Should I Sell or Continue Renting Out...?

Question

My situation:Renovated a home purchased for about $166k back in 2018, and for the most part, it looks like a better home, but there were some issues discovered that I didn't notice during the inspection phase. Those large issues being the following:The basement that is mostly underground is unfinished and the house sits on the side of a hill, so when it rains, the water builds up around a few areas and eventually over time will penetrate the concrete blocks in the basement causing mold to grow on the wall and make the Drylok start to peel in the areas that have the moisture issue. I've received 3 quotes to correct this problem, this will cost $11k-$15k to fix (they will basically drill small holes at the bottom of the basement to allow the built-up water behind the wall come into the basement, and then create a trench in the basement along the wall so the water goes to a sump pit, and then let the sump pump pump the water out of the basement to the backyard away from the house...)The next large issue is my 2 door garage openers can only be operated manually due to previous owner damage, and after 4-5 quotes, due to some other complications with the garage area design, the manual operation seems the most practical now due to cost and other limitations if I attempted to try to get it fixed.So my concern with the sump pump is, I do not think many people have those in my area, and if I were to sell the house in the future, it may be a potential reason some un-educated buyers may decide not to buy the home if they see one in the basement. I also have not had an air test performed, and not sure if any spores from the mold growth will cause health issues down the road for my tenants. I'm in the process of trying to get this done soon to eliminate that concern.My issue with the garage is, most houses in my sub-dividson have fully functional garages, so I would like to use this property as a lesson's learned and take the projected $80k that I may make on this home if I do sell it and use that money to invest in another property that is in better condition when the market is better for buyers 1-2 years down the road.I will also potentially be moving away (over 8 hours away) from this area in about 2 years, so another reason I'm looking to maybe sell since it can be hard to find great property managers.Anyway, this is my first rental property, so I just wanted to pick the brains of others since I have a limited small view of things and maybe missing the big picture on why I should hang on to it.Note, I have been lucky enough to have 2 different tenants rent this home out since I renovated it, but after moving out, they love the house but did mention dislikes about the garage doors and basements when we asked for things they would recommend for improvement.Thanks!

Ronald Allen Barney · Answer

Brand new garage door opener systems range from $120 to $1100 depending on the bells and whistles that come with them, and they support a huge variety of garage door designs. It would blow me away if not a single one of the opener units out there could support the way your garage was designed, a situation that would have taken skill by an evil architect to make a future homeowner's life more miserable.But if it's true about the garage door not being rent ready based on a core design issue, get a couple of different quotes from contractors for redesign where the door can be automated. $80k sounds pretty high to me even to tear-down-rebuild, which is probably an excessive approach just to make parts align right.The dividing line between owner-occupiers and investors in buying and selling decisions is the investor approach is the numbers. If the numbers bake out good but negative emotions get in the way, take the negative emotions out back for a beat down session and get back to the table. If the numbers look bad but the emotions want to cling to a money-loser, do the same. In your case the numbers are not yet nailed down, but once they are, let those numbers (and remote property management figured into those numbers at 10% of rent) make the decision.

Jody Sperling · Answer

My instinct tells me you should hold, repair, and continue renting. I sense that you are leaning toward selling based on fear, and following our fear never results in wins.Yes, you have an easy market to sell in today, and perhaps—though not likely—the market will cool, stretching your dollar further in the next six to twelve months. But today, you have a considerable amount of equity built in paydown and appreciation to access, and you can use that equity to improve the current house and purchase more.Many people find suitable alternatives to manage a handful of properties from a distance, so even if you move eight hours away, you can do most of the managing yourself by building relationships with contractors and real estate agents, paying a small fee for them to help as need requires.Only sell if you know the choice is mathematically correct, rationally made, and leads to more property acquisition now. Best of luck!

Robert Smith · Answer

Thanks everyone. I definitely agree regarding the fear/emotional aspect playing a huge factor in my decision and lack of experience when it comes to selling and what may cause a buyer to become non-interested in a property.I know if I get the right tenant which so far I have been lucky enough to do, these concerns are no longer an issue. The garage is not a health or structural issue and I always point that out during open house viewings so there are no surprises, so I can deal with that being a manual process long term, but I do need to have the air quality checked in the unfinished basement so that if a potential tenant ever did bring up that point, I will already have inspection info present or know what avenues to take if a new inspection is required.

James Mc Ree · Answer

You need to perform a financial and lifestyle/emotional analysis. The financial analysis should be straight-forward: is it worth it to you to continue renting (you make $/yr) or sell (you make $$$ one-time). If you plan to move away in 2 years and not hire a property manager, your time horizon looks like 2 years to a sale.Do you still want to be a landlord? If you sold, what would you do with the $$$? Why did you buy a rental property? What are these changes worth to you? These are questions only you can answer and may help inform your decision.You will take a markdown if you sell with a wet basement, versus a mitigated problem. A buyer may look at that as another $10-15k in down payment-like money to buy the property which will reduce your selling price and buyer prospect pool. The garage door issue doesn't seem like a big one to me. It doesn't look like there is a better solution from what you wrote. The only alternative I can think of is considering turning the garage into living space, but that would involve a significant change to the property that might not come back to you dollar-for-dollar.