Good cash-on-cash % but repairs crush cash flow

[Curtis K.]

I bought my primary residence two years ago using a FHA loan so I only had to put 3.5% down. I did some minor DIY repairs when I moved in and now I am thinking of renting or selling it. All in costs for my house (not including the principal payments I've been making for two years) is about $10,000 (down payment plus upgrades).

So, I can rent it for $1,400/month, and after PITI and landscaping, monthly cash flow is $100 or 12% annual cash flow. Sounds great right? Well, last year I had to repair my HVAC which cost $1,800. If I was renting out this house, that one repair just took away ALL my cash flow for a full year, plus another 6 months. It is an older home (1960s) so I am afraid of more repairs like this coming up.

What would you do? Hold and make potentially 12% on your small investment (or 0% if more repairs come up), which is only $100 a month, or sell which would leave you approximately $25,000 in proceeds after paying off the loan (market went up quite a bit since I purchased).

Goal is to have cash flowing properties, but maybe I need newer assets with lower R&M. Thanks

[Glen Beringer]

Since you only had 3.5% down I am assuming you are paying PMI? With the upgrades and principal payments do you think you could refinance the property and have 20% equity (and potentially a lower rate)? No PMI and a lower rate could get your property to cash flow how you wanted.