Is this propery a dog?

Question

Hi. I am trying to determine if I should sell this property and purchase a multi unit- so what would you do?

I purchased this property in late 2005 and weathered the recession living in it. I was one of those people that had a pulse and they gave me a home for a notorious mortgage that split into an 80/20. I have been renting it out for a few years and refinanced 3 yrs ago for lower interest rate of about 4.2% and to pay it off quicker by shortening the life of the loan.

This is a single family home located in SE Aurora (outside of Denver). 4 Bdrm/3bath. I now have approx. $200k in equity. The home is 15 years old (built 2005).

I have 12 years remaining to pay this off. The rent covers the mortgage and some of the insurance. The issue is that with each year, costs go up (insurance/HOA/repairs) and I can't ever seem to make any money from it even if I increase the rent. Right now it costs me about $4,000 per year to keep and it has not appreciated as much as properties in Denver because there continue to be new builds in the area and so there are options for buyers.

Should I sell and invest in another state? Thinking Washington state.

Thanks!

Christina Z. · Answer

Thank you everyone. I wonder if I can unload this in 2020, given that people may not be shopping right now because of the virus. On the upside, interest rates are ultra low... so I have to admit I am tempted to refinance this house now from 4% to whatever the market rate is in March 2020.

James Carlson · Answer

@Christina Z.

It sounds like you're going to have a nice chunk of change when you sell. That's great! Congratulations! I'd consider re-allocating that capital. If you were making a little cash on it each month, I'd say keep it, because Denver's not likely to go anywhere soon with appreciation. But $4,000 is nothing to sneeze at.

So then the answer is whether to stay in Colorado or go out-of-state. There's no right answer here. Really, it depends on how you want to do this. Denver, for instance, has seen an average of 6% annual home price increases since 1975. That's a lot of appreciation to potentially gain if you stay in Denver area and can find a cash-flowing property. (You might also consider Colorado Springs as you can get in a bit cheaper and the same upward trajectory is seen there.)

Out of state you're going to get better cash flow but you won't see much appreciation compared to this state. It's just a matter of what's most important to you and how much work you want to do from a distance.

I wish you luck!

Theresa Harris · Answer

You've had it 15 years and now have equity.  I would start looking elsewhere and see what your money can do for you, then make the decision.

Craig Curelop · Answer

@Christina Z. - I would definitely consider selling that property. If it doesn't cash flow and is not appreciating then how is it benefitting you? Unless it's an emotional thing and we all know never to invest with emotions.

I would definitely recommend selling. However, before going out of state... there are plenty of properties that cash flow nicely that are also poised for appreciation in the Denver market. I think you can look in your own back yard and pick a few up there before immediately jumping to out of state investing.

I would just recommend areas that are not in Southeast Aurora. Aurora near Anschutz hospital is great... Arvada, Westminster, and Thornton are all on the rise. Same as the rest of metro Denver. If you're in the Denver area and want to chat more about potential options... I am always happy to help! Shoot me a DM and we can go from there :).

Thomas Cummings · Answer

Doesn’t sound like the math is working, especially if you are realizing the crazy awesome capital gains the rest of the Denver metro has experienced.

Time to get out.

Nashville is where I’m looking.

Bjorn Ahlblad · Answer

@Christina Z. It is indeed a dog and you should sell ASAP! I don't know that Wa is best the place, the prices here are very high. Whatever market you choose find a property that has more doors and especially something that can be rehabbed and improved for more rent per unit. All the best!

Joe Villeneuve · Answer

Don't stand near any fire hydrants near the property.  "Bow-WOW"