Investor · Woodland Hills, UT · Member since 2016 · 84 posts · 31 votes
I have done 5 deals in the last 5 years and it has been a home run every time except for my first out of state property.
I purchased a property through a "wholesaler" in AZ. The property looked great but I clearly did not do enough due diligence on the project. I have had the property for 2.5 years and the value has not gone up.
Here are the details of the property:
Purchase Price in Nov 2013: $131k
Current Rent: $845/mo
I pay 8% for property management
Zillow zestament: $131k
Trulia estimate: $139k
I make a little money every month (pretty much a wash) but I am mostly looking on advice if I should just try to cash out (hopefully 20k after realtor fees) and roll that into a better producing property.
If this was your property, what would you do?
NOTE: I just signed a 1 year lease in Feb with a tenant
Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
10y
@Nik Krohn, unless there's good chance of strong appreciation, what are you waiting for? Sell! You're not "breaking even," you're losing money. You could be putting that $20k towards another investment. An index fund would be yielding $1400/year (~7%) a good REI maybe $3-4k.
Investor · Woodland Hills, UT · Member since 2016 · 84 posts · 31 votes
10y
All,
We have decided to sell. We are going to try selling while the tenant is still in the property. If we struggle to sell it this way, we may be able to work with the existing tenants to move out so we can sell it as a vacant property to move it quicker.
Ill be able to get the down back and transfer it to another property. Thank you all for the advise. I am glad that I could find validation through experienced people on this great network!
Real Estate Broker · Silverdale, WA · Member since 2013 · 40 posts · 6 votes
10y
@Nik Krohn Maricopa is saturated. There are also certain 'hoods that are much more challenging than others in Maricopa. Please tell me you are not in Maricopa Meadows! My investors that buy there are typically flippers. It is also a risky market to be in, should the market tank overnight.
To sell quickly in Maricopa, it is best to either have a property that is a shining jewel that really stands out with modern finishes and can compete with the new builds, or a dirt cheap dog to sell to flippers.....Otherwise you will be swimming in a sea of mediocre homes. Remember, Your primary target market in that area are vacation home buyers and first time homebuyers....and in that area some prison but lots of casino employees. There are vacation home buyers who would like to buy now even though they don't plan to use the home much for a few years, so having a tenant in place may be attractive to them. They are likely to pay fair market value for the home and not expect a strong return on rents. Unfortunately, with the tenant in place, selling to an owner occupied buyer is not an option unless you offer your tenant a cash incentive to break the lease. Talk to the tenant about buying first, however, and let him know you would be willing to help pay his closing costs at a fair price. There are low down payment/zero down programs available. My experience with first time buyers is that most are cash strapped, so the less out of pocket they need to move in to your home the more appealing it will be. Offering a fully landscaped back yard, a one year home warranty & a full suite of shiny stainless appliances plus washer & dryer included help attract first time buyers tremendously. Perhaps there are some other minor things that could be done to increase the ARV and make it 'pop' so that you can sell at max value? Painting cabinets white, adding a backsplash, granite ctops, etc. I call it getting your home HGTV ready ;-)
Let me know if you need a full market analysis based on different scenarios.
Queen Creek, AZ · Member since 2014 · 2k+ posts · 1k+ votes
10y
Why note sell it to the tenant? If they done have credit sell to them with a delayed close 2-3 years, then create an occupy before close agreement that gives them access. Since your closing date will be in the future you can increase your sale price to account for appreciation. create the agreement where you carry a second so that if property prices don't go up as planned you don't have problems with the appraisal.
Under this scenario you get:
A higher sale price today
2 years of Payments for a total of 20-30k
hopefully reduce RE fees since you should not have to pay a buyers agent.
A lot of PM's are realtors so you can probably cut a flat rate deal with the PM to handle the paperwork. My wife does flat rate deals occasionally when people are just looking to make sure the paper is signed in all the right places.
Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
10y
Nik, I had an almost identical experience as yours. I had a track record investing with very good returns locally, got arrogant and thought I had this RE figured out, then invested in Phoenix from out of state, and got my A#$ handed to me ... After minimal cash flow on quality properties that were about 2% rule when I bought them (2010) and should have gushed cash flow, burning through 5 property managers in 5 years, I sold. Still had a nice gain due to when I bought. If they are not performing as expected and you can't fix the issue (likely PMs) from out of state, then it is time to sell. It is not you or the market, it is that the odds are stacked against you investing out of state. You aren't the first one to have this issue, and you won't be the last. Sell and consider it a learning experience.