Fountain, Colorado Rental, Keep or Sell

[Kevin K.]

I have a rental that I purchased in 2007 without knowing what I was doing.   I purchased close to the top of the market, with a no interest loan, thinking I would do a rent-to-own in a year or two and make a quick profit.  After multiple bad tenets and vacancies I looked to another local investor for help and we did a Lease purchase where he took over the property management, and gets a cut if he can do a rent-to-own, and I get out of it.  2009.  I also refinanced around then and got out of the no-interest loan.  Since working with the investor my headaches have gone away, I get about $100 cash flow after I pay the monthly mortgage, and 10% fee to the investor, but that doesn't cover a big ticket disaster that is probably looming on the horizon.

The market has heated up in Denver which is bleeding down to Castle Rock, Colorado Springs and Fountain.  I have no real exit strategy except to not lose money, but I feel like I am a step away from pouring more money into this property. 

Options: 

I can just let this other investor continue to manage it and then get 3% of the sales price if he can swing the rent to own.

I can get out of the lease option and find a property manager.

I sell the property.. I just have to give 60 days notice and then fix it up.

I purchased it for 160000 (2007)

Appraised at 207000 (2007)

Current value about 185000, but would need carpet and paint at a minimum.

I owe 160000

Home built in 2002, no improvements

Close to Army Post (Ft. Carson) that could be impacted by BRAC

Opinions?

[Brad Starling]

The way I see it, you have lots of options.

1. If it's really worth 185k after some cosmetic upgrades, list for 170k "as-is". Break even and chalk it up as a learning lesson.

2. Put 5-10k into it for the upgrades, and sell for 185k, make a little profit.

3. Keep doing what your doing, positive cashflow is better than negative, and look into a home warranty and good insurance, cheap compared to the expense of a new furnace/roof/etc...

4. Refi? If you're last was in 2009, rates have dropped considerably, and you might be able to squeeze more cashflow that way, making keeping it more worthwhile.

Sounds to me like you're certainly not in a bad situation, but not the greatest. If your only true concern (you said the investor took away the headaches) is a major expense, insure against that, as we should against all major expenses. Then, look for ways to increase rents or decrease expenses. Maybe you can find a management company to take over for 8%. Refinance. Increase rents. Have you had a Realtor or appraiser look at comps (I happen to know a few)?

I'm sure there's more ideas out there, others will chime in. Good luck!