Advice - Sell 4 units to reinvest or hold and hang on??

[Thomas Ackley]

I’m looking for some advice. Here’s my current sich.

I own a single parcel in a C / D neighborhood. it has a 3/3 duplex and a 2/2 duplex on the parcel. That makes it a non-conforming use property, so it’ll be hard for most investors to get a loan on the property.

I owe about $35k on the property and my best guess would be it’s worth around $70k - $80k.

There are 4 new water heaters and furnaces in place. 3 of the 4 units have been rehabbed to clean and liveable but nothing like the remodels which are described in the brrrr book. GRI is about $2,550 per month.

Within a couple months of buying the property, we were working on our list of needed rehab tasks to make it livable then I received 5 pages of violations from the city. The city worker seemed to write up the whole block.

After about 16 months from the date of purchase, I’d now say most of the work is complete and it’s up and running. One of the four units has had a posting tenant since we bought it. When he moves out, it will need an expensive turn. That’s my biggest expense that I can see coming, besides normal repairs and vacancies.

Gross yearly rent minus expected expenses (piti, PM, grass, snow, water) would be around $15k. I haven’t taken into account saving for vacancies or capex costs.

I think this area may be an area where rent and house prices increase over the next decade, but I definitely see the other side where the neighborhood is where it’s going to stay.

With vacancies factored in, I lost money in 2019, but the last two months finally turned around now that we finally got our projects done.

Question...

Should I hold on, enjoy the hopeful cash flow and expect lots of bumps or sell and reinvest right away? If I hold, I'll be working on a cash out refi in January to put down on a HML to start a brrrr. If I sell, it would be to get my equity out and would immediately reinvest.

My plan is to cash out refi and press on.

My goal going forward is to look for brrrr projects and rehab that are more in line with the model that’s spelled out by BP books, go for less cash flow, cap rates with better neighborhoods and equity returns.

Thoughts??? Thanks!!