Need advice on duplex as new investors

[Shane Baker]

My partner and I purchased a duplex in August. We are now trying to get it rented out after rehab. Unfortunately we are about $40,000 over budget. The rents will not pay us back in the next 12 years. Yes we financed the rehab as it was our first purchase.  We are looking for some creative ways to make this work before we sell at a loss.  Any ideas?

[Steve Vaughan]

Quote from @Shane Baker:

My partner and I purchased a duplex in August. We are now trying to get it rented out after rehab. Unfortunately we are about $40,000 over budget. The rents will not pay us back in the next 12 years. Yes we financed the rehab as it was our first purchase.  We are looking for some creative ways to make this work before we sell at a loss.  Any ideas?

 Define partner.    Unrelated investor?  SO? What were they expecting in the endeavor? 

[Charles Carillo]

@Shane Baker

I would rent it out and try to cashflow. Maybe in a few years you can sell it (possibly to a renter without paying an agent's commission). If you are not able to cashflow; I would probably just try to sell it.

[Nathan Gesner]

Quote from @Shane Baker:

My partner and I purchased a duplex in August. We are now trying to get it rented out after rehab. Unfortunately we are about $40,000 over budget. The rents will not pay us back in the next 12 years. Yes we financed the rehab as it was our first purchase.  We are looking for some creative ways to make this work before we sell at a loss.  Any ideas?

We need hard numbers to be sure, but I suspect your best option is to sell it and take the loss. If it's a negative cashflow and you keep it as a rental, things could get worse with a few bad renters over the next 10 years and put you even further in the hole, not to mention the stress it will cause during that time. Sometimes it's best to admit a failure, accept the loss, and then regroup to try again.

[Eliott Elias]

How much of a loss are you taking if you sell? What will it appraise for right now? Will it cash flow if you cash out refi? Pull the money out and keep some equity in there instead of selling for a loss

[Bob Stevens]

Quote from @Shane Baker:

My partner and I purchased a duplex in August. We are now trying to get it rented out after rehab. Unfortunately we are about $40,000 over budget. The rents will not pay us back in the next 12 years. Yes we financed the rehab as it was our first purchase.  We are looking for some creative ways to make this work before we sell at a loss.  Any ideas?

40k over budget is a big mistake, (assuming it was a 50- 100k budget) If it's worth more than you paid, sell it If just a little less also sell it, 12 years to break even, it will be more like 15 18, as you will have vacancies and repairs. Dump it take the hit and move on, Lesson learned 

Good luck  

[Shane Baker]

Thanks everyone. Selling  is pretty much what we are looking at doing. We definitely learned a ton on this one ad won't be making those mistakes agai or at least try not to. 
 

[Conner Olsen]

Quote from @Shane Baker:

Thanks everyone. Selling  is pretty much what we are looking at doing. We definitely learned a ton on this one ad won't be making those mistakes agai or at least try not to. 
 

 Thank you for being honest and talking about your mistakes! Real estate investing is difficult and not every deal works out, but you'll be successful over many deals and multiple decades. I would love to hear some of your lessons learned.

[Benjamin Aaker]

Selling at a loss is not a terrible thing as you have learned something. Would you care to tell us some of the mistakes you learned from?
Another option would be to split the duplex, condo it off, and sell one condo or both.