Need advice: Sell or rent out our two-family Napa, CA house

[Michael Cavalli]

Hi everyone. I'm not sure if this is the right place to ask this, but I need some advice. The situation is that we moved in to take care of my elderly parents several years ago and ended up adding onto their house so we could live there. Now that we've all moved on, we have a two-family set up on one acre that has turned out to be hard to sell. As I said, it's my parents' home, but I had to put money into it to make room for my family. Therefore, all of my available real estate money is locked up into it. Since it hasn't sold, we can't buy a new place for ourselves. We are now wondering if we should just keep it and rent it out for income. It's a large (almost 4,000 sq ft) two-family set up (2 bdrm/2 bath home on on side and 2 bdrm/1 bath home on other side) on one acre with no mortgage in Napa Valley. We're open to any ideas. Thanks in advance!

[Marshall M.]

@Michael Cavalli it sounds like you’ve put a lot of time, money and effort into the house. I’d look at it from a few different perspectives, you could rent one unit and live in the other one, you could rent both units and move somewhere else or you could sell.

First, figure out how much each unit will rent for. Check out rentometer.com to start. Then see what your costs would be (mortgage, insurance, tax, etc.) Does it cash flow or are you paying to keep the property even as you collect rents?

Next, take the projected cash flow divided by the amount of money you've put in to get a projected annual return on investment (ROI). Is it 2%? Is it 10%? Is it 20%? Is it negative?

You can also try to refinance and pull your money out which will increase your ROI, but reduce your cash flow. If the projected cash flows are negative in every possible situation then I would cut my losses and sell, as hard as that would be.

Hope that helps. Good luck!