Expand, repair or sell and start over?

[Jason Schneider]

It’s time to move on some property development/investment and I need some help weighing out my options. I own a 5 unit apartment building (80/20 with a friend) that I currently live in. I’m the majority owner. It’s in ok shape. Very livable but will need some work over the next few years. The immediate need is parking. There are currently 4 parking spaces for 8 bedrooms. Living in a winter climate parking overnight on the street is off limits. Because of the topography of the lot, there is no additional on site parking available. I do have the option to buy an empty lot across the street and develop it though. I could also sell the house and find a different investment. There’s a lot of options and the following are the main scenarios I’m considering. I’d love to hear your thoughts and answer any questions to help me figure this out.

1. Buy the empty lot across the street. Build a mixed use duplex. Business on the first floor, residence upstairs. I’d put in 7 parking spaces and a laundry room for my current tenants. This project will run somewhere between $120k - $150k. It should being in around $2,400/mo.
2. Forget the lot and development and work on renovations on the current house. The parking isn’t required, it just means a higher vacancy rate in the apartments. The house needs some supports shored up, new furnace/water heater rebuild of two large porches, insulation, siding and eventually a new roof. I’m looking at $40-50k over the next 10 years.
3. Sell the current house and find something better. If I sell it, I could pay off my friend and walk away with about $65k to put into something else.

Current house situation:

Market Value: $236,000

Mortgage:$155,000 @ 5%, 20 year. 19.5 years remaining.

Liquid Assets: $37k

Work estimate over the next 10 years: $50k

Gross rents: $3,675/mo

Expenses (including mortgage): $2,600

Personal Info:

Annual Income: $40k

Annual Expenses: $15k

Assets: $27k (Calvert funds)

Liabilities: $0 (except for the house listed above)