Problem Property

[JBagorio]

Hi Folks I need some advice:

I have a very small single dwelling home that`s been a problem property since day one. It is located in an older neighborhood at the NE side of Edmonton. With this older house, we have done some look and feel renovation inside with no structural changes last year, but still having issue getting it rented.

Part of the problem is it only has 2 small rooms with no closets. There is no basement but a crawl space that looks like a scary dungeon, and a nonfunctioning double garage that could only be used as a storage space. We tried to rent the house ($850) separate from the garage ($150) to maximize the property and we have been getting calls, but after seeing the place they are turned off due to the items I have mentioned above.

I have mixed ideas for this property:


[list type=decimal][*]Do some fixing (like getting the garage functional) and sell as is.Fix the immediate issues like the bedroom and closets (if possible) and a functioning double car garage, and rent it out.[/list type=decimal]I hope someone can shine some light on this issue. I don’t want to make a decision based solely on emotions.

 

[invst4profit]

Depending on how much the place is worth I would buy inexpensive stand alone closets (CT, or Home Depot), do minimum necessary to make garage usable, lower the rent to get someone in and once rented sell the place. Tell the potential new owners they can increase income by renting the garage seperatly.
I would not keep the property as this will probably be an ongiong problem that you are better to be out from under.
A new owner may have better skills or abilities to resolve future issues.

 

[JRL]

I would say that it depends on the mortgage that you have. If your mortgage is small, you could reduce rents to the point where you`d at least get tenants in place and have a modest PCF every month. What would $1,000/mo of revenue (as you`ve budgeted, with the garage included) end you up with on a cashflow measure?

If you could structure it in any way to avoid listing it for sale right now, IE even ending up break-even, that`s the option I`d lean towards. Isn`t there a pretty significant buyer`s market in Edmonton?

 

[Nir]

Hi Jason,

I am not from the area but strongly recommend you also consider the vacancy rate in the specific neighborhood your property is located. If it`s higher than 5% I`d feel more comfortable recommending you sell (depending on other factors as well..). If you are sure vacancy rate is below 5% then don`t sell as there are only 3 options:

- You`re trying to charge above area average rent, or/and
- By coincidence your apartment is one of the 5% that are vacant (or whatever the vacancy rate is) , or/and
- Apartment condition is below average for the area - the minor renovations mentioned above might help (this by itself is not a reason to sell).

Cheers,
Neil

 

[RedlineBrett]

If renters are turned off what`s to say buyers would be any different?

If the property isn`t functional you will have to put $ in to make it workable regardless of your intentions.

You can either do that or keep cutting the price/rent rate until you get someone interested.


QUOTE (investmart @ Mar 26 2008, 04:21 PM) Hi Jason,

I am not from the area but strongly recommend you also consider the vacancy rate in the specific neighborhood your property is located. If it`s higher than 5% I`d feel more comfortable recommending you sell (depending on other factors as well..). If you are sure vacancy rate is below 5% then don`t sell as there are only 3 options:

- You`re trying to charge above area average rent, or/and
- By coincidence your apartment is one of the 5% that are vacant (or whatever the vacancy rate is) , or/and
- Apartment condition is below average for the area - the minor renovations mentioned above might help (this by itself is not a reason to sell).

Cheers,
Neil

 

[Thomas Beyer]

where in NE Edmonton ?

NE has some BAD BAD pockets with LITTLE UPSIDE (say 2-5 years) .. but also some nicer neighborhoods ..

if it is a pain and/or negative cash-flow: sell it .. if you can manage / live with the pain: keep it and rent IF in an area with upside and IF at least break even cash-flow !!

 

[JBagorio]

QUOTE (thomasbeyer2000 @ Mar 26 2008, 11:44 PM) where in NE Edmonton ?

NE has some BAD BAD pockets with LITTLE UPSIDE (say 2-5 years) .. but also some nicer neighborhoods ..

if it is a pain and/or negative cash-flow: sell it .. if you can manage / live with the pain: keep it and rent IF in an area with upside and IF at least break even cash-flow !!

Hi Thomas,

The house is located in Newton.

The neighborhood is not all that bad:


May be if I could fix part of the issue I could make it cash flow. As it is I am currently in a negative.

Jason