Rental Property Investor · Green Bay, WI · Member since 2018 · 9 posts · 2 votes
Hi! So I'm pretty new to the game. I bought 2 small houses this year. I am trying to figure out how to negotiate down the price on duplexes in my area. I'm from Howard a suburb of Green Bay. The deal Im looking at is a 2 bed 1 bath per side. The DP is currently on the market for 194k. taxes $2624.00. Currently rented for 625 per side. The numbers arent even close to making sense for an investment. Howard has a very strong house market. How do you get these people to see that the price isnt realistic with the Cashflow equations. Its possible I could get both sides rented for 800 but Id rather stay conservative with whats in it currently. This seems to be the case for most of the duplexes in my area. Any ideas or thoughts would be greatly appreciated. Thank you :)
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
7y
The market is what it is. If you owned a duplex and people were paying $194K for properties just like yours, would you lower your price so a buyer can have better cash flow? No, of course not.
Rather than trying to convince sellers to change, channel your efforts elsewhere. Search for off-market deals. Or, find run-down duplexes that can be rehabbed and put into service for less than $194K. Or, see if you can convert a cheaper SF property into a duplex. Take what the market will give you.
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
7y
The market is what it is. If you owned a duplex and people were paying $194K for properties just like yours, would you lower your price so a buyer can have better cash flow? No, of course not.
Rather than trying to convince sellers to change, channel your efforts elsewhere. Search for off-market deals. Or, find run-down duplexes that can be rehabbed and put into service for less than $194K. Or, see if you can convert a cheaper SF property into a duplex. Take what the market will give you.
Real Estate Agent · Anchorage, AK · Member since 2017 · 294 posts · 182 votes
7y
Hi Travis - welcome! You've found a great community here.
Just a reminder - that when dealing with 2-4 unit properties - you aren't just competing against other investors - but many of the buyers in that space are home-owners looking to get someone to help with their mortgage. So - your prices aren't going to necessarily make sense from a pure investment perspective - and the sellers don't really care. They care about getting the highest possible price - and if a homeowner is happy to just get $625 a month off their mortgage by living in a duplex - then they're happy.
If a duplex is 194k - what is an average price there for a single family house?
Here in Anchorage - an average house price is around $350k - and a duplex often goes for 420k. Triplexes can be around 400k - oddly enough and then fourplexes range from 400k beat up bad neighborhoods to 700k for nice ones.
Rental Property Investor · Green Bay, WI · Member since 2018 · 9 posts · 2 votes
7y
@Jamie Rose Houses in the same neighborhood go for around 185k. Like Greg said I have to find other avenues to find cheaper I guess. I just don't know who buys or how it sells for that listed price. Of course I will at least put in a low ball offer anyway. Its been on the market for 120 days. Thanks
Rental Property Investor · Anchorage, AK · Member since 2018 · 56 posts · 31 votes
7y
Travis:
Something I also struggle with is not getting stuck on a deal if the numbers don't make sense. Sometimes I really like the house and really want the deal to work, but the numbers simply don't, so I have to move on and wait for that one that does. Is there a reason you need this particular duplex to work vice waiting for another one?
Also, it never hurts to put in an offer where the numbers would make sense. The worst the sellers can do is say no, right? Sometimes they might just say yes and you find yourself in a winning situation. Good luck.
Investor · Luxemburg, WI · Member since 2015 · 40 posts · 15 votes
7y
Hi Travis,
I live in Luxemburg and work in Green Bay, I own 2 rentals having bought my most recent one in Aug. It took me 2 years to find a deal that wasn't what you describe. If you are only looking on the MLS like I was 99.99% will be exactly what you described. The one I just bought was getting $700 total for a triplex, asking $119k. I tossed out the number 75k cause it worked for me and they took it. About 50 offers on other places before that were not taken. So you can be persistent and patient and believe what you are seeing... or start coming to the Green Bay Reia, and Wisco Reia meetings and meet the wholesalers, you'll actually find real deals there. If the market is still like it was 2 months ago, almost all of the duplexes on market are selling for ridiculous amounts with pathetic rents. You have to build a network and get an off-market deal.
Investor · Luxemburg, WI · Member since 2015 · 40 posts · 15 votes
7y
+1 on getting in touch with the Reyments, they are good people. I can also assure you that the only thing you'll be "sold" on at either Reia is a membership but the first meeting is free. No get rich books, no cheesy marketing tactics, no "gurus". Just good people willing to share/learn.
Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes
7y
I live in Illinois and I see the same thing with duplexes and fourplexes down here. The numbers make no sense. For whatever reason, investors are just comfortable with crappy returns so that props up the prices.
My typical SFH deal is buying a 3/2, 1,500 sq ft house for 100k to 110k that is worth 150k or so and that rents out for 1,400/mo.
Yet for the duplexes and fourplexes these sellers are wanting 90k a door for stuff that rents between 800 and 900/mo. Makes zero sense. Then you add in having to cut the grass and do snow for those types of units. Plus the fact that you're dealing with a more transient class of renters and there's no way that makes any business sense whatsoever.
But I would add that it makes no sense when comparing 2 or 4 unit properties to sfh's. However, the returns on those 2to4 units aren't necessarily terrible either. I think sometimes its investors with egos and a lot of money that like the idea of owning multi unit properties.
They buy a couple of four plexes and put down the 25% and have a property manager manage them. In 20 years, they're going to do fairly well on their investment.
And, btw, thats the other thing. With sfh, I can leverage my capital much better if I can find really good deals. If my all in is 70% or better, I can get a hard money loan for 100% of the purchase/rehab and then rate/term refi out when I'm rehabbed and rented.
Still. It makes no sense for me to do 2 to 4 units in my area. I'd rather buy 4 sfh's and get renters that stay longer, get more appreciation, and have better net income numbers per door.
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
7y
@Travis Schreiber
I was outbid on numerous duplexes this summer. First thing I said was; “that’s not gonna cash flow”. I just kept searching and bidding. My bid was to cash flow, not to compete with others. Just keep looking. I’m now closing on a duplex in December. And it will cash flow right away.
Los Angeles · Member since 2018 · 464 posts · 471 votes
7y
@Travis Schreiber One thing you have to recognize is that 2-4 plexes often sell on the same emotional level as a SFR (or SFH as I've seen it here). Now, a 10 to 100 unit apartment building, yah, you can argue cash flow. But 2-4 plexes sell based on "comparables". What did the duplex down the street sell for? It doesn't matter if cash flow is negative. A lot of plex sales are more like a SFR sale, and the buyer plans to move in. Rent from the other units help with the mortgage, and actual profit is a long term dream. There are even cases where the negative cash flow is desirable, to help against a high W2 income, tax-wise. Bottom line, if you can't make the numbers work, and the seller won't budge on the price, move on to another deal. It may be necessary to find a different market.
Rental Property Investor · Green Bay, WI · Member since 2017 · 33 posts · 12 votes
7y
@Daniel Gray
They take down posts if you advertize or suggest attending a reia or other organization. Same thing happened to me when i suggested a local newbie come out to a reia.
Investor · Luxemburg, WI · Member since 2015 · 40 posts · 15 votes
7y
@Gavin Carrigan It seems silly that when people are asking for help and they preach network constantly and joining reias constantly especially on the podcast. They also suggest you start your own if there isn't one in your area, but then take them down when you try to tell people about them? Seems oxymoronic. Either way, thanks for letting me know.
Mcallen, TX · Member since 2017 · 92 posts · 72 votes
7y
Hey Travis. I'd have to agree with Greg and some of the others. Since price on these 2-4 units are based on comps you'll find it very difficult negotiating owners down to where the property will cash flow.
I ran into the same problem, but I was determined to start with small multifamily. I didn't waste any time with the MLS properties requesting market price. I purchased a list of small MF properties from my county, drove for dollars, knocked on doors, cold called owners/LLC's, sent letters basically used all the steps a wholesaler would use for a SFR, but with a different target goal. That's how I found and purchased the 4-plex I'm currently house hacking at far below market price.
I grew up in the Green Bay area (now living down in Appleton). As several of the members have said, I'd either put in an offer that makes cashflowing sense... Or wait and keep looking. I closed this year on my first Duplex for 155k (2 Bed, 1.5 Bath) down in Appleton. Current Rents are @ 775$ (So right at the 1% rule). I’m house hacking while I renovate the one unit, plan to increase rents, and it should be cashflowing once I’m gone.
Knowing the Howard area, I’m surprised rents are that low. Have you checked comparable rent rates? It may be a combination of overpriced market prices and underpriced rents.
Green Bay, WI · Member since 2017 · 6 posts · 2 votes
7y
I’ve found the Green Bay Area has some very odd rent rates, and comparable duplexes 3 miles apart can have a ~$300+ per side rent difference. Unless you are doing some serious legwork and working for those off market deals, vrbo and cheaper, renovated small sfh rentals seem to be the only properties that make sense from a “BP rule of thumb” perspective.
On the other hand, there is a lot of new industry, investment, and construction just around the corner for GB, and lots of gentrification/value increase areas that will not initially make sense on paper, but if the long term buy and hold strategy is what you are going after, there are plenty of hidden gems and areas that off market deals today could lead to massive gains in the next ~20 years.
Rental Property Investor · Green Bay, WI · Member since 2018 · 9 posts · 2 votes
7y
@Chris Shaw I currently have 2 sfhs that cash flow nicely. I would agree with the changes in green bay. Do you think the currently undesirable a few blocks either way from the river will turn and be desirable? I thought about looking into these house often going cheap thinking a few years from now the clientele might be better with corps like Schreiber down there and draws like the farmer's market. If only the schools would get better. Thoughts?
Rental Property Investor · Green Bay, WI · Member since 2017 · 33 posts · 12 votes
7y
Travis, I think that area will rebound some, i believe it already has begun to turn, but schools still are a limiting factor and i don't see that changing in that area.
Green Bay, WI · Member since 2017 · 6 posts · 2 votes
7y
@Travis Schreiber I would agree with Gavin in regards to the river area, but if everything long term goes well with expansion and the “navy pier” bay beach area, I could see the low income properties east of tower drive bridge gaining some value. The fact that you can still get decent sfh’s with waterfront property on the bay so close to town for under 250k is pretty crazy. Ashwaubenon and the titletown district expansion is going to bring in a pretty good growth spurt too, but finding the good deals there will require some sweat equity