C-Level Property with Trouble Tenants but Great Returns, Next Steps?
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votesEverything in your Cons tells you to sell. Funny, everything in your Pros does too.
Pros
- That's over $1200/year in savings (if you get your rent). Keep this in mind when you read the following...
- Whenever you use a word like "if" in your argument to keep a property, you are actually making a statement to sell it.
- 60-90% appreciation is your property losing money by the bucket(s). Appreciation is a great thing. It's one of the goals of REI. However, the role of equity is to buy the property. In other words, the cost of your property is what you have in equity, and the value of the property is the actual property value.
Do the math. Compare these to options (the ones you have presented here), with these money results for both:
1 - If you keep the property, and gain $1200/year from months savings
- Equity
- Property Value
- Cash Flow/year
2 - If you sold the property, and gain and took the now liquid equity and use it as a DP (20%) on another property,...or properties
- Total Equity
- Total Property Value
- Total Cash Flow/year
...and your final answer is?
9 Replies
- 3yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
Everything in your Cons tells you to sell. Funny, everything in your Pros does too.
Pros
- That's over $1200/year in savings (if you get your rent). Keep this in mind when you read the following...
- Whenever you use a word like "if" in your argument to keep a property, you are actually making a statement to sell it.
- 60-90% appreciation is your property losing money by the bucket(s). Appreciation is a great thing. It's one of the goals of REI. However, the role of equity is to buy the property. In other words, the cost of your property is what you have in equity, and the value of the property is the actual property value.Do the math. Compare these to options (the ones you have presented here), with these money results for both:
1 - If you keep the property, and gain $1200/year from months savings
- Equity
- Property Value
- Cash Flow/year2 - If you sold the property, and gain and took the now liquid equity and use it as a DP (20%) on another property,...or properties
- Total Equity
- Total Property Value
- Total Cash Flow/year...and your final answer is?
- 3yVlad B.Member since 2019 · 90 posts · 56 votesOPSell, thanks for validating what I was leaning towards.
Quote from @Joe Villeneuve:
Everything in your Cons tells you to sell. Funny, everything in your Pros does too.
Pros
- That's over $1200/year in savings (if you get your rent). Keep this in mind when you read the following...
- Whenever you use a word like "if" in your argument to keep a property, you are actually making a statement to sell it.
- 60-90% appreciation is your property losing money by the bucket(s). Appreciation is a great thing. It's one of the goals of REI. However, the role of equity is to buy the property. In other words, the cost of your property is what you have in equity, and the value of the property is the actual property value.Do the math. Compare these to options (the ones you have presented here), with these money results for both:
1 - If you keep the property, and gain $1200/year from months savings
- Equity
- Property Value
- Cash Flow/year2 - If you sold the property, and gain and took the now liquid equity and use it as a DP (20%) on another property,...or properties
- Total Equity
- Total Property Value
- Total Cash Flow/year...and your final answer is?
- Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes3yAloha,
Does the PM company also handle Sales? If so, are they well compartmentalized, or is the person managing your property the one that recommends to sell it? I ask simply because it really just sounds like the screening and management of the tenants may be the bigger issue. Increase your site security through fencing/driveway gates, exterior lighting, remote access surveillance system, high security key/fob access control. How is your curb appeal? Common area appearances? Laundry area? What are the individual units like? Clean, fully functional, attractive elements, secure? You can still get lower income people in bad areas, but you need to attract the very best to YOUR units. If you offer the same as the competition, with ceilings, walls, and trim all one color; missing or torn screens and cracked or broken windows; non-functioning doors, windows, drawers, and other elements; very insecure; roach infested and just looking run down, you will get the same kind of tenants. - 3yVlad B.Member since 2019 · 90 posts · 56 votesOPThe PM does do sales but I have my own realtor. The outside of the unit is good, inside was refurbished in 2020 with new appliances, water heaters and HVAC.
Quote from @Richard F.:
Aloha,
Does the PM company also handle Sales? If so, are they well compartmentalized, or is the person managing your property the one that recommends to sell it? I ask simply because it really just sounds like the screening and management of the tenants may be the bigger issue. Increase your site security through fencing/driveway gates, exterior lighting, remote access surveillance system, high security key/fob access control. How is your curb appeal? Common area appearances? Laundry area? What are the individual units like? Clean, fully functional, attractive elements, secure? You can still get lower income people in bad areas, but you need to attract the very best to YOUR units. If you offer the same as the competition, with ceilings, walls, and trim all one color; missing or torn screens and cracked or broken windows; non-functioning doors, windows, drawers, and other elements; very insecure; roach infested and just looking run down, you will get the same kind of tenants.
The area was improving and is an opportunity zone with the state investing in the area. I’m OOS so I can’t speak to exactly what has happened. All I know is I have other investments in KCMO and it’s not like this. - Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes3y
Is the same PM handling your other properties? Were the tenants inherited or did that PM select them? Low inventory should indicate higher rent, quicker turnaround, all else being equal. I would still look hard at security, as that is #1 for Good tenants in any neighborhood.
- 3yVlad B.Member since 2019 · 90 posts · 56 votesOP
Quote from @Richard F.:
Is the same PM handling your other properties? Were the tenants inherited or did that PM select them? Low inventory should indicate higher rent, quicker turnaround, all else being equal. I would still look hard at security, as that is #1 for Good tenants in any neighborhood.
@Richard F. absolutely, right after eviction happens and locks changed.
New PM is better but dealing with previous PM’s bad decisions. It was my fault for not checking who was being placed. Hard lesson learned.
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes3y
If your PM recommends selling, then that's sound advice. They don't want to deal with all the problems and you shouldn't, either.
The DIY Landlord Book4.7248 Reviews - 3yVlad B.Member since 2019 · 90 posts · 56 votesOP
Quote from @Nathan Gesner:
If your PM recommends selling, then that's sound advice. They don't want to deal with all the problems and you shouldn't, either.
Exactly my sentiment, I just wanted the voice of the community to confirm.
- Member since 2018 · 3 posts · 1 vote3y
We would be happy to take a look at it as an outside PM company and see if we can help with any holes in the PM, staffing, strategy, etc. if you decide to keep it!
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