So you’ve purchased an investment property, and it isn’t going as hot as you had imagined. No matter the reason we know the temptation to jump ship can be immense, but hold tight. Just like any major decision in your life you should be weighing the pros and cons – things may not be as bad as they appear. Try asking yourself these questions:
How long have you owned the property? A rule of thumb we live by is keeping a property for at least 12 months. You’ll get an accurate idea of just how well, or poorly the unit is doing within this time frame; so don’t get caught up in the first three months of performance. Instead, monitor things like maintenance orders, slow pays, evictions, tenant complaints etc. The more data you collect, the more informed your decision will be.
Are you losing money? Here’s a legitimate scenario: Every few months a tenant complains about a new maintenance issue. While the complaints are legit, instead of budgeting for repairs you fix the problems with high-end materials, or you hire a contractor to make the repairs. You don’t have to sacrifice quality, but these expenses can add up quickly – so set a budget! For each of our 500 units, Monument sets aside $75/month. If you are losing money in these categories “Save your money for your next home or to spend after downsizing. – Kent Clothier, Real EstateWorldwide”
How quickly are you evicting tenants? Honestly, this questions ties back into losing money. Court fees, attorney fees, the cost of re-advertising, and the potential time your unit sits vacant…Evictions cost money! When at all possible evaluate if it may be worth the additional effort to negotiate an ONE TIME ONLY payment arrangement for the tenant to stay in the property. Don’t make this a habit, but delay evictions if possible. Make sense? Okay, let’s move down the checklist.
Is your unit priced appropriately? Like all investors, you’re purchasing property expecting a gain…just make sure it’s reasonable. If you didn’t have a chance to research the units surrounding the community, knows the time to do it. Investigate what houses/apartments are renting for on your block and the next couple over. If you’ve purchased a home in a community like Slavic village, don’t expect your unit to fill quickly priced at $800 when most other properties are leasing around $550. It’s coming…but not yet. Pull comps or “comparables” if needed to compare your home’s value to others in the neighborhood.
The point is not to let your emotions get involved in your decision making. If you’ve collected evidence that you’re losing money despite making the minor adjustments we’ve recommended over the course of 12 months then its likely time to liquidate the property. If you see a glimmer of hope, don’t be shy to ask for help. Monument Real Estate Services offers property management options for investors across northeast Ohio. We’re the #investorsbroker. Visit https://www.monumentmgt.com/management-services/ or call 216.916.0486 to discuss your options!