In 2020 I purchased an 8 unit apartment building in the south shore of Chicago. It is about a mile south of where they are building the new Obama presidential library. The whole area is getting gentrified with rent going up by about 25%. It took a year to get the property moved from the bridge loan, but now I have it as part of a portfolio loan at 4% for 30 years. In 2021 it was paying well and producing good cash flow. After the pandemic everyone started moving and the building has had a number of issues. It has not cash flowed positive in 16 months, and will not for at least another 3, due to repairs. Half the money has gone towards turnover costs: new cabinets, new flooring, and other upgrades. The other half has gone towards surprise repairs: boiler repair, gas pipe leak, water heater repair. The value of the property has been consistently rising with the repairs, but the lack of cash flow is strongly dragging me down.
The numbers:
I originally paid $480K for the property and just had it appraised at $675K. My portfolio loan is $620K with a monthly payment of $4,000. I would be able to sell the building and clear the debt for three other houses I have on the loan. That would free up monthly income of $4,000. Right now my portfolio is breaking even. All the cash I get goes towards the portfolio loan and the apartment building that needs repairs. If the apartment building stopped needing repairs it would start paying out $5,000 per month. I have been waiting for the repairs to stop but they haven't. Should I sell now and free up my cash for other investments and more flexibility or is the long term investment good enough to suffer through the fact that it continues not to cash flow?
