Strategies for turning an investment around...

[Jake Isaac]

I'm sure a lot of you have been in my situation at one point in your investing careers. I own one rental property - a four plex - and I'm beginning to discover that I paid too much for it. It's not a dire situation yet, and I'm not ready to accept defeat because I know there is a way to turn this around and make it work. Do any of you fellow investors have suggestions for a strategy to help drastically reduce expenses?

Here are my facts: 

Gross rents: $2500 (625x4) The first one year lease expires in March '16 and I plan on raising rent by $70 on each unit within six months of that. New gross rents in one year: $2780

Fixed expenses: mortgage $1598, management $200, utilities $200

Things went well for the first two months of ownership. On advice from a "mentor" I calculated after mortgage expenses at 35%. Big mistake. After a roof repair and flood restoration within two months of each other I ended up with nearly $8,000 out of pocket because the rents hadn't been enough to cover those huge incidences. What was originally supposed to be $6000/year cash flow now look a like negative numbers. 

So, besides upping the rent next year and dropping the property manager when his contract expires next summer, what creative ways can I find of upping my income on the property and reducing expenses? 

I look forward to hearing about some experiences! Thank you BP community. 

[Luka Milicevic]

I hate to say this, but generally there are no cures when you overpay for a property. The old cliche "you make money when you buy" tends to be true.

Too late for that now, so here are a few options you might have....

Refinance your existing mortgage to a lower rate and put more money down in order to lower payment. (If you can)

Manage the property yourself

Make the tenants pay for their utilities

Monetize your units with laundry if they don't have them. Vending machines perhaps.
These will probably not contribute much but it is an idea.

Sell and move on

The roof leak/repair should have been covered with the 50% rule. Half your cash flow will be used for capital upgrades, etc.

You have spread yourself very thin, and I think the best thing to Do would either be refi or sell.

Hope this somewhat helps.

Good luck