Hold or sell a house in La Porte, TX?

[Shakeb Syed]

Hi BP,

Real estate and BP newbie here. I have a house in La Porte, TX (inherited) that I am trying to figure out what to do. I ran the numbers using the BP buy and hold calculator and the numbers are not pretty (showing a negative cash on cash return), but there is a decent chunk of equity in the house. Here is some basic information:

-1600 sqft, 4 bed, 2 bath on 10K SF lot.

-House built in 1950, partially renovated in 2015.

-Needs a new roof, foundation work, and new windows.

Had a couple of area realtors come and give an appraisal of the house and they think it should list for $154,900.  The remaining balance on the house note is around $117,000 @ 3.75% (30 year) with about 27 years remaining. For rental I have received a range of $1,450 - $1,600. Assuming $1,500 rental income per month below are my monthly expenses:

-Principal, Interest & PMI: $618.82

-Property Tax: $289.14

-Insurance: $208.33 (can probably be reduced by shopping around)

-Water / Sewer / Gas: $45

-Electricity: $40

-Lawn Care: $70 / month (summer); $35 / month (winter)

-Vacancy: 5% of $1,500= $75

-Repairs: 5% of $1,500 = $75

-CapEx: 7% of $1,500 = $105

TOTAL EXPENSES = $1,523.29.

As you can see the expenses are higher than the expected rental of $1,500. I can probably get the insurance lower by $50/month, but the property would barely cash flow. Should I sell and get the equity out and look elsewhere to invest? or should I try lowering expenses, spend on CapEX and see if I can get some positive cashflow?

Any suggestions or guidance would be greatly appreciated. If you need additional details please let me know.

Thanks in advance for your help!

Regards,
Shakeb