When a rental starts to feel like more work than it’s worth

Question

I’ve definitely felt this myself lately - as a landlord and from some of my clients' feedback.

It’s not like a property just stops working overnight. It’s more like it creeps up on you -

Usually it’s little things stacking up:

• insurance going up
• utilities going up 
• taxes creeping up
• more maintenance than you expected 
• that one terrible tenant move out experience...
• rents not really keeping up

Individually, whatever. Together, you start to notice it.

And I think this is where it gets a little misleading…
a lot of us still look at: rent – mortgage = “cash flow”. It may still have a big tax benefit but that’s not really the full picture when you factor in vacancy, bigger repairs, and just the time it takes to deal with everything. There’s also the part people don’t really talk about - the mental load. At some point it may shift from “this is a good investment” to “this is kind of a lot to keep up with.”

I see it a lot with properties that have appreciated too. Nothing’s wrong with them… but they’re not exactly performing either.
And they just kind of stay in the portfolio because they’ve always been there.

So I guess what I keep coming back to is— when do you ride it out, and when do you let it go?

Anyone else feeling this and contemplating options?

G. Brian Davis · Answer

I've noticed that investors often ask whether a property is cash flowing, but not whether it's earning its place in the portfolio. If a property has appreciated significantly, has a lot of trapped equity, requires constant attention, and isn't producing much return anymore, I think it's fair to ask whether that capital could work harder somewhere else.

Not saying the answer is always to sell, but I do think it's a healthy question to revisit every few years instead of keeping a property simply because you've owned it for a long time.

Denise Supplee · Answer

A property rarely goes from a great investment to a bad investment overnight. It's usually exactly what you described, a lot of little things that slowly chip away at the returns and enjoyment of owning it.

One question I like to ask is: "If I didn't already own this property, would I buy it today at its current value?" Sometimes the answer is yes. Sometimes it's a clear no. For me, that's often a good signal that it's time to take a fresh look at whether the property still fits my goals.

Alicia Sierra · Answer

The discussion does not assume self-management. A manager does not always alleviate the issues - managers typically require management, review, etc. Also, expenses are expenses.

Often, they start out one way, and things deteriorate when they grow to quickly and give attention to the bigger players first.

Seph Hancock · Answer

I think a lot of investors eventually reach this point, especially if they’ve owned a property for several years. One thing I’ve learned is that a property can be a “good asset” and still not be the best use of your equity.

Seph Hancock · Answer

I think many investors eventually reach this point, especially after holding properties for several years. For me, the question isn’t whether a property is becoming more work it’s whether the returns still justify the work, risk, and equity tied up in it.

Chris Seveney · Answer

How you manage your property and time are the factor. First I always recommend a property manager. Let them deal with 90% of the stuff, and the other is keep your units in good condition and have the pm spend the time to vet the tenants. Lastly a good lease goes a long way, such as lawncare, utilities etc. who is paying for those? We have tenants pay for those items and have a PM so its rare we ever hear from them

Alicia Sierra · Answer

I have clients with management in place - but the pop up issues / expense come up  (such is life) and they start to weigh cutting their losses.  I think patience is key and just like any portfolio, some investments do better than others.

Sara Liskey · Answer

@G. Brian Davis agreed!

Drew Sygit · Answer

Why not hire a PMC to avoid the majority of headaches?

When a rental starts to feel like more work than it’s worth

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