Rental Property Investor · North Augusta, SC · Member since 2018 · 105 posts · 40 votes
I have recently come to the conclusion that I need to sell a property that is too much work for me at the moment for a loss. I purchased the home for $26k and put another $6k into it.
I took the drywall off to replace it and found that all of the studs were termite infested and need to be replaced. It was at this point that I realized I might have bitten off more than I could chew and would end up just hoping to break even after rehab.
I know that there is still room to make a profit if all goes well, but don't think it has enough upside to be worth me sinking another $60k into it, and not have anything left over for other investing in the meantime.
Knowing how much work there is left to do (like $60k), and having an ARV of about $105K I am listing it for what I purchased it at, and taking the loss on the extra I put into it.
I am curious to hear your insights about times when you had to deal with a loss, and how you dealt with it.
You gotta know when to hold em, know when to fold em, know when to walk away, and know when to run. There are several possible outcomes here, and none of them seem great on the surface based on your explanation of the situation. There's a saying that you shouldn't throw good money after bad, and this seems like such a scenario IMO.
Spending that extra 60k doesn't greatly improve your chances of turning a profit as you'd be 92k into the project and would still have closing costs and commissions to worry about. Plus, there's no guarantee that you'd actually sell for 105k and could sell for a little more or a little less. To spend more time and money on something with already-thin margins seems like a bad deal.
I'd cut bait, try to wholesale it to another investor and hope to break even or write off the loss on my taxes for 2019 (if you could get rid of it in a week), and move onto the next deal.
You gotta know when to hold em, know when to fold em, know when to walk away, and know when to run. There are several possible outcomes here, and none of them seem great on the surface based on your explanation of the situation. There's a saying that you shouldn't throw good money after bad, and this seems like such a scenario IMO.
Spending that extra 60k doesn't greatly improve your chances of turning a profit as you'd be 92k into the project and would still have closing costs and commissions to worry about. Plus, there's no guarantee that you'd actually sell for 105k and could sell for a little more or a little less. To spend more time and money on something with already-thin margins seems like a bad deal.
I'd cut bait, try to wholesale it to another investor and hope to break even or write off the loss on my taxes for 2019 (if you could get rid of it in a week), and move onto the next deal.
@Bob Okenwa that is essentially what we are thinking. Would rather take a loss now, then throw more money into a deal only to hope to break even on the other end. Doesn't seem like sound business strategy.
I actually listed it on craigslist on wednesday and already got an offer for $25k with no closing costs for me to pay.
I think it's probably needless to say, but we took it!!!
Happened to me a couple of times. So I threw them out there on craigslist lease/rent-to-own & got my price pus $3k down & they walked in did all the rehab on their dime & it worked out.
One was such a dog I had to get rid of it before the 'I told you so' mantra started at home. The prospective & her handyman son walked through it. Windows were cracked, doors ajar, no carpets throughout just bare plywood, (the seller had cats so we tore them out), most kitchen cabinets doors were askew or broken, the roof leaked. I was embarrassed to show it yet as I apologized she turned to me & said 'it's move in condition'.
They paid on-time, stayed 4 years & then walked away leaving me with a $400 water bill. I re-did the rent-to-own strategy for more than double to the couple who went it to paint & clean it. But we did need to glue the PVC the handyman son had installed using duct tape to hold the joints together, esp the ones leaking above the furnace. Plus the city had us take out the summer studio rental apartment they had set-up in the garage paying them $375/month.
3 years later that second couple bailed after a bad tenant scared them out of being landlords BUT they had spent $8k off their own $$ on windows & doors. Third time lucky & the kid who bought it in 2008 for 3x what we originally paid has it rented for $1400/month, after even more rehab on his dime. But now we just hold it as a Note @ 12%.
Like 'dogs of the Dow' there are the 'dogs of REI' that can be turned around if you have the cash, perseverance & can tolerate the 'told you so'. After all that passed on this property, ALL the cash we took in & keep taking, my wife ONLY remembers being stiffed for that $400 water bill.
Can't win them all my friend. Real estate investing is long term. There will be some ups and downs. Your goals is to have more ups than downs learn from them move on and become better and wiser
@Pat L. I know that I have already learned a lot and can see this one being a good long term play if it doesn't end up selling for about what we're asking for it.
Sounds like you have doing this for a couple years now and have some stories to tell.
@Hai Loc thanks for the words of encouragement. I already have another house under contract I am working on right now. Hopefully this one has a bigger up that we had a down lol.