Hi all,
I've been considering selling the two rentals I have and maybe refinancing one of the two. I'm interested in thoughts from you guys on the pros and cons of selling and maybe some creative opportunities I might not be aware of. Here's some background on each of rentals.
Rental 1: 3/2.5 (1400 sq ft) Townhouse - Atlanta, GA
I bought this as my first home in the fall of 2007 and not understanding market cycles bought it while prices were falling. As a first home buy, I was basically in the house for $500 - which speaks volumes about the state of the lending market. At the real estate market's worst, the home's value was 50% of what I purchased it for. In 2011, my wife and I moved our family up to Kalamazoo, MI and so it became a rental to avoid an foreclosure. After the mortgage, HOA fees, and property management fees I'm basically breaking even every month. One option is to sell now that the market has recovered to the point that if I sold I might get my original $500 back which is better than having to write a check at closing. The other option is to refinance to reduce the mortgage payment by maybe $250, which after netting out closing costs over nearly a year and half would finally make it a cash flow positive investment. The downside is its with new mortgage. The condition of the property is good considering it was built in 2006 and its been more preventative maintenance than repairs.
Rental 2: 4-plex (each unit 2/1 approx 830 sq ft) - Battle Creek, MI
In 2014, I jumped into the deep end to bought a multifamily property. Without understanding the importance of implementing systems and processes to manage a rental or even properly evaluating one before buying, it has been a costly learning experience in both time and money. But still its been learning experience. With the market up, I've got the chance to sell and make a profit and walk away to hit the reset button with my newfound knowledge. In pulling unofficial comps of 3 similar properties that have sold this past year I could make a few thousand before capital gains. I say unofficial because I didn't get them from the official MLS from an agent, just a local site that pulls at least some data from the MLS. Three units are occupied, one of which has a deadbeat who hasn't paid in 3 months, and the fourth is vacant because I have not had the time to turn it (but I'm close to wrapping it up). If everyone pays their rent - it cash flows just north of $1000 a month. Once the fourth is finished, that number will increase to around $1500. The property is a 1940s build with a roof, 4 water heaters, and a furnace that should be replaced within the next 2-3 years. Holding onto it could be highly profitable after tackling capital expenses and improving the management of the property, but it may also be a good time to cut my losses, sell, and hit reset.
BP, what are your thoughts?
