Why isn't my 5-plex in NE not getting offers?
14 Replies
Brad Hammond
Real Estate Agent from Portland, OR
posted over 1 year ago
I have a 5-plex that has been on the market since late May and I've gotten very little interest in it. Am I being too optimistic that it would sell in a couple of months or is there something I'm not seeing? The cap rate is average for the area (5.5%) so I don't think it's the price. The address is 7230 NE 18th Ave, here is a link. Any and all points of view would be appreciated.
Kelvin Lee
Real Estate Investor from Portland, Oregon
replied over 1 year ago
Physical condition, location, rental income and tenancy laws etc. I think the physical condition looks great. The location could be a draw back like the hi-way next to it without side walk, unpaved road etc. Can't comment on the rental income without any data like NOI, expenses etc. Small units could be hard to survive with rent control and the ever changing tenancy laws that 100% work against the property owner.
Zach Davis
Investor from Portland, Oregon
replied over 1 year ago
You'll most likely have to drop the price to get an offer in this market. I personally know people dropping everything from sfh, plexes and up to 250 units in multiple complexes due to the recent law changes. Its not like it was 2-3 years ago. People are scared to buy in this market. Anyone that will take the chance is looking for a deal and banking on decreased investment causing long term market inflation.
Also, i'm sure you know this being a broker but properties that sit with multiple price drops seems to make people think there are issues with it without even looking. You might be able to pull it, take new pics and relist with a lower price. With any luck it could get some new interest.
Just for reference I have a duplex i'm getting ready to sell. Its a 3/1 and a 2/1 with garages, fenced 1/4 acre yards, fully updated, as well as new exterior paint and a new roof. You're probably in a "higher rent" area but right now all of Portland is a no go to most investors. After a quick look at the recent sales, I'll most likely only get $170k-185k a door, probably with concessions. And that's with a vacant unit buyers can view that also appeals to the owner occupied crowd. Rethinking the price is probably the biggest factor in my opinion. Right now people have to have a reason to push through the uncertainty of the market.
Good luck!
Tchaka Owen
Real Estate Agent from Merritt Island, FL
replied over 1 year ago
Originally posted by @Brad Hammond :I have a 5-plex that has been on the market since late May and I've gotten very little interest in it. Am I being too optimistic that it would sell in a couple of months or is there something I'm not seeing? The cap rate is average for the area (5.5%) so I don't think it's the price. The address is 7230 NE 18th Ave, here is a link. Any and all points of view would be appreciated.
It's almost always the price. Every property will sell at a certain price, so if you're not getting offers and you don't see any issues, adjust the asking price. Good luck!
ps - if I were you I would not list it as a 3/3. I'd add up all the bedrooms (7) and all the bathrooms (?) and enter it that way.
Dustin Einig
from Portland, Oregon
replied over 1 year ago
Hey Brad,
I'm a newbie in PDX so take what I say with a grain of salt, but the two things that jumped out at me were the location and the operating expenses listed. I'm paying not too much more than this for a 2 bed out in NW Forest Heights which makes me wonder how much room for rental increases there is in the immediate term. Also, I totaled some assumptions about taxes, insurance, management, shared utilities and groundskeeping which got me to about $16k before any allowances for other maintenance or capex. If I assume $1/sqft or 7% of rents for each of those items, that increases expenses $6-9k/yr which gets me to a cap rate of about 4.5. Again, I'm totally new to this, but others might be making some of the same assumptions I am so maybe this is useful.
Brad Hammond
Real Estate Agent from Portland, OR
replied over 1 year ago
Thanks for these views, I just talked to my banker at Onpoint and he said he would lend on it and the current price which is great news. He also said lots of people are waiting to see what the Fed says on Wednesday. @Zach Davis , thanks for those thoughts and I agree that people are scared to invest in Portland. Out of state investments have dropped 40% this year already. I was planning on pulling it and reposting it with a different price towards the end of August but maybe I'll do it sooner. I think that $175k +/- per door is about the going price right now.
Derrick Aragon
Investor from Portland, Oregon
replied over 1 year ago
I own the property behind you, there is not really upside, and off Lombard units are tough. 5.5% is more of a turn-key totally upgraded product you are almost there but not totally.
I think there is money there for you to move on just do what it takes to sale and go on to the next one.
Brad Hammond
Real Estate Agent from Portland, OR
replied over 1 year ago
Thanks @Derrick Aragon , that makes sense. I'm going to reduce the price and hope for the best. If you want to buy it, let me know ;)
Cory Carlson
Real Estate Broker from Oregon
replied over 1 year ago
Patricia Ann Murphy
from Portland, OR
replied over 1 year ago
Location, location, location. That is a high speed thorough fair to get to the airport or Far East by avoiding 84.
That and the new OR tenant rights laws are huge drawbacks for investors. I’m struggling with my inner optimist on investing in Oregon, especially right now.
Zach Davis
Investor from Portland, Oregon
replied over 1 year ago
@Brad Hammond Any update on the sale of your 5plex? I'm in the process of finalizing the sale of the duplex I mentioned before and somehow ended up driving right past your place while on the job today. How goes the battle?
Brad Hammond
Real Estate Agent from Portland, OR
replied over 1 year ago
Hi @Zach Davis , thanks for asking. I've had some low ball offers but still for sale. What did you think of it?
DJ M.
Realtor from Southeast Michigan
replied over 1 year ago
My friend, the simple answer is the price. If your not getting offers you have 2 options. Continue waiting, or price reduce. In my market, the buying season slows down considerably after August. IDK your market, but you may have already missed your best chance to sell it. Talk to your agent and ask for his honest professional opinion, and dont take it personally. If you dont have an agent, this is probably a case study in why you should get one thats knowledgeable on your market.
Good luck friend.
Zach Davis
Investor from Portland, Oregon
replied over 1 year ago
@Brad Hammond It seemed like a well cared for property from the quick drive by I did. I didn't want to disturb anybody since its back off the street a ways so I kind of just did a quick pull in and turn around. I think the biggest issue you'll have selling that place is it backing up to Lombard and the fact that its a 5plex. Not that its not doable but you may have to entice people into it given the reduced interest in the market. IMO 5-6 units are the most difficult to sell (and buy) because most people that have the ability to finance a commercial property are looking for something with more units and most looking in that size range probably can't or don't know how to get anything but a standard mortgage which generally won't cover anything over a 4plex. That issue alone substantially limits your marketing pool. The location issue is also one that smaller landlords, I include myself in this, deal with since they tend to be more attached and look at their investments through the lens of "would I want to live here" instead of "does it make money". I don't think either of these can't be overcome, but some head scratching may be in order to find the best market and marketing for the property.
There are still a surprising amount of people buying right now. After talking it over with my agent we decided to list that duplex for about 5% under what the comps showed it was worth hoping for a bidding war. We also waited for a vacancy so at least one side could be viewed without an offer hoping to expand our marketing to first timers, small holding and owner occupied in addition to the usual suspects. It was on the market for 2 1/2 days and we ended up with 10 offers, only two were for asking price, the rest were 6%-10% over and two were 15% over asking.
I think you can sell your property, and maybe even sell it for what you are asking, but you may need to think over a way to expand the amount of people that you can successfully market it to.
Jacob Szeto
from Portland, Oregon
replied about 1 year ago
@Zach Davis Excellent answer. 5- Plex, not a great location, the market must be very limited for buyers that want all the cons of a plex and all the complexity of commercial.