Should you sell your problem property--even at a loss?

5 Replies

Brandon Turner asked a question about what "problem properties" would you never want to buy, here.

Yet many of us HAVE bought what turned out to be problem properties.  I bought a duplex in a D neighborhood that cash flowed really well but was too much of a headache and too much stress for me.  I dumped it before I could break even on it--and couldn't be happier.

It seems nearly every podcast Brandon mentions this one particular property that he is underwater on, doesn't cash flow at the minimum of 1% of the cost, and has problem tenants.  Should he sell it?

Problem properties are not worth the hassle to me.  I'd rather cut my loses, count them the cost of education, and move on.  How about you?

@Larry T.

 I hear you on that! We are looking to sell one of our properties that is too far away, to maintain properly. I am also thinking of selling our property in the 19th ward as I would like to just purchase in the suburbs. We have had the same tenants and although they are a pain, I would like to still eventually sell. This house has been our worst nightmare and a money pit, but now is cash flowing with not much of a problem. We would still walk away with a loss on this one with what we put into versus sale price. Although, I sometimes feel all our properties are problem properties, at times. The one we live in, in Charlotte is fine and we cash flow well with our East Irondequoit property, despite some hiccups with inherited tenants that had to go and infested the house with every rodent you could think of. I wish I would have found this site prior to purchasing the properties we have now. 

Jerry Padilla, Lender in NY (#NMLS 1084877)
585-204-6923
Originally posted by @Larry T. :

Brandon Turner asked a question about what "problem properties" would you never want to buy, here.

Yet many of us HAVE bought what turned out to be problem properties.  I bought a duplex in a D neighborhood that cash flowed really well but was too much of a headache and too much stress for me.  I dumped it before I could break even on it--and couldn't be happier.

It seems nearly every podcast Brandon mentions this one particular property that he is underwater on, doesn't cash flow at the minimum of 1% of the cost, and has problem tenants.  Should he sell it?

Problem properties are not worth the hassle to me.  I'd rather cut my loses, count them the cost of education, and move on.  How about you?

 Larry,

I would think it would be based on a few different factors, mostly what your RE investment objectives and style are. For example if you are completely hands off investing, hiring a PM, and renting out the properties, I would think it wouldn't make a whole lot of sense to sell a property that's underwater. That of course assumes a few things like, the rent is covering expenses, the neighborhood isn't rapidly deteriorating, basically you believe things aren't in permanent decline. To an investor like that, a good return is worth annoying tenants because the investor pays someone to handle the tenants. On the other hand if you manage your own properties having to deal with an under-performing property as well as the headaches of maintaining the property, it would be very frustrating. By the same token, a lot of landlords who manage their own properties would chose a stable tenant, who pays on time, and is planning on staying long term, where the passive investor is much more likely to seek better returns. 

I guess my point is, it's easy to say you would sell your "problem property", maybe the question should be what constitutes a problem property (threshold for selling) to you?

Adam

Originally posted by :

 I wish I would have found this site prior to purchasing the properties we have now. 

I feel like I have bought a lot of properties wrong.  I've still managed to do okay, but if I had to do it all over again I would do it differently.  And I'll be making smarter decisions going forward.

@Adam Hershman I sold a rehab I was upside down on.  Ran into some big troubles and went way over budget.  I could have kept it as a rental, but I would have had to leave a big chunk of funds into it and I figured I could do better things with those funds.

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