First investment problems - LTR

[Matthew Hermenau]

Hello BP forum!!

I'm a new investor and recently purchased an out of state property (3 bed/2 bath) in Cleveland, OH. After finishing up my deal I'm finding it very difficult to fix a few city violations at a reasonable cost and with contractor shortages leaving overpriced quotes from handymen. You must fix all violations before being able to rent. I also inherited a 30 yr old furnace and 12 yr old water heater which will probably need replacing but otherwise no other major cap exp. My loan is a 7.5% 7-1 ARM.

At first my COC was 5-7% but now it's looking like maybe 1-3% and the monthly rent will just pay off all the expenses leaving minimal cash flow ($50-100/month)

At this point I’m wondering if I should just 

1.) Wait a few years, rent and refinance to cash flow more leaving money in the property.

OR 

2.) Fix up any city violations and try to sell it (likely taking a slight loss). Wiping my hands from this deal. I am worried about this market we’re entering into as a seller and if it will burn me with less people purchasing homes. 

Thank you so much in advance! 

[Shane Kelly]

Purchasing OOS as a brand new investor is not an easy task. Especially if you don't have a strong team in place in that market and it sounds like that might be the case here. In the future, you might want a different agent to give you more knowledge of what you're getting into. However that's not what you were asking for today. In the present, some conditions matter that would change my answer for sell or hold. For example, if this house is in a B- or higher neighborhood, then it might be worth it to just hold the house as it could appreciate or rent prices could go up. If it's not in a B- or greater neighborhood, the idea to get rid of it could result in taking an even bigger loss. Fortunately for you, I'm really not seeing the market slow down here that much, especially for investment property, so you might end up breaking even or better if you're lucky. Either way, sounds like a pain in the rear end. If there's anything else I can help with, please shoot me a message and I'll try to do what I can. Best of luck!