When to get out/ move on on a property?

Question

Hey all!

I'm now 1 1/2 years in on my first out of state rental property, a duplex, in Davenport, Iowa. It's in a rough part of town, ~C neighborhood, with a nice & reliable section-8 tenant family, with the other unit recently vacant via an eviction–costing a few thousands in turn over repairs. The property cashflows nicely, and has grown some equity. I want to build a long term rental MFR portfolio–not necessarily in Davenport.

Based on this info, my goals, me being new to this, and the numbers here on my deal:     https://dealcheck.io/s/-MmV1dHjb59npcOnRFJV     what would some of you do? Keep as a long-term rental, or 1031 into a nicer market?

Bud Gaffney · Answer

DO NOT SELL! Borrow against. Buy more. Get really rich.

Nathan Gesner · Answer

I don't recommend selling real estate unless you have a plan to invest the money in something that will produce a better return or otherwise move you closer to your goals.

What are your goals? How will you invest the money to get closer to them? So many questions!

Kyle Dorn · Answer

Just seeing this post now. I invest in Davenport Iowa also. Send me a message and we can connect. I’ll see if I can help

Quaid Cde Baca · Answer

I owe $71K P&I, and with a new tenant in place, it could be worth $123-135K. The numbers are good, but the PM and lack of communication is killing me–having trouble finding any good ones in the area.

As it does have great numbers for a long-term hold– I'd like to stabilize it, forget it, and move on to a better market.

Michael Junior · Answer

Yeah sell it and scale up, comps that you provided on the report look good. You'll turn a nice little profit to roll into the next one if it sells anywhere near those guys.

Nic S. · Answer

@Quaid Cde Baca I had this EXACT scenario happen to me in KCMO. I bought two duplexes in a C hood because they cash flowed well on paper.

Evictions, late rent, sob stories, turnovers, lawsuits it became too much to deal with OOS. I 1031’d into a much better hood and so thankful I did. C class tenants C class problems. It won’t stop. Cut your losses and think long term. You want to be in better hoods

Michael Smythe · Answer

Before making a decision to sell, you should figure out where you can invest and sales proceeds and get a higher return.

Alex Hileman · Answer

Evictions happen everywhere, even in class A neighborhoods. I recommend having a higher security deposit and getting proof of income of 3 times the rent. It's not a guarantee that they won't be evicted, but at least you'll have more money on hand for repairs.

Alex Bock · Answer

I agree with this. To add to it, there are a ton of people looking for homes in the QC right now. It may be time to have a look at your property management and / or strategy.

Dave Foster · Answer

@Quaid Cde Baca, does it really cash flow nicely after figuring in the eviction expense (and subsequent vacancy)?  If so then that property is hard to beat.  But if adding those in as real expenses makes your cash flow look anemic then it is time to 1031 into an area, and class of property you like better.

When to get out/ move on on a property?

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