Should I Sell or Stick it Out?

Question

Guys,

I’m fairly new to investing. I have 4 rental properties and the first two have been great, but I am having some trouble with my third and fourth ones.

For simplicities sake, let’s only look at the third one:

I have had trouble keeping it rented, for starters. I rented it out to a guy when the market was strong for $1,300. He was only in town for about 8 months for work. When he left, I put a guy in it for $1,200 a month that up and moved in the middle of the night. I had to put a lot of money in it to get it back up to standards. We put a window in it because it was busted out and now a week later the new window is missing! It’s not even a bad area! I’m wondering if I should sell or stick it out?

Rent: $1200 (maybe I should lower to attract more tenants. I believe I can get $1,200, but how long will it have to sit on the market to get that $1,200!)

Mortgage: $677 (adjustable with two years left)

Taxes and ins: $1,000/ year combined

I could sale the place and make my money back and maybe even profit on it. I just don’t know what to do because I’m getting discouraged since we are having trouble with two properties at once!

Any help or encouragement is appreciated!

Randall Alan · Answer

Account ClosedFirst question - How are you finding your renters? We use Zillow.com and get flooded with inquiries... like 20-30 inquiries a day. After we contact them about 10-20% of those turn into applications. So if you aren't using Zillow... try them... you will be amazed. Sometimes that is free. We use an affiliate connection through our rental platform, so have to pay a couple of bucks a day to list on Zillow... but we literally have to turn off our ad after 2-3 days because we are inundated with leads. So it might cost us $5-10 to find a renter.Second question. You say it isn't a bad neighborhood. But how does a window go missing? That's a strange one to me. All we can do is take your word for it. Hopefully that is a one off. If it is... I would ignore the window situation and probably stick with the rental. I had a D class property on the market (the only one we ever bought) and we had a window AC stolen out of it while we were marketing it to sell... they broke out the window. We fixed the window and when we went to do the walkthrough at closing, the #*&$%#*ers had broken into the other unit and tried to steal another AC. We had to cough up $1,000 for repairs / damages at closing. Ugh! Lesson learned...but we did double our money on selling the property... so it's not all so grim! Third - Are you pricing your unit comparable to the other rentals around it? My experience has been that if I am priced at market, it should readily rent within 3-4 showings... and I should be getting inquiries from my listings. If others are getting $1,200, and you are not, it is the market telling you that something isn't adding up... maybe it's the condition of the property... does it feel dilapidated? Is the paint / floors / cabinets / appliances / bathroom on par for a $1,200 rental? You can judge this by objectively looking at those items. If it feels old, used, etc... it is not going to appeal to the top end of the rental market for that area. If it isn't a D property / area, I would keep the rental. It has good cash flow. You just need to figure out why you aren't getting good people. It could be where you are advertising. I have good luck with Zillow leads. You still need to screen them and check their backgrounds and verify their income, etc. Look your tenants up on your county clerk website if they lived locally and see what their prior history is before you rent to someone. You'll be amazed what you find!When we have continual turnover, we do bail on a property though... so if you have tenant after tenant leave quickly... it is a sign that something isn't right. But usually they let you know what that is by asking you to fix it. Wish you the best!Randy

Account Closed · Answer

Everything is running smoothly now! Got a tenant in for $1225 a month. I think I was just freaking out because rents tend to drop in our area during the winter. I was afraid I would have to take less rent to attract a good tenant, but we got it occupied!! Tenant has been in for a few months and has paid on time each time!

Account Closed · Answer

Hello again Randy! In fact, It was just a bad tenant. I have another tenant in the house at the price I wanted and they are doing great!! I believe the old tenant broke the window ☺️

Account Closed · Answer

Randy,Thank you for your reply. We are using Zillow and Apartments.com, but we aren’t using any paid offerings from them. I believe the window was actually replaced by my maintenance guy, but it was not replaced correctly. So I believe I was mistaken when I said it was stolen. I have offered $300 off of first months rent and $100 off of the deposit. That is only a $2000 move-in cost. I am thinking of lowering the rent to $1100. I would rather have someone in there this month for 1100 then next month for 1200..

Alan Asriants · Answer

I heard this from a lot of successful investors: I never regretted buying, but I have regretted selling. What kind of neighborhood is this property in? Is there potential for highly qualified tenants (good income, 700+ credit score, great landlord references, etc)? If so, a solid renovation should attract quality tenants and higher rents. I found that the quality of my place determined the kind of people I rented to. Hope this helps

Bill B. · Answer

Do me a favor. Contact a local, well regarded, property manager. Ask them how much rent they would charge and how long they think it would take to find a tenant. You might find they get enough extra rent that they pay for themselves and get tenants that don’t need lowered standards to qualify or leave in the middle of the night. If not, it doesn’t cost you anything to confirm your numbers and practices. Good luck. Ps. If you add your location to your profile and your posts you’ll get more local experts chiming in.

Theresa Harris · Answer

Some times you have bad luck for lack of a better word. I had one place where a good tenant suddenly had something happen and created problems. I evicted her and then covid hit and the next tenant stopped paying and had to evict her as well. If it is causing you problems, then why not sell and buy in a different area? It is important to run your numbers periodically and see how rentals are performing. If the market is up and a rental isn't performing well and will need some major repairs in the near future, why not sell and put your money into another place?