Duplex with crawlspace, septic, drainage, tree, retention wall related issues sale?

Duplex with crawlspace, septic, drainage, tree, retention wall related issues sale?

Investor · Atlanta · Member since 2019 · 522 posts · 89 votes

Hi All,
I bought a single family converted duplex 136k from a wholesaler  and spent 200k so far as I did not get opportunity to do proper due diligence. 

Area is appreciating but lot of challenges with this property like below

1. Bad rain drainage issues which i resolved by building French/trench drain on side and back by spending 10k

2. Rain drainage water used to sit in crawlspace and did crawlspace water proofing for about 10k. 

Still see sump pumps in all corners get some water from sub surface not sure where it gets it.
3. Septic field lines failed in backyard and installed new small Elgin septic fields in front yard between drive ways and put a motor and dozing tank to collect from both septic tanks and pump through crawlspace for 30k 
4. Upgrade electric both sides for about 30k
5. Upgrade floors kitchens and bathrooms etc 20k
6. Fix roof mold issues like 10k

7. HVAC move to attic to replace package unit and other side replace fan and heater for about 20k

8. redo plumbing work 20k

9. spent 10k to fix sagging floor issues by putting concrete blocks in crawlspace.

There is big neglected strip mall in back as attached with loud noises and some weird smell of tobacco etc. also has big dogs barking at people even if I go to the corner of my backyard lot.
There is one bad neighbor who has big dogs always barking who elevated his backyard and rain water runs naturally towards my side

Big trees other side in neglected waste land which I think belong to strip mall owner behind and city also pushing some rain water in to that waste land.

I am in dilemma now

1. My current PM (say PM_1) does not sell my property as they only do Project management with whom I am there for 5 years now. If I terminate lease with PM_1 for this duplex end up paying commission of one year on one side tenanted unit and 250$ for other side vacant unit.

3.  new PM_2  says he can sell my property around 350k even it is under PM_1. Is it good idea to keep property management with PM_1 and sell with PM_2?

4. new PM_2  says since PM_1 did not advertise properly and not taking prospective tenants calls and taking long time to rent now. PM_2  promise he can rent in 21 days for 1350$
5. I am not able to decide selling is good idea to avoid big ticket repairs which puts burden and not sure when I get what repairs  on this 1961 crawlspace septic tank duplex with rain water drainage issues etc.

If I can some how absorb all these crazy repair costs and contractor challenges it will definitely appreciate in next day 5-10 years (already new built sfh and townhomes selling in this area around 400k-500k) then I can probably sell as I did most of the hard work already and brought up to good shape compared to what it was when I bought.

Also I see big trees next to unit as seen in the attached photos which concerns me that if they fall on roof (which might be baseless fear). Please advise.

Also behind there is retention wall belonging to the strip mall owner (who does not care for my concerns as per my talk with his property manager  few years back) where I built back french/trench drain which is leaning towards my property side which I am concerned may collapse.

6. PM_1 said his other friend broker can list for sale but not himself which i am not sure a good idea.

7. If I move to PM_2 can he list for sale and also same time for rent (which he confirmed yes) ? 

If I get 350k or more is it good idea to sell at  breakeven price after owning 6 years now ?

or get good tenant for around 1200$ on vacant unit (i reduced rent from 1350 to 1200 as not much interest in current market) and hold few more years absorbing repair costs and contractor issues, trees issues, retention wall issues, tough neighbor issues, loud music, tobacco etc. smell issues, dogs barking issues.
7. So far last 5 years with PM_1 provided overall decent experience but not like excellent or great especially after mergers with big companies.
8. If PM_2 sell this duplex he said he charge 4% . 

If PM_2 sell for 350k how much percentage I have to pay in taxes?

If I do 1031 exchange can I  save on  taxes ?




PM_2 agent says he can take 2% while buying new property in 1031 exchange as buyer agent

Please advise on these confusions

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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    1y

    @Gp G. NOT a good idea to have one PMC managing a property and another trying to sell it.

    Human nature is to comete, so they will do so by fighting and trying to make the other look bad. You will suffer.

    PMC 2 may not be playing "fair":
    1) What's the penalty if they don't rent the other unit in 21 days for $1350?
    -- If there's no accountability, sales guys will say anything to get you business!

    2) 4% commission to sell covers what exactly?
    -- National Association of Realtors settled an anit-trust lawsuit last year. Now a listing agent cannot advertise the commission they will pay another agent for bringing them a buyer. What can happen is PMC 2 charge you 4%, but when an offer comes in they may have to negotiate with you to include the other agent's commission in the sales price, which may cost you depending on what the property appraises for.

  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    1y

    @Gp G. It ultimately boils down to what you can tolerate in the short and long term if you choose to hold onto the property.

    However, if you do end up selling the property, a 1031 exchange will allow you to defer all of the tax from any gain and the recapture of depreciation on the property. 6 years of depreciation will not be huge. But it will be significant.

    To determine roughly how much tax exposure you're looking at you would need to know what your net gain will be.

    You will have to break down your Adjusted cost basis, and your net sale.

    Adjust cost basis - This is the purchase price, plus capital improvements, minus depreciation.

    Net Sale - This is the contract price, minus the closing costs and commissions.

    Net sale - adjust cost basis = net gain

    Once you figure out what your net gain is then you can subtract state and federal taxes from that figure.

    The 1031 Investor5137 Reviews
  • Investor · Atlanta · Member since 2019 · 522 posts · 89 votes
    1y

    Thank you for your amazing inputs. Some of the repairs I did were from handymen or small contractors who do not have an invoice system or estimate on paper for cash payment like painting and rent ready repairs. Those will be hard to show in documents for 1031 exchange as well. I am meeting one realtor today to get a better idea and opinion whether to sell or hold. If I get 350k or above I am thinking of selling, which is kind of break-even price forgetting all the time and effort I put there.

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