Fixing current rental or selling?

Question

Jonathan Klemm · Answer

Hello there @Will Mejia - Lots of good questions you are asking - I usually like to start with figuring out your goal with the property?  And what do you need currently in your current life situation?  consistent cash?  A Lump sum?

Reading between the lines it doesn't sound like you have a lot of passion for being a housing provider so why not sell it as is before you put any more money into it?  Take the proceeds of the sale and use that money to start a side hustle or business that you can get behind.

If you want some consistent cashflow and don't want the headache of repairs and maintenance hire a PM...just know you won't make as much and be okay with that.

Michael Smythe · Answer

@Will Mejia couple thoughts:

1) A simple buyer inspection will probably catch the needed work, so it will negatively affect your sales price. May be best to fix it no matter what.

2) My manager is easily bored! He likes to find new things to do, create new processes for them, and then hand them off to his staff (like me) and then just stay involved to fix issues and improve over time.

Handing your building off to a GOOD PMC may be similar. Then you can go find something else that excites you to invest your extra time in:)

Brie Schmidt · Answer

If you are going to sell not making those repairs is going to limit your buyer pool.  They have to get done either way and most buyers don't want to make capex repairs that don't increase their rents.  With the new 5% down program they are also hesitant to have such a large upfront cost which prevents them from buying a second property next year.  As an investor agent I would tell my clients to pass unless the return is amazing, because they could get two properties for the same capital if they don't have to do those repairs

Theresa Harris · Answer

If you are not enjoying being a landlord, sell it.  Realize that if the place needs repairs, that will be reflected in the offers you get.  All houses require maintenance and repairs; you can either do them yourself or pay someone to do it.  Think about what it means to have a rental that is paid off and what the numbers look like.  Also get estimates on the repairs.

Paul De Luca · Answer

Like others have pointed out, the answer to sell or not depends on a number of factors in your situation. I won't rehash those, but a couple more questions here to get you thinking:

-What would you do with the money if you decided to sell?

-Is the property performing well, meaning giving you good cash flow and the tenants are generally happy?

-Have you connected with contractors to get estimates for the work? That way you have concrete numbers to go off.

I don't think landlording or building wealth is meant to be fun. It's meant to be to be mostly boring but the good news is you can hire people to do the things you don't want to deal with.

Lynn McGeein · Answer

@Will Mejia consult with an agent who is knowledgeable about nearby investment properties.  For my clients, I give them sale values as-is, after renovation, and expected rents if they decide to keep after renovation.  If you find good management, it can make things much easier, although it’s not as hands-off as you might want.  Remember to factor in depreciation and capital gains tax when deciding to sell or not.  It worked better for us to keep as rentals under management, especially with current rent increases, then our heirs can decide to sell or not at their stepped-up basis.

Alecia Loveless · Answer

@Will Mejia People have given opinions on the repairs so I’ll skip that.

Personally I LOVE real estate and everything about it. From the tenants to the challenges of finding the next deal to dealing with repairs and maintenance.

If you’re not enjoying it then I’m not sure handing it off to a property manager is going to help because you’ll have to manage the management company.

However if the property is almost paid off I’d look at the cost of the repairs (they’ll only get more expensive if you let conditions deteriorate further) and weigh the costs vs the income you are making.

The increase in cash flow you will get when it is paid off may be great enough that you want to keep the property, either monthly, or you can always cash out refinance and take out a larger lump sum which is tax free and just let the tenants pay it down over the course of the next 20 years but this time with a manager so you’re less involved.

Fixing current rental or selling?

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