SFH Rental Strategies or Exit Strategies
Member since 2018 · 27 posts · 13 votes
SFH Rental Strategies or Exit Strategies
Most Popular Reply
Real Estate Agent · Colorado Springs, CO · Member since 2021 · 279 posts · 121 votes
2yHello @Anthony Hidalgo,
I will say that you are definitely not alone in your situation. There are many buyers out there who purchased in 2020 to mid-2022 and are in the same boat! Either their home may not be worth as much as they expected when sold or insurance and taxes have increased to the point that the rent no longer covers the PITI. I run a property management business here in Colorado Springs and have seen this situation many times over.
If your goal is to build wealth, then I would not suggest selling the home. As Greg mentioned above, the appreciation and principal paydown is most likely more than the "loss" of $600 per month that you are paying in. As long as you can afford to cover this difference, then you are still in a good position to build wealth in the future once rents catch-up.
If you are interested in hearing about how I can help you lose less per month on your rental property, I would love to chat! I specialize in finding creative ways to make the rental work for you now while we wait for the home to build equity over the next 2-5 years so it can be sold for a profit in the future, or at least until rents improve enough to cover the mortgage. I wish you the best in your adventure, just don't sell!!
Brian Bohrer - GRRS Inc
12 Replies
- 2yGreg WeikBusiness MemberProperty Manager · Denver, CO · Member since 2020 · 263 posts · 327 votes
$600 negative cashflow is certainly a significant number.
My question for you would be if you've run any projections on getting that -$600 closer to $0 or even positive.
What rental rate do you need to break even?
Is it possible that some condition improvements could get you closer to where you need to be?
If interest rates fall below your locked-in level and rental rates continue to climb, what is the timeframe to break even?
A lot of people here would probably scream, "Sell, sell, sell." I suspect you understand that you are building wealth while losing money each month, so the calculation is not really so straightforward. $600 X 12 months = $7200. I'm guessing appreciation and mortgage paydown combine to give you greater wealth building than this $7200/year loss. So that's the real math.
Even though you don't have room in your budget for property management services, I'd be happy to help you if possible.
Real Estate Solutions4.3379 Reviews - 2yJay HurstBusiness MemberLender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
Quote from @Anthony Hidalgo:
Hello, BP family! We have run into a dilemma. Our tenant is breaking the lease early. We are in the 80925 area code of Colorado Springs close to Peterson SFB, Shriever SFB, and Fort Carson. Home is a 3700SF 5/3 Ranch with basement. Current remaining mortgage is 528k @4.375 VA.
Some of the options include:
Re-rent at a $600+ negative cash flow.
Rent by room with all utilities included for $700-900 per room and $1000-1200 for the primary. ($3800-4800)
Fully furnished rental. I'm new to this concept, but I've heard insurances will pay recently for displaced families.
Traditional Sale in line with market. We're waiting on an appraisal since there are no true comps in the area that have sold recently.
Creative finance sale. Still working on terms and waiting on appraisal.
Any information is welcome and greatly appreciated!
With the current tenant are you losing 600 a month? Or, have rental rates dropped that much in your area?
Hurst Real Estate, INC4.991 Reviews - Member since 2018 · 27 posts · 13 votes2yWe were $450 below with the tenant that broke the lease. We were receiving $2800 and mortgage was $3250. With property tax adjustments and the mortgage company requesting an additional amount for possible future increases. Our payment is going up to $3700.
Quote from @Jay Hurst:
Quote from @Anthony Hidalgo:
Hello, BP family! We have run into a dilemma. Our tenant is breaking the lease early. We are in the 80925 area code of Colorado Springs close to Peterson SFB, Shriever SFB, and Fort Carson. Home is a 3700SF 5/3 Ranch with basement. Current remaining mortgage is 528k @4.375 VA.
Some of the options include:
Re-rent at a $600+ negative cash flow.
Rent by room with all utilities included for $700-900 per room and $1000-1200 for the primary. ($3800-4800)
Fully furnished rental. I'm new to this concept, but I've heard insurances will pay recently for displaced families.
Traditional Sale in line with market. We're waiting on an appraisal since there are no true comps in the area that have sold recently.
Creative finance sale. Still working on terms and waiting on appraisal.
Any information is welcome and greatly appreciated!
With the current tenant are you losing 600 a month? Or, have rental rates dropped that much in your area?
We can probably rent for $3000-$3200. $3600 if we include utilities with a Section 8 Tenant. - 2yJay HurstBusiness MemberLender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
Quote from @Anthony Hidalgo:
We were $450 below with the tenant that broke the lease. We were receiving $2800 and mortgage was $3250. With property tax adjustments and the mortgage company requesting an additional amount for possible future increases. Our payment is going up to $3700.Quote from @Jay Hurst:
Quote from @Anthony Hidalgo:
Hello, BP family! We have run into a dilemma. Our tenant is breaking the lease early. We are in the 80925 area code of Colorado Springs close to Peterson SFB, Shriever SFB, and Fort Carson. Home is a 3700SF 5/3 Ranch with basement. Current remaining mortgage is 528k @4.375 VA.
Some of the options include:
Re-rent at a $600+ negative cash flow.
Rent by room with all utilities included for $700-900 per room and $1000-1200 for the primary. ($3800-4800)
Fully furnished rental. I'm new to this concept, but I've heard insurances will pay recently for displaced families.
Traditional Sale in line with market. We're waiting on an appraisal since there are no true comps in the area that have sold recently.
Creative finance sale. Still working on terms and waiting on appraisal.
Any information is welcome and greatly appreciated!
With the current tenant are you losing 600 a month? Or, have rental rates dropped that much in your area?
We can probably rent for $3000-$3200. $3600 if we include utilities with a Section 8 Tenant.what is your current escrow shortage?
Hurst Real Estate, INC4.991 Reviews - Member since 2018 · 27 posts · 13 votes2y
Quote from @Jay Hurst:
Quote from @Anthony Hidalgo:
We were $450 below with the tenant that broke the lease. We were receiving $2800 and mortgage was $3250. With property tax adjustments and the mortgage company requesting an additional amount for possible future increases. Our payment is going up to $3700.Quote from @Jay Hurst:
Quote from @Anthony Hidalgo:
Hello, BP family! We have run into a dilemma. Our tenant is breaking the lease early. We are in the 80925 area code of Colorado Springs close to Peterson SFB, Shriever SFB, and Fort Carson. Home is a 3700SF 5/3 Ranch with basement. Current remaining mortgage is 528k @4.375 VA.
Some of the options include:
Re-rent at a $600+ negative cash flow.
Rent by room with all utilities included for $700-900 per room and $1000-1200 for the primary. ($3800-4800)
Fully furnished rental. I'm new to this concept, but I've heard insurances will pay recently for displaced families.
Traditional Sale in line with market. We're waiting on an appraisal since there are no true comps in the area that have sold recently.
Creative finance sale. Still working on terms and waiting on appraisal.
Any information is welcome and greatly appreciated!
With the current tenant are you losing 600 a month? Or, have rental rates dropped that much in your area?
We can probably rent for $3000-$3200. $3600 if we include utilities with a Section 8 Tenant.what is your current escrow shortage?
Just revisited the escrow document shortage is only $200 a month, and the forecasted increase is not on there. Payment will only be $3575. So that makes it a little more manageable
- Real Estate Agent · Colorado Springs, CO · Member since 2021 · 279 posts · 121 votes2y
Hello @Anthony Hidalgo,
I will say that you are definitely not alone in your situation. There are many buyers out there who purchased in 2020 to mid-2022 and are in the same boat! Either their home may not be worth as much as they expected when sold or insurance and taxes have increased to the point that the rent no longer covers the PITI. I run a property management business here in Colorado Springs and have seen this situation many times over.
If your goal is to build wealth, then I would not suggest selling the home. As Greg mentioned above, the appreciation and principal paydown is most likely more than the "loss" of $600 per month that you are paying in. As long as you can afford to cover this difference, then you are still in a good position to build wealth in the future once rents catch-up.
If you are interested in hearing about how I can help you lose less per month on your rental property, I would love to chat! I specialize in finding creative ways to make the rental work for you now while we wait for the home to build equity over the next 2-5 years so it can be sold for a profit in the future, or at least until rents improve enough to cover the mortgage. I wish you the best in your adventure, just don't sell!!Brian Bohrer - GRRS Inc
- 2yJay HurstBusiness MemberLender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
Quote from @Anthony Hidalgo:
Quote from @Jay Hurst:
Quote from @Anthony Hidalgo:
We were $450 below with the tenant that broke the lease. We were receiving $2800 and mortgage was $3250. With property tax adjustments and the mortgage company requesting an additional amount for possible future increases. Our payment is going up to $3700.Quote from @Jay Hurst:
Quote from @Anthony Hidalgo:
Hello, BP family! We have run into a dilemma. Our tenant is breaking the lease early. We are in the 80925 area code of Colorado Springs close to Peterson SFB, Shriever SFB, and Fort Carson. Home is a 3700SF 5/3 Ranch with basement. Current remaining mortgage is 528k @4.375 VA.
Some of the options include:
Re-rent at a $600+ negative cash flow.
Rent by room with all utilities included for $700-900 per room and $1000-1200 for the primary. ($3800-4800)
Fully furnished rental. I'm new to this concept, but I've heard insurances will pay recently for displaced families.
Traditional Sale in line with market. We're waiting on an appraisal since there are no true comps in the area that have sold recently.
Creative finance sale. Still working on terms and waiting on appraisal.
Any information is welcome and greatly appreciated!
With the current tenant are you losing 600 a month? Or, have rental rates dropped that much in your area?
We can probably rent for $3000-$3200. $3600 if we include utilities with a Section 8 Tenant.what is your current escrow shortage?
Just revisited the escrow document shortage is only $200 a month, and the forecasted increase is not on there. Payment will only be $3575. So that makes it a little more manageable
You can call the servicer and just pay in one lump sum the shortage. That will lower the payment because you will have caught up with the extra they are charging you to make up for what they paid for you.
Hurst Real Estate, INC4.991 Reviews - Member since 2018 · 27 posts · 13 votes2yThis is Plan A. We would like to keep it if the #s work. We did this with our other rentals, but this is the largest negative cash flow we've encountered. More than likely it'll even out in the next few years. We just need to weather the storm while prepping for military retirement as well.
Quote from @Brian Bohrer:
Hello @Anthony Hidalgo,
I will say that you are definitely not alone in your situation. There are many buyers out there who purchased in 2020 to mid-2022 and are in the same boat! Either their home may not be worth as much as they expected when sold or insurance and taxes have increased to the point that the rent no longer covers the PITI. I run a property management business here in Colorado Springs and have seen this situation many times over.
If your goal is to build wealth, then I would not suggest selling the home. As Greg mentioned above, the appreciation and principal paydown is most likely more than the "loss" of $600 per month that you are paying in. As long as you can afford to cover this difference, then you are still in a good position to build wealth in the future once rents catch-up.
If you are interested in hearing about how I can help you lose less per month on your rental property, I would love to chat! I specialize in finding creative ways to make the rental work for you now while we wait for the home to build equity over the next 2-5 years so it can be sold for a profit in the future, or at least until rents improve enough to cover the mortgage. I wish you the best in your adventure, just don't sell!!Brian Bohrer - GRRS Inc
thanks!
- Member since 2022 · 18 posts · 10 votes2y
I would consider renting by the room at a higher rate. That should fix your cash flow issue while also giving you a bit more security, since you're not counting on a single lease anymore. It'll be a pain in the butt, potentially, but at least you'll be positive. I'm not OK with being in the hole at all on a monthly basis - I don't know about you.
Almost nothing here is even close to cash flowing, so I've been considering renting by the room to turn a 4+ BR SFH into a multifamily property. I tried mid term rentals when I shut down my STR, and I found that the rates were very close to long term rates. It's not really worth it to constantly find new tenants and pay for furnishing and turnovers.
- Real Estate Agent · Colorado Springs, CO · Member since 2019 · 79 posts · 77 votes2y
With the growth that is still expected in the CO Springs area in the coming years, I'd try to hold onto it as much as makes sense.
If you're shooting for a ~26% increase in rent to cover the mortgage, rent by the room does sound like the best scenario in your situation to be able to keep your investment as long as you can get the right group of renters to join in on it. At least, if you advertise each room separately, you're placing people in a house who might not have otherwise found each other and can get a house more affordably than they would on their own. I'd give it a try!
As @Account Closed pointed out, furnishing a rental is a hefty ticket and the turnover can be a lot to manage (esp. if you happen to be out of state/country). If it doesn't look like there's enough margin to make it significantly greater than renting by the room, I wouldn't do it. - Member since 2018 · 27 posts · 13 votes2y
Aubrey thanks for the reply! That is one of the downfalls we were considering by midterm/long term rent by room. We may have an out lined up. We're waiting for a reasonable accomodation for our section 8 tenant that lives in our other property in the Springs. If that works out we will get about $3600-$3700 total. We would be responsible for utilities is the only down side.
Quote from @Aubrey Maldonado:
With the growth that is still expected in the CO Springs area in the coming years, I'd try to hold onto it as much as makes sense.
If you're shooting for a ~26% increase in rent to cover the mortgage, rent by the room does sound like the best scenario in your situation to be able to keep your investment as long as you can get the right group of renters to join in on it. At least, if you advertise each room separately, you're placing people in a house who might not have otherwise found each other and can get a house more affordably than they would on their own. I'd give it a try!
As @Account Closed pointed out, furnishing a rental is a hefty ticket and the turnover can be a lot to manage (esp. if you happen to be out of state/country). If it doesn't look like there's enough margin to make it significantly greater than renting by the room, I wouldn't do it. - Real Estate Agent · Colorado Springs, CO · Member since 2019 · 79 posts · 77 votes2y
Quote from @Anthony Hidalgo:
Aubrey thanks for the reply! That is one of the downfalls we were considering by midterm/long term rent by room. We may have an out lined up. We're waiting for a reasonable accomodation for our section 8 tenant that lives in our other property in the Springs. If that works out we will get about $3600-$3700 total. We would be responsible for utilities is the only down side.
Quote from @Aubrey Maldonado:
With the growth that is still expected in the CO Springs area in the coming years, I'd try to hold onto it as much as makes sense.
If you're shooting for a ~26% increase in rent to cover the mortgage, rent by the room does sound like the best scenario in your situation to be able to keep your investment as long as you can get the right group of renters to join in on it. At least, if you advertise each room separately, you're placing people in a house who might not have otherwise found each other and can get a house more affordably than they would on their own. I'd give it a try!
As @Account Closed pointed out, furnishing a rental is a hefty ticket and the turnover can be a lot to manage (esp. if you happen to be out of state/country). If it doesn't look like there's enough margin to make it significantly greater than renting by the room, I wouldn't do it.That's great! I hope the section 8 situation works out for you. It would be a much more stable way to get closer to covering your mortgage, for sure.
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