Sorry for the long post! I would really appreciate input from people more experienced than myself. RE investing is a very part time thing for me, and I have only been doing it since 2010. The property is a 12plex of 1 bedroom units, 8 of which were built in 1928 and 4 added in the 60's. lower 8 units were remodeled at that time. The apartments are charming with high ceilings and large windows, but rather small at 600 sq ft. It caters to low income or retired people mostly--many long term tenants. There are not many options in the area for low rent units such as these and the apartments are always rented. It is in a nicer bedroom community with mostly SFH's around. I use a property manager so it does not take much of my time. The market for multiunits in my area is tight...prices have risen over the past few years and there is very little inventory. I am trying to decide if I should cash out, remodel it, or keep it as is. After all expenses including mortgage payments and property management, the property cash flowed 40k over the past year. It has separate electric meters so tenants pay own electric, but I pay everything else. Recently had submeters installed on boiler heat and am now charging tenants a portion of the gas bill starting this month, which can reach 1k in coldest months. I don't rely on the income from the property right now, since I work full time and have a good income. I would like to transition to part time within 10 years or so (I am in my late 30's with a bunch of kids and expenses) and will use income from this (if I keep it) and a couple other properties I own at that time.
options:
sell:
pros: cash out making ~50k, thinking about investing equity in larger (mostly financed) commercial property with lower return but more equity building potential
cons: finding new investment property, probably lower initial return on commercial property, no personal experience with commercial
remodel:
pros: peace of mind with new electric, lower heating costs with improved insulation and modern heating, more bills in tenants' names, increased equity, greater pride of ownership?
cons: expensive, newer similar size apartments don't fetch more than 650/mo in this area--limited financial benefit?, huge hassle, kicking out tenants, etc.
keep as is:
pros: decent 10% cash on cash return, low hassle
cons: expensive utilities paid partly by me--what if prices go up?, will eventually need remodeling?=$$, not building much equity, high income taxes on cash flow
Market Value: 580k
Original Purchase price: 505k
Original Mortgage Amount: 105k
Interest Rate: 5
Mortgage Term: 30 yr fixed (private loan)
Term remaining: 29
Amount remaining on mortgage: 103k
Gross Rents: 6400/mo
Principal and Interest (the P&I of your PITI - should match with the above info): 563/mo
Taxes and Insurance (the T&I of your PITI): 7260/yr
HOA costs: none
Deferred maintenance notes: older building with excellent (brick) structure and exterior, old wiring, central heat/boiler that I pay for, plaster/adobe interior walls in good shape but poorly insulated, most units in decent shape but older fixtures.
Anything else special or unique in regards to the numbers of the property (not the property itself; things such as city assessments, back taxes, special costs due to unique features of the property, etc. etc.): none