Poor cash flowing House: List it, Keep Renting It, or AirBnB It?

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Poor cash flowing House: List it, Keep Renting It, or AirBnB It?

Corey Schaecher
Rental Property Investor · Saint Louis, MO · Member since 2016 · 50 posts · 30 votes
Alright BP Community, I need some advice here. I have to make a decision soon on a poorly cash-flowing house that was our first rental out of necessity because my wife bought it in 2006 with 0% down (ugh). My tenants just moved out, do I keep renting, sell it and find a replacement property, or turn it into an AirBNB. The house is a cute 3 bed, 2 bath in a convenient area that's very popular with post-college aged folks, in the Dogtown area of St. Louis. An agent very well versed in the area said it should sell pretty quickly for 160-165k. The current financials for the place look like this - spoiler alert, it doesn't satisfy the 1% rule: Purchase Price in 2006: $165K Current Loan Payoff: $138,500 (0% down after all) Rental Since: 2009 Current Monthly Mortgage (taxes, insurance, and PMI [ugh] included: $1228 Current Monthly rent: $1400 Vacancy has never been more than 3 weeks, and that's just because of slow turnaround time by me, popular spot. I'd have to stage the house for sale ($1500) and do repairs of about $750 The roof was put on when the house was renovated in 2006. The furnace and water heater are old, and an inspector will probably say i need to replace a retaining wall that's leaning slightly toward the bordering neighbor's house (they have to split the cost under state laws) and fix a few other things the flippers did hastily in 2006. I need to make a decision ASAP because I either need to get it listed or get tenants in there by July 1, 2016. HELP!
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  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    9y

    So you didn't put any of your cash into the deal (0% down).  That means you have nothing at risk.  That's a good, check that, that's a great thing...so why the "uggh"?

    If you don't like the numbers, get rid of it.  The only thing you have at risk by keeping a negative cash flow property is adding to the cumulative negative CF by keeping the house...that means the risk is you.

    If you like the CF when it is rented, and "Vacancy has never been more than 3 weeks, and that's just because of slow turnaround time by me,...", then get off the "you know what" and rent it.  Again, the only risk is here is you.

    If you don't have the time, energy, knowledge, resources, etc... to fill the "easy" vacancy, you need a Property Manager.  If the property cash flow can't afford one, get rid of the property.

    It's not about how cool the property is based on if you would live there, it's about  how cool the numbers are ($$$$) because you are "not" living there.

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  • Corey Schaecher
    OP
    Rental Property Investor · Saint Louis, MO · Member since 2016 · 50 posts · 30 votes
    9y
    I appreciate the thoughts and input, all good. But I may not have emphasized the right points in my question. It's not that I don't have the time, energy, resources, desire, etc. or that the property is "cool," it's not. And no, I don't want to live there. Hence the rental. My question and the real issue that I'm looking at is the opportunity cost of the money, time, and effort of that house vs another house that might have better cash flow, chance of appreciation, and more $ going to equity each month. There's also the whole cap-ex issue, which is why I mentioned the roof, wall, furnace, and water heater. So, the inquiry is more on the numbers and others experience with this type of situation. Do I cash out the few bucks we can from mortgage pay-down or continue to let this one chug along at a lower rate. Again, if I didn't have the time, energy, resources, or whatever else, I wouldn't have my other rentals or considering trying to trade this one in for a better deal. And it's also not a matter of sitting on my you know what and getting it ready and rented, its making a decision on hold or sell, which is why i need to make the decision quickly to avoid any unnecessary vacancy. I don't want to accept applications and then tell them I decided to sell the house. I'm fine with my turnaround time as well, life's busy, I'm not watching the grass grow while the house sits empty losing me money. The "ugh" was because you'll recall that 2006 was not a great time be a buyer, that is how we ended up with a house that was bought at the top of the market with no equity to pull out or offset any loss in a sale, so we broke even and eventually made some money as a rental. If I bought in 2010 with 0%, I suspect I'd be cash flowing much better and wouldn't be asking this. I could be wrong.
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