I need advice on our rental portfolio! Please help!

[Jesse Kreun]

Hi all - 

I need some help!  My wife and I are real estate investors - we own three properties and none of them are living up to our expectations.  We have been putting a ton of our own money into the properties to keep them going, but at this point there is no more money to keep them afloat, so we need answers.   The only option we can see is to sell them all, but I wanted to post on here to see if there was any advice or options that we haven't thought of yet.  We do not want to make an emotional decision, but we seem to be painted into a corner with our finances.  

Property 1: 4plex (the best performing property we have).  Generally gives us a few hundred dollars per month after paying the mortgage, but we have probably about $100k in equity at this point.  We could refi and get some of the cash out, but that would remove any of the cashflow we have currently, which doesn't seem to make sense. 

Property 2: 24 unit apartment complex.  The numbers when we purchased look good, but we are still not realizing the profit we expected and the expenses seem so high each month.  The managers keep telling us that we'll get to the profit soon, but month after month is doesn't materialize.  I don't believe they are scamming us, but yet we continue to have to dig into our own pockets to cover part of the mortgage. If we sell, there is a little bit of equity here, but not a ton.

Property 3: Hardest property we own. 11 unit apartment complex.  Again - the numbers looked good when we purchased, but again- after years of owning it, it is still not performing and we rarely get any money from the property to even pay the mortgage out of, so it is ALL coming out of our pocket!  We just got rid of a bad tenant and the managers say the property is stabilizing, but it could be a few months yet before we start getting paid.  If we sell, there is a little bit of equity here, but not a ton.

So question-  would you sell one? All?  Any other options that you can think of? What kind of professional can give us advice on this? We are talking to a financial planner this week, but of course they are going to be more interested in selling us on stocks, etc.

Thanks, all!

[Karen F.]

I just looked at your past posts.  I see you are in Washington State, and that at least one of these properties is in Ohio.  I want to cry when I see that you have taken lots of classes and read lots of books (at what cost?), that have persuaded you to buy apartment complexes far away from you, that aren't making you money.  Your opening post should be required reading for anyone who's thinking about buying rental real estate.  The first rule of real estate for poor shnooks like us is,  buy within 20 minutes of where you live, so that you can keep a close eye on everything yourself.  

The only reason that we got into this business is that my husband can fix almost anything himself., and likes to design and do renovations - himself, with maybe a young guy assistant or two.  He is like a carpenter/electrician/plumber/HVAC guy/social worker all rolled into one.  We search for properties together, negotiate deals together, I screen tenants over the phone, he shows, we discuss how to manage problems together, he fixes. Yes, we use licensed tradespeople appropriately when we need to, but they're all people who we found through word of mouth and who don't charge a lot.  I spend many hours researching real estate online, but I really enjoy doing that.  I also work in healthcare, and earned the money to buy the properties.  We've been doing it now for about 9 years or so, started small, slowly adding to our portfolio, buying for cash.  We've turned about half a million into a portfolio worth about 2 million over the 9 yrs, because there's been some increase in value, and it earns us a pretty good living, too, enough to live on.  We NEVER took a single class, and the only book I ever read was Landlording, because I heard the sample lease in it was good, although I did eventually read Rich Dad Poor Dad just cause it was a good "Ragged Dick" sort of story.  Both books were taken out  of the library, not even purchased!

You need to sell these far away properties.  You will never "turn them around" because the property management company is the only one who is ever going to make money on these.  If you don't have handyman skills, stay out of this business.  If you do, or could do the management yourself, sell all these and buy something very close to home.

Also, if you're in healthcare, consider combining real estate with what you already know, healthcare.  Maybe you should look into buying a white elephant near you, and turning it into the lowest possible level group home or "rest home", the kind that is not regulated, where you house people who are on SSI.  These are homes for people who don't require true nursing care, they just need a little supervision.  This might be your niche, that you can do better than most because you know the healthcare side of things.