Should I sell my first rental?

[Joseph Bass]

my first rental in Chattanooga

Bad

Constant maintenance issues

Capex (roof right around the corner/old ac unit)

Has yet to cash flow broke even maybe even gone negative since ownership

Good

2014=63k 2019=100-110k

New sports Stadium going up down the road with restaurants and lodging

Mortgage=512 with escrow

Rent= 895

The way I see it after fees and closing I could get 35k out of a sale

Refi scares me with it not even cash flowing now

10% pm

10% capex

8% maintenance

7% vacancies

=35% of 895

313.25 operating expenses plus 512 mortgage and escrow

825 = 70 month cash flow over time

70x12= $840 annual

840$annual vs 35000sale that’s 2.4% on my money.

Am I doing this right? Please help cause if it is I’m thinking I should sale what do y’all think?

[Kevin Sobilo]

@Joseph Bass, your numbers are ultra conservative.

Negotiate your PM down to 8%. Also, they should get you 5% or less vacancy or else fire them!

10% capex and 8% maintenance are also very high. I would think 5% each would be more typical.

If you were able to adjust those numbers would it cash flow more to your liking?

Also consider the tax ramifications. Are you depreciating the property on your taxes? If so, any cash flow is likely tax free or nearly so. If you sell, you will pay tax on any profit, unless you 1031 exchange into another investment.

You mention constant maintenance issues. Perhaps look at why that is? What type of issues? Are they things that the PM should be mitigating through their management policies? Are any of the issues caused by the tenant and should be billed back to them? Is there deferred maintenance to the property where if you took care if it ahead of time it would cost you less in the long run?