sell or hold in Aurora CO

[Omar Shahid]

Hello,

We own a rental property that my family and I lived in Colorado for about 3 years and rented it out about a year ago when we moved to another house.  We bought the rental for $335K and the property is now worth $450K - $470K.  We owe about $240K on the property.  We are currently renting it out for $2,650/mo and make good cash flow (mortgage pmt is about $1,700 with insurance and taxes).  However, we are having issues with our renters, and with the location and price point, it can be a little difficult to find new renters.  I am thinking of selling the property and buying another property in cash from the proceeds of this home.  However, the current property we rent out is newer (minimal maintenance) and is very close to where we currently live, making it convenient for repairs and tenant issues.  If we were to sell the home, we would get $170K - $200K in proceeds to use to buy another house.  Since we lived in the house for 3 years and just rented it out a year ago, I don't think we would have to pay any taxes on the sale.  Would you hold the property or would you sell it and use the money to buy another better rental with cash? The problem too is that the Denver realestate market is hot!! and it is tough to find good deals.  Let me know if you guys have any advice or questions?  Let me know what to do?????

[Chris Lopez]

@Omar Shahid

It's not a property problem that you have. Rather, it's a renter problem. More specifically, it's a "how did you get these tenants or allow it to get so bad" problem. That's on you, not the property.

If you use the same screening process for these tenants in your new property, then you'll probably end up with bad tenants again.

My advice is to hold on to it. You have good cash flow, it's in good shape and you know the property. Work on your tenant screening process or hire a PM to handle the tenant issues.

Some people have the personality to deal with tenants, some don't. There's no right or wrong. Just know your personality and focus on your strengths. 

If you sell it, you'll be comparing current deals to the property that you just sold, and probably unhappy!

- Get rid of the tenants when the lease is up.

- Improve your tenant screening process or hire a PM.

- Rent it out for another year to improve your land lording skills.

- While you're renting it out, start searching for deals around Denver. See what's out there. I doubt you'll find "greener" grass as compared to your current investment.

@Matt M. brings up a good point. You can still rent out for another year because you lose out on the personal residence capital gains exclusion. 

@Marc Cunningham - You have a lot of experience in situations like this. Any troubleshooting tips?