To Keep or Sell - Under Performing Multifamily Property

[Michael Henry]

For Context - I understand real estate is a long term deal but, after holding a property for 1.5 years I feel as if the performance is lack luster and have considered selling off the property in pursuit of something larger and more profitable.  

This is a 4plex which was purchased June 2019 

Purchase Price: $152,500 (20% Down - 30yr Commercial Loan @ 6.5%)

Appraised Value: $182,000

Rents: $1,750 

PITI: $1,099

Everything checked out, the building was fully occupied, I purchased with an instant $30K equity, and the property met the 1% rule. The first thing I did was hire the top rated property manager in town since the previous owner had self managed.I was in process of a refinance pre COVID but that severally delayed the process and I was unable to complete, I also struggled to find a bank which would refinance and keep the property in my LLC.

From a pure cash flow prospective, its hit or miss in terms of profitability. There has been higher than normal turn over all but 1 tenant have moved at some point. Maintenance has been high (A/C issues, appliance issues, etc). Rents have been stagnant. All my other properties have performed much better so im wondering how long does it take to see real gains from a property like this or is it best to just cut my losses sell for market price and invest in another property?  

Ive attached my financials with the address blacked out for YE2020

[Bernard Sanga]

@Michael Henry

This is a lesson I learned on my first deal and you need to see it too. If you’re having problems with hvac and appliances it means they’re probably old and needs replacing even before the purchase- due diligence is key. Costs to replace these things should be accounted for when calculating purchase price and your 1 percent rule.

The only answer here is to hold. Selling before even stabilizing the property is wasting all the time you already put into the deal - time is the most valuable asset an investor has.

Stabilizing the property includes repairing or replace all the issues you have seen correctly - always make sure they are just not putting a band aid to the problem to avoid recurring issues. And replacing all the bad tenants (inherited or not).

Money is in the sitting. Buckle up!