Gut or sell my SFR that has constant maintenance issues?
Hi BP,
I need your advice on whether I should get rid of my problematic out of state SFR rental property or take a loan to gut it.
It's a 120-year old 4br 1ba SFR in a not-so-good part of Allentown, PA - very typical to the area. We bought it in May 2019 for $66k. The tenant pays $900/month and all utilities, my PITI is $517/month, I pay 10% to the management company to collect rent, do quarterly inspections, repairs, and evictions if need be. A generous cash flow of $290/month IF it weren't for something constantly breaking.
We bought it in May 2019 with bad tenants. The eviction took (all in all) about two months + a 3wk bed bug treatment $900). I had to put around $5k in junk removal and repairs (wall, gutters, electrical, stove...), while also putting a lot of sweat into it myself (cleaning, painting, caulking, minor repairs I knew how to do). We got a good tenant by mid-October. My cash flow has been murdered by repairs that keep adding up. The latest quarterly inspection showed
- sewage leak in basement
- door and window issues
- toilet sinking into the floor
- weak spot in the roof (leakage)
Estimated repairs possibly in the thousands (waiting for a quote). The problems seem never to stop. I’m already losing my sleep over this house. My wife doesn’t even want to hear about it anymore.
Now, what would you do? In my mind, my options are:
- sell asap and let someone else deal with the issues. Realtor says I’d get max $75k.
- take a loan, put some $30k into renovations and charge higher rent (max $1200 in this market)
- fix for some $30k and flip, which (per my local realtor) is not an option in this market
It's important to note that SFR is not a strategy I want to stick with. Owning +100 SFRs sounds like a nightmare to me. I want to move into multifamily investing. So from the strategy POV there's no point in me keeping this property. I never expected to make money off of it (certainly not get rich, obviously), but I also don't want to lose any. The main point for me with buying this property was to take the first step into REI, to take action, to pull the trigger, and to learn - the whole journey with this house has been a phenomenal learning experience (albeit painful). I guess the main reasons I'd want to keep the house are 1) ego - to be able to say "I own a rental property" and 2) hope for things to magically turn around and one day sell for profit (gambling...)
What would you do in my shoes?