Should I Sell Now or Wait Until Spring?

5 Replies

Good morning BP! I recently closed on a duplex in Little Chute, WI which is near Appleton, WI. My plan from the start was/is to flip this property, but I'm having a hard time deciding when I should put it back on the market. Right now both units are rented for well-below market ($3-400/unit). Total rents are currently $1,650. They should be in the $2,300-2,500 range. One of the tenants is month to month, the other signed a lease the day before I signed the purchase agreement that ends Sept 30th. My initial plan was to give notice to month-to-month tenant in the near future so that he is out by April 1st. His unit (both actually) need pretty minimal work. However, his unit will need a new furnace and A/C unit to be able to command top dollar in rent as both tenants pay their own utils and the existing furnace/AC in that unit are old and in-efficient. Total cost of furnace/AC is somewhere in the $5-6k range. Obviously, the higher the rents are, the better price I will get for the property. However, there is currently nothing on the MLS for multi-family properties in Little Chute and I know there is some demand. Should I wait to sell until I get rent up in the one unit and risk there will be other properties for sale on the MLS this spring, or should I sell now without having to put any money into the house when there are no competing properties on the market, even though it's typically a slower time of year? Thanks in advance for your help?

@Vern Hixon - congrats on your duplex. What have you done to increase the value in this flip or is your market hot enough you can hold onto a property short-term and flip for a decent profit without doing any improvements? A seasoned investor is going to negotiate a better price for an older HVAC but as a buyer I might be willing to pay a little more to not deal with the upcoming headache. 

And when dealing with <4 unit properties, my experience, higher rents doesn't always mean a better purchase price for <4 unit properties. To a seasoned investor, yes, I agree, higher rents = higher price. But to the bank (if prospective buyer is obtaining a loan), the bank is going to look at a duplex, triplex, or quad just like a single family and assign a value based on recent comps, not seasoned rents. 

@Vern Hixon Every market is different to a degree but what is stopping you from giving notice to the tenants now in order to have the ability to rehab the property in early spring when the units are vacant, and then sell it in early summer? Better yet, hold on to it if it makes sense at those higher rental rates.

@Jay Helms , I haven't done anything to increase value other than buy at the right price. It was a FSBO and I don't think the seller was aware of the market when he listed it. At the end of the day, I know he was happy with the price he received, and so was/am I, so it's a win-win.

I agree that higher rents don't necessarily mean higher values for <4 unit properties. However, the increase in rents I anticipate this spring certainly won't hurt my cause. My worry is that if I wait, I'll have to sink $10k into the place (there are a few cosmetic repairs that need to be made) and may not be any further ahead than if I sold now as-is. Also, there are no other properties on the market right now. I'm guessing that will change this spring. Just wanted to get some other opinions from investors who have been in the same or similar scenario.

@Neil Collins , one of the two tenants is leased up thru Sept 2018, so I can't make any moves with him until then. The other I am waiting on until spring - basically because I don't want to force someone to have to move during the winter.

The reason I don't want to hold onto the property in anticipation of the increased rents is I have none of my own equity into the property. I took out unsecured loans to fund the downpayment, so my CF right now is basically zero. I need all of the monthly rents to make the mortgage and unsecured loan payments. I have nothing left over for maintenance/Capex items. Even with the increased rents, my CF won't be much after deducting ins, taxes, and etc. plan is to sell and 1031 profits into different property or properties where I'll have some skin in the game and better CF.