Need advise on selling or holding
Would appreciate advice. We own an investment property in Ohio. It's a duplex purchased for $45k last December. Rehab took way longer than expected and went WAY above budget. We're now all-in for $160k. Had it appraised a few weeks ago and it came back at $133k. The comps pulled were truly not fair (over a year old for two, several miles away in a very different part of the city, etc.). We asked another appraiser that we know to take a look and he said the comps were incorrectly chosen, in his opinion, and he found comps that were more recent and closer. In his opinion, it should have been appraised at least around $150k. At this point, even if it appraises at $150k (if we try again with another bank), we'll be leaving a good chunk of money in the deal. Our other option is to try to sell off-market for around $150k - $160k. This will be a cash-flowing property for sure. We own several other duplexes in same area and are getting $1800+ in rent each month. And this will be a fully renovated property, just one block from a major hospital. The thought of having to leave so much money stuck in this deal is what is keeping me up at night... but the thought of losing up to $20k if we sell isn't exciting either. This experience has been so stressful that I'm ready to hang it up with real estate investing altogether! Just curious what any of you would do if you were in my shoes.
@Colleen Murphy, I would refinance and enjoy the cash-flow!
If you get a $150k appraisal upon refinance, you could get $112,500-$120,000 back out which is leaves about $20k or less in the deal. If you think of that as your acquisition cost for a turn-key cash-flowing rental and run the numbers I suspect they look pretty good.
You can look to refi out the rest of your money later.
Also, you'll recover the money you're leaving in the deal just with cash-flow (not counting mortgage pay-down) within the first couple years. So, your deal will turn universally positive within a shortish amount of time.
Thank you for your response. That's a good perspective - sort of taking the patient route, which is challenging in the short term. BUT, would avoid losing a significant amount of money. And hopefully the market in this area will improve so we can refi sooner rather than later!
Hi Colleen,
I understand that you're facing a tough decision regarding your investment property in Ohio. It's always challenging when unexpected costs and appraisal discrepancies arise. Here are a few things to consider:
1. Refinancing: Refinancing could be a viable option to recoup some of your investment. If you can secure a $150k appraisal, you might be able to pull out a substantial amount of money, leaving only a small portion of your investment tied up in the property. The positive cash flow from the property can help offset this remaining amount over time.
2. Long-term Cash Flow: Your property seems to have solid cash flow potential, with other duplexes in the area generating $1800+ in rent each month. This, coupled with the fully renovated condition and proximity to a major hospital, adds value to your investment. Consider the long-term benefits of cash flow and potential appreciation in the area when evaluating your options.
3. Market Outlook: Assess the local market conditions and projections for the area. If there are positive indicators for future growth and appreciation, holding onto the property could be a wise choice. However, if you anticipate a stagnant or declining market, selling off-market might help you avoid further losses.
Ultimately, it's essential to weigh the financial and emotional aspects of your decision. If the property aligns with your overall investment strategy and long-term goals, staying the course and riding out the challenges might be the better option. But if the stress and potential financial loss outweigh the benefits, selling off-market could provide a clean exit.
Consider consulting with a local real estate professional or financial advisor who can provide insights specific to your situation and the local market conditions.
Best of luck with your decision, and don't hesitate to reach out if you have any further questions!