Sell or Renovate First time Out of state RE investment Debacle

[Akscal]

I bought an out of state (Indianapolis, IN) 3 bedroom 2 bath property that was supposed to be renovated for an all in price of $65.5 K 1 year ago. It was tenant occupied for a few months then the property management company went out of business without warning. I have since enlisted another company who helped me remove my previous tenant because they weren't paying, and it turns out that the property was never renovated and needs approximately 25K in repairs, more likely 30K to bring it up to rentable standards. Initially, I have made the decision to sell the property as is (likely at a 35K loss), and it has been on the market for ~ 2 months. I am thinking that if it doesn't sell by the end of spring I will renovate it and attempt to get a tenant. It should rent for $950 with property taxes of 1,100 every 6 months with PM fees of 10%.  I initially bought this property to create an alternative investment to the stock market to provide cash flow with the hopes to scale up if successful. Other that the above my financial picture is good, no debt with investments in 401k, Roth and taxable accct. I can carry this house by paying the property taxes without a problem, its just painful especially with this being my first attempt at real estate investing.

My question is what would you do in this situation? Thanks.

[waltworks]

So:
$185/mo in taxes
~$100/mo insurance?
~$100/mo vacancy
$100 property management
~$200 capex/maintenance

So we're talking in the ballpark of $250/mo of cash flow, right?

Since at this point you are "buying" it for $35k and forgoing $35k of sale proceeds if you choose to keep it, it seems reasonable. Sunk costs, and all. $70k in to generate $3000/year of cash flow is pretty bad but it's not a money loser.

But it's a *tiny* cashflow in the grand scheme of things - the kind of property that only makes sense if you have 30 of them or something. If you want to keep trying, you could hold onto it.

But I'd sell it and call it a learning experience, personally.

-W

[tralfamadorian]

I agree with walt's numbers except I would call the invested amount $65k. $35k the OP would get to sell it plus $30k in renovations. That's a 4.6% return on what I presume is a turnkey that you are not near enough to visit occasionally or want to. I would sell it and chalk it up as a lesson.

Was the turnkey company the GC and the property manager? Are you trying to get some of your funds back regarding the fraudulent renovations?

[sammybiker]

@Akscal   I would really make the decision now:  do you want to buy more?

If no, sell it and move on. If yes, then continue with your plan.

Have you flown out to visit the property?  If not, why not buy a plane ticket and go check it out?  I would also connect with some local Indy investors on BP and have a couple of them go check your property out and put together their estimate for fixing it up.

$30k is a lot for a renovation.  You need rent ready not flip ready.

[Akscal]

Thanks for all the replies. I am going to stick with trying to sell the property.
@waltworks those numbers make sense, I will chalk it up to a lesson learned and move on
@tralfamadorian the "turnkey" company was separate from the GC and property manager, although they all worked together and promised a seamless transition, but it turned out that they did nothing and defrauded a lot of people by saying properties were rented when they weren't and not renovating properties. A lot of other people were left out in the cold by these companies but I am not going to try to get any funds back because two of the companies disappeared
@sammybiker I wanted to buy more properties but after this experience I am going to stick with the stock market and index funds, I wanted to have a more tangible investment asset, but I think if I do real estate again it will be after a lot more research and be local. I haven't flown out to the property and likely wont. I connected with some people on BP that is how I connected with my current property management company

[sammybiker]

Fair enough, best of luck with your sale @Akscal