Selling a duplex with settling/sloping

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Selling a duplex with settling/sloping

Jeremy Barth
Investor · Minneapolis, MN · Member since 2016 · 11 posts · 5 votes

I'm attempting to sell a duplex that has some significant settling/sloping.  The property is sound, but it's very noticeable and is scaring off buyers.  Any advice?

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John Woodrich
Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes
9y

What do you mean by very noticeable?  I didn't notice any cracking in your stucco or any issues from the photos but I suppose they were taken to avoid any issues.

As far as price goes - are you still getting showings?  If you aren't getting showings that could be a sign that you are priced too high.  Looking at the Zillow listing it has only been listed for 9 days???  You may be jumping the gun on getting concerned.

Ever consider removing the Ivy?

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  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    9y

    Are you very competitively priced? I think that would scare off people who are inexperienced.

    Mine slopes too but I had an inspector tell me it was fine. 

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  • John Woodrich
    Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    What do you mean by very noticeable?  I didn't notice any cracking in your stucco or any issues from the photos but I suppose they were taken to avoid any issues.

    As far as price goes - are you still getting showings?  If you aren't getting showings that could be a sign that you are priced too high.  Looking at the Zillow listing it has only been listed for 9 days???  You may be jumping the gun on getting concerned.

    Ever consider removing the Ivy?

    1Reply
  • John Woodrich
    Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    Not sure what rent is but OUCH on the $6500 property taxes....  

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  • Oscar Brooks
    Minneapolis, MN · Member since 2016 · 62 posts · 29 votes
    9y

    Your photos look fantastic, it's a beautiful building. I bought my owner occupied Minneapolis duplex in June and as an first-time buyer significant sloping was definitely one thing that changed my opinion on some properties. The main reason is contractors I've talked to say there is no cost effective way to fix it so you basically have to be OK with uneven floors. As an owner occupied buyer that was one thing I understood is hard to avoid in Minneapolis (100% of the places I looked at had some level of settling), but also something I was looking to minimize. If you are priced right an investor likely won't care, but you may lose some of the OO market if folks have specific criteria like I did.

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  • Bruce Runn
    Investor · Minneapolis, MN · Member since 2014 · 743 posts · 927 votes
    9y

    @John Woodrich

    I don't own a duplex or triplex with taxes less than $6500!   Its just indicative of the value and that you have to get superior rents to compensate.  Just part of the formula.

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  • Bruce Runn
    Investor · Minneapolis, MN · Member since 2014 · 743 posts · 927 votes
    9y

    The pictures look great!  What rents do you get a month?  It's really about the equation of income/expense that matters to investors. 

    I just put a duplex up for sale today in Minneapolis so I'm anxious to see what happens for me.  I'm guessing mine will most likely go to owner occupy which is what you seem to be targeting too.

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  • John Woodrich
    Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes
    9y
    Originally posted by @Bruce Runn:

    @John Woodrich

    I don't own a duplex or triplex with taxes less than $6500!   Its just indicative of the value and that you have to get superior rents to compensate.  Just part of the formula.

    $6500 per month on a duplex is over $500 a month of your rent geared towards property taxes...  I am not sure what rents are in the area but that could be a huge deal breaker for cash flow.  Regarding the property that this post was about - Zillow shows listings for $1350 and $1150 per month.  I can't see how the cash flow would work at these prices.  Seems that single family outside of the city would generate higher rents and less taxes.

    Everyone selling a 2-4 unit property is looking for an owner occupant - they are always willing and able to spend more than an investor.  It is easier for an owner occupant to get in with a lower down payment and their goals are typically based on covering most if not all of their mortgage payment.  You are selling your duplex because you think you have a better use of funds at that price - most true investors will likely think the same.

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  • Bruce Runn
    Investor · Minneapolis, MN · Member since 2014 · 743 posts · 927 votes
    9y

    I thought you'd laugh at my comment since you're a CPA and I assume see lots of investment property tax returns with huge variances in taxes paid. The property I'm selling is at $450,000 but get $3700/month in rent/income with some upside if self managed so it spins off over $1,000/month in free cash flow and 11% cash on cash return and 19% ROI if principal pay down is calculated.

    This one with my pro forma calculations has a $200/ month cash flow so I can see why it's may have a tougher time moving.  It's also on the wrong side of 35W for higher rents.

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  • John Woodrich
    Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    Yea, I see quite a bit of variances, I believe all of the duplexes my clients have in both of your price ranges are owned by owner occupants.  Many of these people people are happy that they can just cover their payment, or most of it.  Like you I self manage but I build the property manager into the equation when I buy as I may be fighting that when I sell.

    Your gross rents look good, I am always trying to hedge risk so I have been working primarily on single family properties for the last 5 years or so.  I am however working  now on a deal for an unlisted 4 plex....  Our niche has been on the renovation side, the cash flow game is being built back into our business.

    1Reply
  • Kevin Anderson
    Commercial Real Estate Broker · Minneapolis, MN · Member since 2016 · 7 posts · 7 votes
    9y

    Bruce - this is a good looking Duplex, love the potential of the Whittier neighborhood. You seem quite savvy so I'm curious how this would return for an owner-occupant like myself using FHA.

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  • Jeremy Barth
    OP
    Investor · Minneapolis, MN · Member since 2016 · 11 posts · 5 votes
    9y

    @Bruce Runn Thanks Bruce. We're getting 1350 for the upper unit. We vacated the lower unit but would get more for that one. Probably 2700-2800 total for a non-OO.

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  • Bruce Runn
    Investor · Minneapolis, MN · Member since 2014 · 743 posts · 927 votes
    9y

    @Jeremy Barth

    I based my calculations at $2700/month for your property.  As I said, it looks great.  Most of my friends/people I know that own/buy multi family properties  strictly run off cash flow and unfortunately, I couldn't figure out how to make your place work financially.  I'm glad to send you what I use for a template but with putting 20% down, the mortgage is $1418 and total expenses based on my experience would be $2500-$2600/month so $100-$200/month cash flow and that's without using a property management company as that would put it as a negative cash flow.    As John said, your best hope is finding a potential owner/occupied situation where they are just looking for someone to help cover the rent.  

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  • Bruce Runn
    Investor · Minneapolis, MN · Member since 2014 · 743 posts · 927 votes
    9y

    @Kevin Anderson

    You know the maximum FHA loan is $425,425 on a duplex so you'd need at least $25,000 down, right?

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  • Bruce Runn
    Investor · Minneapolis, MN · Member since 2014 · 743 posts · 927 votes
    9y

    @John Woodrich

    My niche is exclusively on the renovation side as well.  I buy properties and bring them back to life.  We are in the middle of a renovation that will be done in 3 weeks and will go onto the market soon in the Uptown/Lyndale neighborhood for $399,000 ($10,000 less if a buyer side realtor isn't used).  It is a 6 bed/2 bath duplex.  (Comps are $391-$425)  It probably won't surprise you that I hold and rent every property I buy for a year and a day before I sell them.  Just good  (tax) practice-right-LOL.  

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  • John Woodrich
    Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    @Bruce Runn that plan of renting is a good idea, I use that same approach on some properties.  I am biting the bullet on the last flip and will pay ordinary rates, I have a good use for the money so the tax cost isn't my biggest concern.  Plus I have a brand new heavy duty pickup truck used only for business which will help offset part of the gain this year.

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  • Bruce Runn
    Investor · Minneapolis, MN · Member since 2014 · 743 posts · 927 votes
    9y

    @John Woodrich

    I bought my truck last year off a short term flip and the section 179  offset all the profits.  Love using the tax code in my favor.

    1Reply
  • Account Closed
    Rental Property Investor · Portland, OR · Member since 2015 · 338 posts · 332 votes
    9y

    I once looked at a rental in a suburb of Portland Oregon that had sloping floors, and I passed on it.  Maybe this is my inexperience with settling issues talking, but are people noticing it on the outside, or on the inside, when they walk around?  If the latter, could the issue be fixed above the foundation?  I realize there are plumbing and HVAC etc. systems, but I wonder if a contractor could detach the sill plate from the foundation and put some sort of shim-like system in there?  

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  • Jeremy Barth
    OP
    Investor · Minneapolis, MN · Member since 2016 · 11 posts · 5 votes
    9y

    @Account Closed It's only inside that you notice.  After fixing everything up, there aren't cracks or anything, but the floor is obviously sloped.  It's certainly possible to lift and fix the property, but it's so risky and expensive that I can't imagine anyone choosing to go that route.

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  • Bruce Runn
    Investor · Minneapolis, MN · Member since 2014 · 743 posts · 927 votes
    9y

    I can't imagine anyone doing that either.  Every fix out there tends to be an expensive one.  I have done it but only while in full renovation mode-  I opened up the ceilings and sistered  a 2 x 8 to every floor joist.  Of course while I was at it, I also replaced all the headers and reinforced the structural supports.  Voila, 90% of the slope was gone.  Don't ask the cost-LOL

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  • Steve Milford
    Lender · Vancouver, WA · Member since 2015 · 482 posts · 316 votes
    9y

    I sold a home last year that was built on a hill and the garage was installed with a sloping slab toward the house. It took just the right buyer and a foundation cert that everything was ok.

    0Reply
  • Brandon Rand
    Real Estate Agent · Plymouth, MN · Member since 2017 · 6 posts · 0 votes
    9y

    @Jeremy Barth its all about price...

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