC. Market rent for a 3 bd in the area where my home is located is $775-800 / month. Not USDA qualified area. I could offer a lease option. Right now I have the home listed with one of my friends who is a realtor, so I have left marketing up to her. . . until this point.

Adam Schneider · Answer

@Dana O'Donovan you left out some information. What is market rent? Is the prop USDA qualified? Could you offer a Lease Option deal? Is it on multiple MLS sites?

Should I keep trying to sell?

Most Popular Reply