Keep and Rent? OR Sale and Invest Elsewhere?

Question

Very new to this and Bigger Pockets - have watched/listened to as much as possible - till cross eyed. Learned so much, thankful for BP! I'm too green to make this decision - it must be the right one.   *Inherited families long owned rental property in 77008 area of Houston, Tx.  Prices amaze me. Long time tenant now gone, house was left many years with no updates/upkeep. Costly repairs needed.

Location, location, location - means higher taxes!  Lot is 50x100 containing two 25x100 lots that city now allows 1 house per. Setting very near major Interstate Hwy, Downtown and Medical Center, private and commercial properties. Majority of neighboring properties removed small houses and squeezed in 2!!, 2 story townhomes leaving this 40s 2/1 bungalow feeling shabby and low. Contractors proposals leave me shell shocked.

Do I repair, update a bit and rent? Or do I splurge and change the property to two homes?  or do I walk away (sell), spare the expense, take the $ and invest in 2 or more new units that will require less upkeep and expense with lower taxes and give me the same/better income? This Heights property value should gain greatly, quickly.  My laziness and fear of unknown push the sell button. My drive to succeed as Landlord/investor demands the correct choice.  Cash is on hand to do an average repair/update/rent scenario but taxes may eat my lunch if extensive updates are done too quickly.  This area is in great demand, property prices are climbing quickly as is rent.  Decent offers are made weekly.  Please help this confused oldie make up her mind. Thanks for reading!  All replies are much appreciated.  Have you been on this see-saw yourself?  How'd you get through it?  Too many variables!

Karen Moreau · Answer

Thanks Matthew! Will do!  Appreciate your great ideas. I agree with you - best use of land and most money to accomplish and to earn in long run.  Decided to sell and use funds to accomplish our goals elsewhere - taxes were the deciding factor - they will eat most of the profit making land a bit further out more profitable in the long run. Thanks again. Have a blessed weekend.

Karen Moreau · Answer

Thank you everyone, your insight is invaluable.  Taxes on these Heights lots will devour greater portion of income. Current building cost is ridiculous considering poor build quality currently available.  The choice to sell will be regretted for years but the income new properties provide will sooth that pain.   The math won - more money faster in smaller, lower taxed homes built a bit further from downtown will make me a rich girl with less work and worry.  Thank all of you again. Each of you made valid, helpful points and I truly appreciate your time and effort.  Have a blessed rest of the year!

Joe Villeneuve · Answer

Sell.  Take the cash and invest it in properties that will give you a better return.  Based on what you described above, there are no reasons stated that tells me keeping the properties is in any way a financially good idea.

Matthew Rolf · Answer

Hey @Karen Moreau, it sounds like you have thought out a lot of the situations which is great.  Maybe to give you some peace of mind, getting a CMA done for sale, pricing out building, pricing out fixing and having all the data may give you the most clarity on what is the highest and best use of your time, resources, mental energy etc.  If I had to guess, tearing down and building the max # of units would be the highest and best use of the land, but also the most stressful/time consuming and would carry the most risk.

Matt Ziegler · Answer

I agree with Joe, sell it and reinvest. The process of fixing and or building new will teach you a lot, but will come with growing pains. Based on your experience level, use the proceeds to invest in another property that will allow you to learn on an easier curve.

Either way, best of luck on your journey

Theresa Harris · Answer

Do you have the money to build two homes on the property?  Could you build one (or both) with legal suites effectively creating 4 rental properties?  Run the numbers to see how much your payments would be and taxes (look at adjacent lots with two homes for comps on taxes), how much would they rent for?

If the numbers make sense and you proceed, once they are done and before you rent them out sit down and ask yourself do you want to rent them or sell them? Again run the numbers and be honest with yourself as to what you are able to do.

Keep and Rent? OR Sale and Invest Elsewhere?

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