Property Value is higher than rent cash flow.

9 Replies

Hello BP,

Haven't been here in awhile and need to ask a question. We purchased our first triplex back in 2012 and at the price we bought it for we could live in one unit and make a decent cash flow off of the other 2 units. 

Now we are looking to sell and our property has doubled up in value. The problem is that now the rents won't cover the property value mortgage payments.

We have thought of redeveloping the property to make it a single family with a guest house but don't have the funds to do so. So we are going to list it.

Any advice on how we should proceed would be greatly appreciated!!

I get it. Took me a minute since your existing mortgage pmts have nothing to do with FMV. You're worried it won't cashflow for the new buyer since it 'doubled up' in value? I would list it/ put it up for sale at a realistic price and see what happens. There are motivated buyers in every market. If you find no buyers, only then would I consider the massive project of changing it to a SFH. Pls keep us posted @Gulfield Jones !

Originally posted by @Gulfield Jones :

Hello BP,

Haven't been here in awhile and need to ask a question. We purchased our first triplex back in 2012 and at the price we bought it for we could live in one unit and make a decent cash flow off of the other 2 units. 

Now we are looking to sell and our property has doubled up in value. The problem is that now the rents won't cover the property value mortgage payments.

We have thought of redeveloping the property to make it a single family with a guest house but don't have the funds to do so. So we are going to list it.

Any advice on how we should proceed would be greatly appreciated!!

 If the market says the value has doubled why are you arguing with the market?  Geez.

I would list it at FMV, whether it cash flows or not. Leave it up to the market to determine- I have passed on many multifamily properties that were priced too high to cash flow, but they still sold. Not everyone is looking for cash flow, some are still out there willing to buy with negative cash flow and banking on appreciation.

You can sell it to me at an 8 cap then :) 

I either think you should list it and see what you get

or

Maybe its time you raised the rent. 

Also, are you counting the rent you are paying yourself in there too?

Why sell it at all? Why not rent all of the units, continue to generate good cash flow, and continue to realize appreciation. Pull some equity out of the house for your next purchase.

Hello

Back in 1994 I bought a triplex for $110K in North Park San Diego that the bank had repo at $220k. I thought how can anyone make money at $220K. That triplex sells for $550K right now and twenty years form now someone will say remember when you could buy a triplex for just 500K. By the way I still have that triplex which rented for $400 a unit in 1994 and now rents for $1250 a unit. Keep the property if you can.

Thank You

Tommy

Originally posted by @Tommy Sowell :

Hello

Back in 1994 I bought a triplex for $110K in North Park San Diego that the bank had repo at $220k. I thought how can anyone make money at $220K. That triplex sells for $550K right now and twenty years form now someone will say remember when you could buy a triplex for just 500K. By the way I still have that triplex which rented for $400 a unit in 1994 and now rents for $1250 a unit. Keep the property if you can.

Thank You

Tommy

 A triplex in north park for 550k is a steal!