Interested in getting some opinions on what I should do with one of my poor performing rentals. I do have a couple of good rentals that meet the 1% rule, but I've also got this one bad rental that I kick myself every year for it. What would Mustachians do in my shoes?
Background:
Single Family Home - Las Vegas, NV
Loan Balance: $240k
Home Value: $180k
Monthly Rent: $1000
Monthly Mortgage: $1425 (adjustable rate, principal & interest)
Monthly HOA Fees: $75
The obvious bad: home is underwater and rent is way below monthly expenses.
Even worse: The HOA is run by crazies and rules are even crazier. Every dead plant must be replaced, tiniest sprout of weeds must be removed, driveway must be clear of oil stains or tire marks, backyard must be kept & landscaped, heck even satellite dish wires must be painted the same color as the house. If the violations are not corrected, the HOA fines are $75 per week! At $350/month, it adds up fast!
I've owned the home for 9 years and am burnt out managing it from out of town. This was my worst investment in life -- I was young/dumb and just getting started in real estate at the time. I know some of you will recommend getting a good property manager, but the cashflow is so negative that I just can't afford it.
I've had mixed luck with tenants. Some were good and always paid rent on time. Others were horrible, and I've had to evict a couple and clean up after their mess & repair damages. When the house turns, it's usually 3-5 months of vacancy until the next tenant is located. I do use professional tenant locators, but that has also been a mixed experience (4 different ones).
Since it is underwater, selling would probably involve a short sale scenario. I've considered it for a while now, but didn't want to ruin my credit (700-800 scores) because I need access to capital/financing/refinancing for my other investments, properties and my personal home. Nevada is also a full recourse state, and this particular lender (known to be aggressive debt collector) could pursue deficiencies since I have other assets they could go after including savings & other properties.
On the other hand, being cashflow negative to the tune of $500/month is painful....and that's when I have a tenant in place. Also, dealing with the HOA has been a nightmare. If I crack down on the tenants and force them to fix the HOA violations (weeds, dead plants, etc), some tenants just break the lease and vacate, leaving me with 3-5 months of vacancy. The lesser pain has been to fix the HOA violations myself by paying a contractor $200-$300 every 4-6 months (vs risking 3-5 months of vacancy).
What would you do in my shoes? Bite the bullet and get rid of the property via short sale? Or ride it out and continue to pay down the loan (by ~$7k/year in principal), with the hope that I can breakeven eventually if property values rise (in 3-5 years)?