What would you do if you had this property?

Question

Hey Everyone!

My wife and I are attempting to sell our home that has been a cash flow machine but has had quite a lot of capex and other issues over the last few years.

This property has been a great house hack for us and we have lived for free here however we are moving. It's a pretty high end home for the area but is having trouble selling due to a few design choices of the previous owner as well as I think the age of the home might be turning people off.

Specs and strategies we use: It has a main home, above garage apartment and an ADU in the back yard. We MTR the apartment and STR the ADU. Both bring in exceptional cash flow. We are confident we can MTR the main home as well however after all expenses we will be bringing in around $600 a month in cash flow after accounting for capex, maint, vacancy.

We have been hit with multiple major roof repairs in the last two months because of spring storms and are faced with having to replace our main houses roof as well.

So here's my question: Would you rather fix the issues and continue using the strategies above and wait a few more years to sell, or would you still fix the issues(because you have to, sell ? We are anticipating walking with between $15,000- $30,000 after all taxes and fees.

Thanks in advance and I will do my best to respond to everyone!

Theresa Harris · Answer

If you don't want the headaches, then sell it.  For the roof, I'd fix it and sell it.  If you are having problems getting it to sell, a new roof can be used as a marketing tool.  Many buyers won't have the cash to do a roof replacement up front.  Also use the mortgage helpers (ie ADU) as a marketing tool.

Also think about capital gains, if you sell it now, you won't have to pay those; but sell it in 5 years and you will.

Repairs seem to all happen at the same time and then nothing for a while.  I've had two hot water tanks (different rentals), most appliances (another rental) and a tree removal (another rental) all within the last year.  Just one of those things (or so I tell myself).

Jaycee Greene · Answer

Hey @Grant Med, welcome to the BP Forum! Is the $600/mo ATCF on just the MTR for the main home or both the ADU and MTR combined? Also, what's the value of the total property and how much debt you have on it? This is important as $600/mo on a $200k home is much different than on a $500k home. Lastly, is the main home located in a sought-after school district?

Austin Moore · Answer

This sounds very cliche and simple, but if the numbers make sense to keep the property then I would do everything in your power to keep it. I have a couple properties that have had years where they are extremely costly and everything has gone wrong that can go wrong. This is all personal preference on my part though.. I just hate letting real estate go. However, if you can sell it and utilize the proceeds from the sale to buy a personal property for yourselves or a better rental then I absolutely understand that as well! Best of luck!

Grant Med · Answer

Thanks for the reply Austin!

I would prefer to not real estate go as well. I know over the long term things usually work out well. It's tough because this city is more or less losing population and has insurance out here has almost doubled in the last three years. With the money we've saved from house hacking and from the sale(hopefully happens) we are in a pretty good position to use these funds to buy in a market with more upside.

We definitely are torn. That's solid cashflow for us, but in the sale wed make 5 years worth of cash flow and the headaches go away.

Alan Asriants · Answer

Walking away with 15-30k might not do it for me, however I don't fully understand what issues you've been having.

If the property has been built after 1970-80+ then what are really your issues? Windows, roof, HVAC, water heater?

That being said if this is a 100+ year old home and no one has done a full gut rehab in the past 30 years or less, then I can see this being an absolute money pit - plaster walls, century old electric and plumbing, etc. If this is the case take the 15-30k and use it for something better.

Need to fully understand the story to point in the best direction

Grant Med · Answer

@Theresa Harris solid points for sure.

We definitely are fixing these issues because we know many buyers couldn't even with a credit.

We have marketed the income producers that the MTR and STR provide but it seems most people don't want that or don't really understand how powerful these can be for them.

You hit the nail on the head with repairs haha. Our first year here every major system of the property broke but the last two years have been easy but now all the roofs are going out.

Thanks for the advice!

Jaycee Greene · Answer

@Grant Med If you believe the area/neighborhood are in decline AND you're only getting $600/mo for all 3 units, then I'd go with @Theresa Harris' advice! Good luck.

Grant Med · Answer

Hey @Jaycee Greene

Thank you!

The cash flow is after and is for the two MTRs and the ADU/STR: all income and all expenses. So PITI, Landscaping, pool service, cleaning fees for the STR, utilities because they are included for the two MTRs and the STR.

Now the property was purchased for $482,000 and we have it listed at $560,000. Pretty solid appreciation but the list price is definitely on the high end for this area. The school districts are not that great where we are. The area is desirable but sadly crime and population decline is happening here.

What would you do if you had this property?

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