What to do with a Class C/D property?

Question

Hello All,

I could really use some guidance on what to do with one of my rental properties. We currently own a 2/1 (built-in 2004) in an area of Wilmington that is less than desirable. There has been gang activity and even a few shootings over the last few years, not to mention (as you would guess) the quality of tenants is less than desireable. I'm not opposed to holding on to it, however our current tenant is moving out on Jan 31st and we are questioning whether we should sell it or cater more to section 8. Another pitfall is, there is a street memorial for someone who died right next to our property, clearly that won't bode well for getting it rented or sold! Any thoughts on what to do would be much appreciated!

Jaron Walling · Answer

@Joe Kelly Real estate investing is a numbers game, not an emotional pursuit. What are the numbers telling you? What's the ROI? How much has the property appreciated? How much debt is on the property?

Stick to your strategy and keep moving forward. Given the current housing market selling is probably the best option but I haven't seen the numbers.

John Underwood · Answer

Sounds like a perfect section 8. Maybe plant a thick bush on your side of the memorial.

I love Section 8. I just added another one last week. Mine are not in war zones and I have the option of renting for a good amount to a regular tenant.

Brian Garlington · Answer

@Joe Kelly   Put a Section 8 tenant in there and keep it moving.

Joe Kelly · Answer

Definitely not attached to this property emotionally :) Comps in the area are going for 140k -160k. I paid 129k. Exact replica of my house, 8 houses down went for 155K in Sept 2020. Rented for $895 (however my original numbers were based on $1095), set on market unrented for a few months, so lowered to that number. Have about 40k in equity, little or no deferred maintenance (new roof 2018, new appliances 2019, new HVAC 2020, new WH 2019, again built in 2004). ROI is about 4%.

John Hinnant · Answer

@Joe Kelly as I understand, Section 8 in Wilmington, NC is getting up to $1,150 per month for 2 bedroom homes. If I were you, I’d contact the section 8 folks now to schedule a walkthrough and know what you’ll need to do to qualify. I know an investor with several Section 8 rentals in the downtown area. I’m happy to make a connection for information purposes. If you still want to get rid of it, let me know. I’ll take a look at it

Mark Cruse · Answer

Just sounds like a personal choice to me. From what you posted it sounds doable. Four percent is ok and eventually there will be appreciation with higher rent. If it´s not presenting you a problem then what is the problem? It all boils down to what you want. Do you need that cash from the equity? Do you feel you can invest in something else that you want? Are you tired of dealing with it? For me, my entire portfolio is C/D aside from my vacation rental. Eventually I may start selling some off because I would like to have A/B. In the mean time it´s no problem though.

Lam N. · Answer

Exactly what Jaron said.  You need to stop thinking about this in an emotional sense.  What do the numbers tell you?

What to do with a Class C/D property?

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