Would you sell or re-finance this SFR?

Question

Hello all!  I have an SFR in Memphis that I purchased a couple of years ago for $60k (Original contract was for $70k but inspection revealed a need for a new roof so I asked for $10k off).  I financed with 25% down on a 15 year note which has resulted in a nice paydown of the loan of $10k.  So, the value of the house is currently $75k - $80k, probably closer to $80k since I have a long term tenant paying $925/mo and a brand new sparkly roof installed last week.

The expenses have been higher than I would like and the cash flow has been more of a break even, leaving me only appreciation and loan paydown as my "profit".  If I refi, I can pull out about $15k and I would flip to a 30 year, making my payment about the same, if not a few bucks lower.  If I sell, I probably walk away with around $30k, very little of which will be taxable after adding $7,500 for the roof and the closing costs of the sale.

With this scenario, what would you do?  Take the $30k and find something with better cash flow or pull out the $15k and hope that you have repaired just about everything that could be repaired at this juncture?

Any thoughts would be appreciated.

Rich Vogel · Answer

@Steven Gillmer If it was me I would sell this property.  I never buy a property unless I am going to cash flow from it. Are you breaking even calculating vacancy loss and cap ex or are you breaking even not calculating these items.

Thomas S. · Answer

I would sell and put my money to better use. It was not a really good investment and as the property appreciates cash flow diminishes based on the value of the equity. If they cash flow is not there to support the effort it is not worth holding.

Invest in multy units.

Michael Seeker · Answer

@Steven Gillmer - Are you using a PM company or self-managing?  If you're using a PM company, you may want to be more diligent about seeing what they spend your money on and if the charges are reasonable or not.  Some PM companies (read "most") will milk you if you're not careful.

If you're looking to own properties like this one, then I'd lean towards keeping it.  If you just dabbled in REI and don't think this is for you, then definitely get out and move on.  You should be doing better than break-even based on your numbers unless you're counting the CapEx roof replacement against your proceeds as a wash which wouldn't be fair given you got a credit for that a couple years ago.