Should I sell and use the proceeds for better deals

Question

Im currently in escrow for my second quadplex in Houston TX, this deal im financing with a 7/1 arm and the cashflow is around 800$ after expenses. My first purchase wasn't a home run by no means its taken much more work to position the property to the cashflow amount that im comfortable with. The issue im having is that the area isn't very promising although the cash flow is good ( 1200$) , the quality of tenants that are attracted to this area is very low. Im constantly going back and fixing small things here and there which has eaten into my cashflow. My cap rate is about 5% now which isn't that high but from what I hear this has become the norm. My question is would you sell and look for another deal or hang on to increase cap rate in a few years and then sell? Please let me know your thoughts.

Thomas S. · Answer

I would sell, in your position, based on being a worn out landlord. Some properties simply are not worth holding regardless of the cash flow if the work is more than the reward. If moving your money makes scenes to you then why not.

Don't bet on tomorrow unless you can somehow see into the future.

Ryan Deasy · Answer

@Darlington Agu i don’t think any of this advice is good. where are you in sugar land that you are getting these tenants? i manage everything from texas while my properties are 1500 miles away. i place tenants and manage them from here. don’t just sell because you have a round of bad tenants. maybe your marketing of the property is off. there’s a million things you could tweak before selling and giving up on it. happy to help in any way that i can.

Kevin Wood · Answer

@Darlington Agu D class neighborhoods are tempting on paper, but often not worth the trouble. We started our journey on single family homes in C- neighborhoods such as Channelview/Baytown area that are near nicer neighborhoods. I think you answered your own question. If a property is not up and coming the headache is probably not worth the vacancy costs. That is our experience as well. If you do want to do D class areas I know folks have had success doing section 8. It's very specialized and you need to be very tight on all your numbers and finish levels, etc.

Ryan Johnson · Answer

Which area of Houston if you don’t mind me asking? Some areas that attract not so great tenants now are up and coming and may have some appreciation upside in the future.

Darlington Agu · Answer

@Ryan Deasy I really appreciate the encouragement, I've considered that maybe I've just fallen on unlucky times but what I'm seeing is a consistent decrease of quality tenants in the area as well as an increase in vacancies. I haven't given up on this part of Texas as there are many great areas, but from what I'm seeing there are only a few problematic areas. If you have any suggestions on where to focus on please do share.

Robert Haney · Answer

I live and own properties in Sugar Land that I have rented and properties that I have flipped.  I'm not aware of any D-class areas with a Sugar Land address.  Where is your property?

To answer your question directly: SELL

Darlington Agu · Answer

I purchased my first property in the sugar land area

Should I sell and use the proceeds for better deals

Most Popular Reply