Cost premium on selling rental occupied

[Alyssa Campbell]

I own a townhome in Portland, Oregon that has a legal ADU so I it has two separate tenants. I've talked to a couple of professionals and I've gotten different answers on what the cost premium is when selling occupied versus not occupied. My husband and I are both busy and not looking to have to help the tenant in unit a navigate her move and then schedule a fresh coat of paint and possibly update the carpets and all the little things that need to happen for listing. That said, we're busy but not desperate so we're not going to sale to a wholesaler who will give us 60% what it's worth. Ballpark what percentage would you expect an occupied rental to fetch below market? For additional context, both tenants are up-to-date on rent and at or near market rate.

[Amber Clark]

Hi Alyssa, I have been specializing in tenant occupied real estate in the Portland Metro area for 10 years. When I come across a property like yours I always like to ask what is your timeline expectation for selling the property first? If you're not in a rush - I'd recommend listing just under market value and test it out. Subject to interior inspection. I agree with Jason - there has to be enough skin in the game to bait an investor - BUT also remember that depreciation provides a paper loss that shelters rental income from taxes, boosting after-tax cash flow. There are investors looking, right now, to buy depreciated (under market rent) properties before the end of the year. If the investor uses a cost segregation study, they can accelerate depreciation (especially under current bonus depreciation rules), creating big upfront tax write-offs. This is especially powerful if the investor has other passive or active real estate income to offset. And, there are also new investors or multigenerational families looking to get into the market by househacking a property just like yours, using conventional loans to owner occupy and rent out the ADU.