Phoenix - Sell SFR and cut losses or hold the property

[Brock W.]

Hello BiggerPocketers,

I'm seriously considering selling a SFR, but want to get a sanity check from you.

The property: 1150 sq ft, 3/2 detached home, 2 car garage, Estimated value $140K-$145K

The money: 2 years into a 30 re-fi, current principal = $128.5K

PITI: $809, HOA: $58, gross rent: $950, management fee 8%, city tax; 1.75%

So rent minus deductions is $857 - $809 - $58 = ($10) monthly cash flow.

That assumes no repairs or vacancies (LOL). If I add some money into my spreadsheet for repairs and/or a vacancy, they still look bad even if I up the rent $50.

The place currently has a good tenant who just renewed for a second year. Their lease is until next spring.

The dilemma: 

1. Hold the place and hope for rising rents and/or market appreciation

OR

2. Sell the place when the lease is up and possibly only break even on what I owe.

I'm leaning to 2. Why?  I'm assuming that rents will not climb significantly in the area. We also seem to be past the big market appreciation that PHX has seen since 2011.

So folks, I'm trying to "trust the numbers". Do you think my reasoning is sound?

Brock

[Alfonso Inclan]

Hi Brock, every investor has a different way to invest.

What it seems a very good investing strategy for some, it can be the worst deal for others...

I have known investors that if things have changed, and a property is not giving them at least $200 a month, they will sell immediately (or they will not buy if purchasing).

Most savvy investors i know they would not wait for the market to rise rents or market appreciation. They are making money when they buy.

Also, there are other type of investors doing Lease Options or Rent to Own. In this case, they would ask your tenant to deposit $3 to 5k down and rise their rent/mortgage to $1,100. No credit required. You will be amazed how many tenants agree to stay in their houses in these terms.

Remember, the Real Estate Business is to MAKE MONEY.

With Gratitude,

Alfonso Inclan