JV partner wants out, Please advise

[dobiso]

Hi,

We have a duplex in Red Deer with 3 bedrooms up and undeveloped basement. My partner wants to sell the property. I want to keep it. Please advise us of some options. Here are the details:

3 Bedroom, 1.5 bath Duplex in Red Deer, Basement undeveloped

Market Value = $225,000 (according to appraiser)
Mortgage Bal = $170,000

Monthly Expense = $ 1100 (mortgage + tax, tenant pays the rest)
Income = $ 950 (rent)

We have a 50%/50% ownership with this. I can come out positive cashflow if I raise the rent or develop a basement suite. I can also buy out my partner. However, I don`t really have the cash to do that right now.

What options do you see in my deal ?
Is it a good hold property for me ?
Should I sell ? at this buyers market ?

Please advise.

Dexter
Fork in the road to Belize

 

[UTCVenturesLtd]

QUOTE (dobiso @ May 2 2008, 12:17 PM) Hi,

We have a duplex in Red Deer with 3 bedrooms up and undeveloped basement. My partner wants to sell the property. I want to keep it. Please advise us of some options. Here are the details:

3 Bedroom, 1.5 bath Duplex in Red Deer, Basement undeveloped

Market Value = $225,000 (according to appraiser)
Mortgage Bal = $170,000

Monthly Expense = $ 1100 (mortgage + tax, tenant pays the rest)
Income = $ 950 (rent)

We have a 50%/50% ownership with this. I can come out positive cashflow if I raise the rent or develop a basement suite. I can also buy out my partner. However, I don`t really have the cash to do that right now.

What options do you see in my deal ?
Is it a good hold property for me ?
Should I sell ? at this buyers market ?

Please advise.

Dexter
Fork in the road to Belize

I see your JV looking at the equity and the $150 mo. negative cash flow and wanting to cash in on the spread between the current market value and the mortgage. Basically take the money and run! It is a quick exit strategy and you will have a successful completed joint venture project behind you at that point.

You can always advertise for a JV partner to replace your current one, but you would have to get positive cash flow one way or another to attract one. Also, with negative cash flow, any repairs needed would be added to the pile.

If you try and raise the rent, you will risk having your renters moving out. It all depends on what the other rents are like in the area. Renters understand that a landlords costs do go up and you might be able to get away with a one time large jump in rent if the area rents can justify it.
If you add the development, you will need more $$ to do it, and where will you find the money? If you do develop, that should easily bring you into positive cash flow.

 

[JRL]

If it`s losing money for you every month, I certainly wouldn`t call it a good hold!

 

[dobiso]

QUOTE (UTCVenturesLtd @ May 2 2008, 01:17 PM) I see your JV looking at the equity and the $150 mo. negative cash flow and wanting to cash in on the spread between the current market value and the mortgage. Basically take the money and run! It is a quick exit strategy and you will have a successful completed joint venture project behind you at that point.

You can always advertise for a JV partner to replace your current one, but you would have to get positive cash flow one way or another to attract one. Also, with negative cash flow, any repairs needed would be added to the pile.

If you try and raise the rent, you will risk having your renters moving out. It all depends on what the other rents are like in the area. Renters understand that a landlords costs do go up and you might be able to get away with a one time large jump in rent if the area rents can justify it.
If you add the development, you will need more $$ to do it, and where will you find the money? If you do develop, that should easily bring you into positive cash flow.

Thanks so much for the GREAT advice. This is a negative cashflow property. I will charge this to experience.

 

[dobiso]

QUOTE (JRL @ May 2 2008, 01:34 PM) If it`s losing money for you every month, I certainly wouldn`t call it a good hold!


Thanks for the response.