HELP!!! Low ROI SFR...Analysis paralysis requires your expertise!

[Aaron Schick]

Hello Bigger Pockets! This is my first post and I thank you in advance for sharing your expertise.

I currently have a real estate perdicament for which I could use some advice and I expect that my experience is a relatively common one.

I currently own a 3bd/2ba SFR in Oklahoma City (OKC) which I purchased as my primary residence in February 2016. At the time of purchase I was ignorant to the wealth buliding potential of real estate and purchased this property with no regards to ROI or investment value. Due to some unforseen job circumstances I moved to Colorado Springs in August 2017 and rented out the property. I will provide detailed numbers below, but suffice it to say that this property barely breaks even after expenses and has proven to be a worthless use of the significant equity I hold in the property. My goal is to turn this situation around and use this equity to begin building a buy and hold rental real estate portfolio in CO Springs and beyond. The sooner I can get out of this cubicle the better.

Now that I have summarized my situation let's look at the numbers...

Purchase Price: $207,000

Equity: $104,000

Monthly rent: $1300

Monthly expenses: $1229.54 (This includes P&I, taxes, Estimates for vacancy and repairs, insurance, & property management 10% ... No CapEx)

Monthly profit: $70.46 (so basically nothing)

Cash on Cash ROI: 0.79% (ouch)

Cap rate: 8%

As you can see, the numbers are grim...

My options as I see them are as follows:

1) HELOC to gain access to this equity. I have called around regarding HELOC rates. Wells Fargo offered $30k (due to rental status) @ 7% with negligible costs. Refinance would put cashflow way in the red so not really an option IMO. This option seems risky to me and $30k of lent cash doesn't get one very far in the CO Springs market...

2) SELL ... Average days on market in OKC is around 100 days and I would lose closing costs plus around $5k of maintenance I have put into the property. I did not live in the property for the full 2 years and so would have to pay taxes on any gains. I estimate I could get around $225k if I wait around for the right buyer or I could dump it for a bargain price and chalk up the loss to lessons learned. ****Any buyers out there?!?! Current tenants lease ends November 2018.

3) Maintain ownership in the property and get creative regarding increasing rental revenue and financing future deals. (Increase rent at OKC house, save like a mad man, and seek seller financing or low money down properties)

The benefit of the property is that it is an A- house/neighborhood surrounded by a rougher area that is experiencing gentrification. The detached garage and windows could use some work which could add value presale. Other than the windows and garage the property is completely remodeled. Granite countertops, new electircal, bathrooms and trim redone... the works. The house is a registerd historical home built in 1937.

Upon remedying this foolish decision I have a few options to consider..

1) Purchase a 3+ unit owner occupied multifamily property in Colorado Springs. Basically a multifamily househack.

2) Stick to a cheaper market I know well (OKC) and purchase investment multifamily residences while continuing to rent in CO Springs.

I am at a point of analysis paralysis and thus seek your input. Any and all advice is welcome. 

[Ron Harris]

You might look into a 1031 Exchange and delay paying taxes on your gains. 

Not sure how the rules work for a personal residence that you turned into a rental. Most Oklahoma title companies can help you with 1031. 

I've had students have success with First American Title with a 1031.