Selling 4 Family Rental Property

[Rosalie DiPietro]

I'm going to be listing a four family rental property for my dad. It's a property that I've managed for the past 13 years. The property is in a trust (I am one of three trustees with my brothers) and we'll be doing a 1031 exchange into a DST.

Property is located in the Bensonhurst section of Brooklyn NY 11214. The primary buyers in this area are currently Asian who come in and gut renovate, installing separate, tenant-paid, heat and hot water.

Question: There are currently three remaining tenants. All four apts need renovation and the remaining tenants pay below market rents.

Should I try to sell the property with the current tenants or should I ask the tenants to leave (I'll need to give two tenants up to 90 days to leave and one tenant up to 30 days, as per NYC law) and then list the building as empty and ready for renovations and new, market rate tenants?

Thanks for your input!

[Abel Curiel]

Quote from @Rosalie DiPietro:

I'm going to be listing a four family rental property for my dad. It's a property that I've managed for the past 13 years. The property is in a trust (I am one of three trustees with my brothers) and we'll be doing a 1031 exchange into a DST.

Property is located in the Bensonhurst section of Brooklyn NY 11214. The primary buyers in this area are currently Asian who come in and gut renovate, installing separate, tenant-paid, heat and hot water.

Question: There are currently three remaining tenants. All four apts need renovation and the remaining tenants pay below market rents.

Should I try to sell the property with the current tenants or should I ask the tenants to leave (I'll need to give two tenants up to 90 days to leave and one tenant up to 30 days, as per NYC law) and then list the building as empty and ready for renovations and new, market rate tenants?

Thanks for your input!

Hello Rosalie,

Short answer: Yes, sell the property vacant.

Having the property vacant will make showings easier and attract more buyers in the first 30 days. This will also lead to faster offers. The best and highest-value deals are typically negotiated within the first month of the listing being on the market.

Furthermore, multifamily offers with full vacancy contingencies tend to be on the higher end, whereas investors/buyers who will take a property as-is (with tenants) offer at a steep discount. We just listed a Brooklyn multifamily where investors who offered to buy as-is with full occupancy offered 20% below the asking price, while other investors who want the property vacant have offered well above the asking price.

If you anticipate receiving finance offers from buyers, you can give your 90-day notice now OR when you list the property online. Median Days on Market for small multi-family buildings in Bensonhurst is about 30 days before a listing goes into contract. It will likely take about 45-60 days to close after contract.

If you anticipate an all-cash buyer, I'd give the 90-day notice before listing. About 1/3 of recent multifamily closings in Bensonhurst were cash deals.

All the best!

Abel