Sell as investment opp or wait?

Question

Hi BP,

I have 3 houses in Portland Oregon that are fully rented.  I was hoping my tenants would move out this year so I could sell them and retire.  But of course, the rental market in Portland is so very hot right now that no one wants to move out!  For reference (for those who know the area) its about 2 blocks off Mt Tabor in SE Portland with a part view of Mt Hood.

What to do?  Should I wait and sell these later when people finally move out?  Or should I try and sell them to investors?

For example, we have a fully remodeled 1911 houses.  Upper house is 4 / 2 and rents for $2750 and the basement apartment is a 2/1 that rents for $1850.  Realistically this house should sell for approximately 880k.

Would I be able to sell with renters in place or should I wait until at least one of them moves out so it can be half owner occupied and half income property?  It's really fancy and nice and everything was done top of the line so when it came time to sell it would match the fancy and top of the line neighborhood.

TIA!

AJ Shepard · Answer

If the best and highest use is as a single family home for an owner, you should sell it as such.  There is a rule that allows someone purchasing the property to live in can remove the tenants.  Might be worth looking into?

Chace Fraser · Answer

Hi @Ellie Hanson, you have a high-quality problem :) And a few options. Like others have said, people are buying houses like crazy whether they vacant or tenant occupied. Inventories are CRAZY low right now and money is still cheap, now is probably the time to sell if you want to cash in. We don't know what the market is going to do in the future so you may think about "making hay while the sun is shining".

I'm working with some investors now who are looking to buy an investment property to simply "store cash" so that it appreciates with the market instead of losing value. They haven't been successful because they aren't willing to go $80k over asking price... but they're close.

Have you thought of selling them with a 1031 exchange to get more cashflow and then retire or do you just want the cash? That's an easy question to write and I know there are likely a ton of little nuances that need to be taken into account in order for you to achieve your goals.

Brad Hammond · Answer

Hi @Ellie Hanson, it is usually easier to sell a vacant property than one with a tenant in it however, it isn't impossible.  A few tips... it is easier if the renters are on a month-to-month lease rather than a fixed term.  Also, you could raise their rent by 9.9% with 90 days' notice and see if they move out from that.

If you are curious about the process of selling with a renter, I would be happy to talk with you about it.  There are some nuances you need to be aware of.

Mike Dymski · Answer

Provide proper notice of non-renewal near the end of the lease term and then sell when they move out.

Taylor L. · Answer

Why not sell them occupied and let the buyer decide what to do? In my part of the country we see properties regularly selling for significantly over asking price with little to no contingencies. Decide what price you want and see if the market will bear it.