My wife and I purchased a single family (manufactured)home on 30 acres in 2007 for $300,000 with $60,000 down as our primary residence. We lived in it for 3 years until I made an offer on a short sale property that my wife loved. Long story short, I kept the old house and decided to rent it because I had some attachment to it and misjudged the future market. The rent has gone from $1,700/mo to the current $1,100/mo.
Estimated Market Value = $260,000
Current Loan Balance = $208,000
Current Rent = $1,100
Yearly NOI = ~ $6,000 (Rent - PITI )
Current Mort Pay (PMT)= $1521.00
Yearly Net = - $5,150 (negative cash flow per year)
Now – I’ve been fairly lucky in damages – BUT I haven’t been budgeting for major replacement expenses such as a roof, carpeting, appliances, HVAC, etc. I plan on doing any and all repairs/maint. myself.
OPTION 1 – Refi if possibile – Currently at 6% - But my wife says that since it’s not our primary residence, and it’s a manufactured home, we’ll be unable to do so.
OPTION 2 - Put on market and hopefully sell at market value = $260,000 (minus commission and mortgage, and closing costs). Walk away with approx. $35,000 – Losing about $25,000 of our original down payment.
Anybody see an Option 3?
I’d probably have to put ~$5,000 into the house to “clean” it up for salable condition. Also, this type of property will take some time to sell I’d assume, so carrying that mortgage for up to 6 months is not optimal.
We have other properties(commercial) as well as a business (car wash) that remain positive cash flowing/profitable.
With that kind of negative cash flow, Id probably sell. Im shocked to see the rent drop so drastically too.
Can't advise on your particular market but if the property is stagnant then the question is would you buy that property again today if you could, if you answer yes then you might want to hold. If you wouldn't then sell it and recover whatever costs you can.
Sounds like you holding based on appreciation so you have to analyze the direction of your local market and see if it's worth holding on to.
Also, agree that's a huge drop in rental amount... Can you make some cheap improvements to justify raising the rent a little?
Also, can you make any use of the 30 acres that would prove profitable while you hold onto the property (if you decide to wait out your market)? The same way an owner of a small SFH might rent out a storage unit maybe you can provide something on the 30 acres that might be mutually beneficial to you and someone else.
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