Hold or Sell 2 Properties?

Question

Hey All,

I'm a new BP member living in San Diego, CA. I'm looking to get some advice on my current situation. I have 2 properties that I bought prior to finding BP and becoming knowledgeable (somewhat) in REI.

Property 1: SFR in Orlando, FL. Bought it without any prior real estate knowledge.

• Purchase Price: $239,000 w/ 20% down (about $50k) 
• Current Rent: $1650.00 
• Mortgage: $1215 + $100/month for lawn
• Monthly CF w/o maint. issues: $335
• Current Home Value: $250,000

Property 2: SFR (Condo) in Downtown San Diego, CA. Bought it with VA loan. Was a probate sale.

• Purchase Price: $400,000 ($2,500 in closing costs) 
• Using as short term rental: Avg Monthly Income - $3,200.00
• Mortgage: $2615 + $200/month for utl + $65/month for WIFI = Total Monthly Exp - $2,880.00
• Avg. Monthly CF: $320.00
• Current Home Value: $449,000.

I want to get into multi family apartments 16+ units. Have about $30,000k cash saved up as well.

Any advice would be greatly appreciated.

Thank you in advance!

Andrew Ashby · Answer

Account Closed, when did you buy the Orlando property? The Orlando Metro Area has seen roughly 9% appreciation in the last 12 months alone. And why are you paying for the tenant's lawn service?

Dan H. · Answer

The San Diego property is producing good for San Diego but is at risk of STR regulations. in addition STR has additional effort or cost (tenant turnover).  Do you use a PM?   Do you turn it over yourself?  You show no PM costs but you called it money income so that can be post PM expense.  We self manage except for our 2 STR units.  I can find LTR with virtually the same rent rent to value numbers.  However cost to sell will be close to 10%.  I lean towards selling it.

Orlando is out of state.  You can do better than this RE local.  You can get better cash flow in many locales (virtually entire Midwest).   I am not a fan of local investors buying OOS especially before they are seasoned RE investors.  I cannot see any reason to keep this RE unless you have an emotional attachment.  I would sell it.

Brent Coombs · Answer

Sell 'em, and start again, now you've got better ideas and education. You know you want to! Welcome to BP...

Kevin Fox · Answer

Hey Account Closed

The best way to decide between to alternative investment decisions is by putting it all down on paper to compare. I would be more than happy to help map out your options and what each would mean for you dollar-wise. I'll shoot you a PM so we can chat!

Andrew Ashby · Answer

Account Closed,  selling while tenant occupied is no problem.  It just requires a little more coordination. If the home is bought by another investor, which is unlikely at this price point,  the tenants would have rights to stay under their existing lease. However, if it is bought by an owner occupant, they would have the right to kick out the tenant and move in after closing.

Account Closed · Answer

@John Reardon thanks for the reply!

I agree the external forces (HOA and regulations) could severely hinder the cash flow the condo is producing. My backup plan is short(er) term rentals through corporate leases and/or using travel nurse sites such as furnished finder. My last resort would be a LTR and essentially break even. Selling is always in the back of my mind but holding off for the time being.

Account Closed · Answer

Thanks for the replies.

@Dan Heuschele the $3200 a month is net. Current rates for 2/1 downtown range between $2400-$2900. I've also looked into corporate leasing, travel nurse, and other STR (but over 30 days) to mitigate Airbnb risk but haven't had any luck yet. Ideally, I'd continue using it as Airbnb until regulation comes into play or the market turns and the unit doesn't generate enough money to cover the mortgage and look into selling then.

@Andrew A. i bought the Orlando property December 2016. The value has increased about $15k since then. I'm paying the tenants lawn to avoid HOA issues. Again, I purchased this property without real estate knowledge or research. I'm currently using a property manager and have tenants in there through April. Most likely will sell once their lease ends. Do you know the restrictions of selling a property while its tenant occupied?

Another option would be eliminate PM and lawn (about $250/month) and try to increase rent another $50/month. That would increase CF to about $485/month. Still just trying to weigh out my options...thoughts?

Hold or Sell 2 Properties?

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