Hold or sell?

Question

Hello everyone, I posted about 6 months ago whether to sell or hold my condo. I had a bad run with property managers, the last one being the worst. The condo has been updated and is now finished and ready to be rented or sold. It sat vacant for 2 years while being fixed due to a small kitchen fire and the need to seek a public claim adjuster. I am at a cross road. I acquired it in 2006 and I own it free and clear 3/2 @ 1400 sq' in Orlando. The complex is well located and 90% investors owned so renters occupied in Avalon Condominiums S.Semoran Blvd and Pershing Ave in Orlando. Either I rent it and self manage to recoup some of the past loss and start making money right away with the possibility of tenants trashing it or sell and lose more money on realtor commission and closing cost or find a cash buyer at the right price? I even considered seller financing? Investors are hounding me weekly with low ball offers. Can anyone give me some advice on how to reach a decision?  Any feedback is greatly appreciated. Ultimately I would like to invest in more rental properties for "passive income"

Adam M. · Answer

I agree with @Ko Kashiwagi here. @Corinne Faivre, so sorry to hear about the terrible property manager; that is always stressful. Seeing as it is well located and owned outright, I would look at refinancing as an option but I personally would go with renting! Guessing for a 3/2 @ 1400sqft could pull in $1,100ish a month on the rent? You can control prospective tenants "trashing" the place with a strict contract and higher up front deposit.

If your goal is to invest in rental properties for passive income and you own this outright, why not start with what you already have? This could be an exciting challenge to overcome the hurdles you have been through with bad property management and asset damage. Perhaps you are eager to move on from this property (emotionally) given the history, but given the facts you have outlined-- it seems like a fortuitous asset to stand by :)Hope this helpful and good luck!

Ko Kashiwagi · Answer

Hi Corinne,

If you don't see yourself holding on to this 5-10 years later, it would be a good to sell and move on - possibly through 1031 exchange. Another alternative could be to seller-finance or cash out refinance. Since you've likely built a lot of equity, cash out refinance would allow you to put a down payment on a new property while keeping the cash flow from this one.

Crystal Smith · Answer

The benefit of owning the property free and clear are the options it opens up.  Based on your comments or fears about tenants one of the options that you should eliminate is renting then self managing.  So your options are to sell.  And in my opinion you can use multiple strategies simultaneously to sell

1. Sell at full price through a flat fee realtor- It would have to be the type of listing contract that allows you to find your own buyer without having to pay the realtor.  You won't really get much service from a realtor except exposure of your property

2. Sell at full price or just below price on terms - i.e. Seller financing or lease with option :  You can request a small or large downpayment.  That's up to you.

3. Sell at a discounted price to cash buyers- I say discounted as an incentive to cash buyers because we are always looking for deals

Jaron Walling · Answer

@Corinne Faivre What are the numbers on this property? What's the current market value and what is market rents? The size, description, and location sounds like a long term winner. You already "won" even with a 2 year loss of income.

"sell and lose more money on realtor commission and closing cost" - Harsh truth; drop that mindset because you will make more $$$ listing with an agent than selling by yourself. It's unfortunate you lost income for 2 years but it can always be worse. If you don't like the ROI get it on market and stop looking in the rearview. You already said investors are giving you low offers. That's what smart investors do everyday.

Shawn McCormick · Answer

Hi @Corinne Faivre. Sorry you are in this position. There may not be an ideal solution, but without knowing a little more it's hard to give advice. If you've owned it this long and it's paid off, you likely have gained a ton of equity and possibly have options to refi and definitely could do a lease to own scenario.

Since it is in a complex with so many investor owned units, it's very unlikely you will find a buyer that needs to finance, which means selling to another investor (and 'we' all want a deal, right?). Only you can decide if it is best to sell and reinvest (1031?) or maybe take advantage of any tax related benefits.

I would be happy to give you an opinion of value and even market it to my investor clients to gauge interest. I also know some of the biggest wholesalers in the area that have huge buyers lists that could dispose of it quickly with no commissions to realtors. If getting the highest price, perhaps listing it would be best. We can talk over options if you like.

Best of luck

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