What should I do with this SFH property in JAX?

Question

My first SFH was in Jacksonville and was purchased via Roofstock. The property was my first out of state investment, and it taught me everything I know. Since then, I have purchased mostly higher CoC units, and multifamily units. While the property performs well, I am in a sort of dilemma (sell or keep) on what do with it since I am shifting focus to MFH going forward. Details below:

• Purchased Nov. 2016 on Roofstock for $90,000
• Loan was at 20% down at 4.375% (great rate!). Current loan amount is $69,146
• Rented at $993 on a 2 year lease ending in Dec 2019
• Upgraded the roof in Jan 2019 (cost $8,000)
• Cash flow after all PITI, reserves (20%), vacancy (5%), prop management (10%) is $171/mo

Here is where I am having trouble with and mistakes I made with this:

• My entire 2 year cashflow and reserves are gone based on an $8,000 roof repair. Back to square one.
• Lease will end in winter month (i.e., Dec 2019 to Jan 2020). Tenant has been in place for 3 years now. They have not stated their intent to leave (too early now)
• If tenant leaves, I am left with a vacant property in the winter months and may be difficult to get it rented
• Expecting to spend at least $1,000 on turnover it tenant leaves. I do yearly inspections so I know property is in overall good shape but of course, basic wear & tear will happen

What should I do?

• Sell? With realtor fees, and slight appreciation from $90,000 to maybe $100,000 price point, I will not be able to recoup my roof repair costs. I will be able to get back my downpayment though to reinvest into my next MFH.
• Hold on to it? That comes with the risks and extra costs I've outlined above

While this is not an underperforming property (mostly it was me underperforming while I was learning the past 2 years of the ins and outs), I am shifting focus to MFH and thus I do not see this property long term in my portfolio (unless I am convinced otherwise). I am not hard-pressed for funds nor do I live off any cashflow from my properties.

What would you do? Thanks for the help!

Account Closed · Answer

You know winter doesn't really exist in Florida right ?

I've found tenants multiple times during the "winter" here in Tampa. Only time I had a long vacancy was when the lease ended mid-December when nobody is looking to a home. Worst case scenario you get it rented in Jan.

Roofs are one in every 25 years. I'd just keep holding to the property and wait for better times to come.

Ryan Robbins · Answer

I'd be happy to take a look at the property @Mushfiq S. and give you an evaluation on the market in the area. As far as the rental goes, if it was something you were going to hold onto and needed to rent out in the winter months I would suggest a 7 month lease which would land you early to mid summer and then renew yearly from that point going forward!

Frank Wong · Answer

You had to replace the roof it happens it is part of the game.  Maybe the expectation was a bit high?  Maybe the data provided was incorrect?

Switching to MFH will not fix this it just means you have 4 stoves 4 water heaters to worry about.  What if a 3 Heaters go out?  There are always expenses in REI.

If I was looking to sell it wouldn't be because I want to jump into MFH, I would sell because I bought incorrectly and in a bad area.

Mark Fries · Answer

@Mushfiq S.

Your deal went bad because you used rootstock and overpaid.

Myself and many many others are doing awesome in jacksonville. My COC return is NUTZ....cashflowing like crazy

Mushfiq S. · Answer

I would like to clarify as my last message came out completely wrong.

Cash Flowong SFHs are definitely available. I see them daily. I own 6 other units that are SFHs that follow the 1.5%+ rule and in similar areas to the one above. I am happy with those and were purchased after I got the property in question. I've learned a ton after my acquiring this first property. I am finding MFH off market and on market that have better numbers. I am extremely bullish for JAX. I am under contract on a MFH right now.

The one in question was my very very first property through Roofstock. Roofstock does inflate sales prices which is wrong.

Just trying to figure out if I should prune this underformer in terms of cash flow from my porfolio and potentially take a loss.

Jack Bobeck · Answer

@Mushfiq S. Whoever is telling you that you cannot cash flow properties in Jax is full of horse manure. Find a new mouthpiece in Jax, people who are on the ground and making it happen.

Ryan Robbins · Answer

@Mushfiq S. I would challenge your comment about the 1% rule on single families in Jacksonville. If Roofstock is the only platform on which you are searching for single families I would suggest exploring elsewhere as many of the homes I've seen on their website are overvalued compared to what can actually be found in the market.

Mushfiq S. · Answer

@Jack Bobeck Do you mean starter SFHs for owner occupied homeowners? I believe this to be correct. However, in JAX, cash flowing SFHs is no longer viable. Prices have increased too much and the 1% rule does not work.

@Ryan Robbins Thanks. I have contemplated the lease idea which I will do. However, that's only if a renewal is on the table, which I am not sure. As for valuation, I have received a valuation from Roofstock and my realtor so I am good there. Thanks!

Jack Bobeck · Answer

@Mushfiq S. Right now starter SFHs are in short supply under $200,000. If it were me, i'd see if you could get a bit more and cover the nut on the roof and get you out. There will be better times to buy and hold, but this is a hot market for buy, fix and flip. Best of luck.

What should I do with this SFH property in JAX?

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