Hi All, I'm in desperate need of a financial wellness checkup for my rental property. I bought this approximately 10 years ago and have been relatively hands-off with the help of a management company. Recent events have caused me to look more closely at the numbers as I think I need to decide to sell or hold. At the time I felt like the numbers made sense, but I could use the opinion of people who actually know what they're doing.
Quick summary, I bought a quadplex a while ago for $240k. 25% down, mortgage rate around 6.8% for a non-occupied property. I refinanced a few years later after the recession down to about 5.5%. PITI seems to come out to around $1450/mo. At the time the rents for the 4 units ranged from $500 to $550/mo. I was able to get those up to $600 and even one to $675 within a couple of years. Approximately 1% rule worthy, but not great. I tried managing it myself but a few seriously challenging tenants forced me to hire a management company at 10%. They were great in that they sorted out the legal crap very quickly and got things back on track.
A couple of years after we bought it we put in a good chunk of change (~$20k?) to fix it up a bit (and fix some necessary issues). This brought rents up to approximately $700 where they've stayed for a while now. It's in a decent neighborhood near a university. Our units are 2 bedroom and have a nice floor plan, which is a bit of an exception in the area. Right now comparable 1 bedrooms are going for $600/mo and 2 bedrooms are around $800/mo so I 'should' be able to get rents at that level moving forward (maybe even $850-$900 if we keep the units in good shape). In general things have been good but not great, average vacancies with a few issues (eviction or two) over the past 10 or so years.
Now I've run into a bit of a problem. Two units are empty and they're not filling. I walked through the units and they are in very bad shape. Need new floors (was laminate hardwood) and potentially some other work (kitchen cabinets, leaky tub). The roof is leaking and my manager has quotes for $9k (or maybe $15k to fix a hidden structural issue and bring it up to code). My property manager is estimating $8k for each units' repair.
I'm pretty torn on a number of issues. I really do like the property and want to keep it if it makes sense. I have a majority of my investments in my 401k and like the slight diversification this property gives me. I don't need a great return, but I'd like to at least not lose money on it.
On the other hand, I'm not sure if I should keep it if I'm not able to give it the attention it needs. My property manager has a large portfolio and only pays attention if I bug her. She has staff for maintenance and upkeep. Lately I've been wondering if I should trust her as I fear she may be over-charging me for her estimates. She procured the 3 roofing quotes herself (though they seem reasonable). Her quotes of $8k per unit for renovations seem high, but I could just be paranoid. They do need a lot of work. We get monthly statements from the management team with itemized receipts for all work orders, so it's not like they're operating behind a veil. When I talk to her about the property it's clear she knows the business very well and I value that expertise.
At this point I don't even know what questions to ask. If, and if is an important word here, if I can get the rents up close to $900 in the next few years and keep it mostly occupied, I think that would be good enough? But that may be too optimistic? What if Ican only maintain $800 or even $700? I should probably try and refinance again... and I'm not quite sure what I could sell the place for, I'd guess a bit over $300k? I asked my manager what she thinks it would sell for but she didn't respond yet. It's not in her interest for me to sell so I think I should at least check in with some agents. And, even if I did want to sell, I'd need to fix the roof and repair the floors in the empty units.
So, can anyone help me make a decision? Or at least help me ask the right questions to get the numbers I need to make an informed choice? I'll try and answer any questions to the best of my ability!