Sell as-is OR improve and sell

[Joseph Weisenbloom]

I have a duplex I am selling that has low cashflow and a ton of equity. The rising property value has increased the taxes to the point where it is eating a lot of my cashflow. I cannot sell it as-is to a conventional buyer currently because it is a duplex in a single family zone. I am now in a situation where I would make much more selling than collecting the measley cashflow.

The property is a duplex and is rented out until February 2019. So I have 2 options:

1. Sell fully occupied property now in as-is condition. Its in decent condition. I have a cash offer for $125k and bought it at $105k.  This sale would allow me to pay off a mortgage on another property and increase my cashflow.

2. Wait until February 2019 for leases to expire. Do rehab on house, convert back to single family and bring it up to level of rapidly rising neighborhood. Similar houses fully rehabbed are going for $200k-$325k. 

Thoughts?

[James Orr]

@Joseph Weisenbloom... you had mentioned that fully rehabbed properties are going for $200K to $325K... that's a really wide range.

If it is on the lower end of that and you'd need to pay real estate commissions when selling that's a much harder decision than toward the top end of that range.

For example, if your costs of sale are 7% (which I don't know if that is normal in your market or not) and a sale price of $200K that's $14K in cost of sale plus whatever you need to put into the property to sell it. If it's $20K in repairs, then you might net $61K over what you paid.

At $30K in repairs, you would still net $51K , right? $40K in repairs, $41K? I don't do much rehab anymore, but I don't like having my ratio of repairs to profit be that high personally. Not sure how you feel about that.

I am assuming your $125K cash offer doesn't have the same 7% costs of sale, but is it worth the extra work and risk to earn $61K then $20K from the cash sale? For me, probably.

If you're toward the $325K price, I think this decision becomes MUCH easier for me.

I'm curious what is causing you to hesitate with waiting? Are you afraid of a market correction? Of fines from it being an illegal duplex? Doing the rehab work? Coming up with the rehab money? Interest rate risk for owner occupant buyer if you wait? Something else?