Can I sell my duplex for this much?

Question

I bought my first duplex at the start of 2023 in OH. I bought it for $143k and put 30% down ($43k down). The seller gave me a check for repairs. I thought I had enough but quickly realized there was way more that needed to be done than what was shown in the inspection report. I ended up coming out of pocket $27k. So I’m all in for $170k.

It’s a 3/1 on each side and $1250 sq Ft on each. In a small rural town. I would like to recover my money. $850 on one side and about to get a renter on the other for $1000. So $1850/mo in total rent. The $850 side could be raised a bit when the buyer takes over.

If I sold it for $190k minus the agents commission and other expenses I would probably net $170k. But would it make sense for an investor to buy a duplex for $190k? What is the minimum down payment someone in OH could put on this property? Is it better for the buyer to pay all cash?

I’ve fixed most of the issues with the property. However, it might have unexpected things because it’s an older property. I want to sell it because i have found better opportunities elsewhere that have proven to work for me. And so I need the money. But I’m afraid I will only recover my down payment and not the money I spent on repairs. I’m afraid I’ll be forced to sell for less than $190k.

The property also doesn't make sense for me anymore from an investment point of view. I have a DSCR loan at 9%. My mortgage taxes, insurance, PM, and maintenance adds up to $1,460/mo. So my cash flow is only $390/mo which is like 6.5% on a $70k investment.

How can a duplex with gross rents of $1850/mo be worth it for an investor at a price of $190k? Also, should I list it a bit higher like $205k?

Alecia Loveless · Answer

@Mike Boss I understand you plan to sell it but I’m from northern New England and regardless of what we put into a deal, which is usually 20-25% of the PP plus repairs it’s considered a pretty solid deal if it’s cash flowing $200/door/month. I’ve got 20 active doors and 5 doors being rehabbed and I think my average right now is about $250/door/month. I know it will depend on your market and the types of deals you can find. My last two deals were better, $450/door and $380/door but that one is being split with a partner. So I think as you do more deals and get better at sourcing deals you’ll likely get better at finding bigger cash flowing properties. I search my MLS target markets daily and my Realtor is always looking for me. The more frequently you look for deals the more and better ones you will find.

Vadim F. · Answer

What are the comps in your area? If they support 190k, you'll see for 190k. If they support less, then it'll sell for less.

Travis Timmons · Answer

My first read on this, which may be missing some important context, is that you're going to have to hold on to this thing or want to get rid of it so badly that you are okay to lose money. The pre-payment penalty, transaction costs, recent purchase, and the fact that you mention that it is not in a market that appreciates much lead me to believe that your walk away number is going to be at or under the $170k that you have in it. Again, I am missing details and potentially important context. You may have done the necessary repairs that added enough value to bump the purchase price up a bit more. It feels like you're going to be stuck with it or are going to need to be okay losing some money to walk away. We've all been there. It happens; call it tuition to the school of RE investing. We all have to pay it at some point.

Julien Jeannot · Answer

@Mike BossCouple of thoughts:- Duplexes behave much like single family residential units, the price will be set by comps and willing buyers as opposed to the performance of the property from an investment standpoint.- Wether or not someone is willing to pay all cash is not something you can control.- Listing too high will turn off buyers and it will sit on market, they are all keenly aware of property values given all the data out there. You'll have to reduce the price and in the end, the list high/ make me move pricing strategy nets sellers less due to buyer psychology.- Sounds like you are looking to justify a higher value then what the property is worth in the market in order to break even.- Regarding cash on cash return, take into account principal pay down as well as the tax benefits from depreciation for a complete analysis.

Mike Boss · Answer

Hi Brittany. The town and neighborhood it’s in doesn’t really appreciate. It’s mainly for cash flow. My DSCR has 54321 penalty. I don’t want to refinance. If I raised rent on the $850 side to $1000 it would be better but I still would want to sell it. I want to put my money somewhere where i know I can get double digit returns. I’m understanding of the fact that I may have to sell at a loss. Out of the $70k investment I wouldn’t want to get less than $50k back. as for raising the $850 rent I want to be careful because she’s a decent tenant and I’m not sure if she can afford $1k. Probably $900. For the empty side I listed for $1100 but no takers. I lowered to $1k and got multiple applications. You can privately message me and I’ll tell you what town in OH it’s in. Is there a way I could have both units occupied and then sell it to someone to move in for 5% down? For example, when it’s under contract I give one of the tenant’s a 3 month notice to leave and then the buyer will move in.

Brittany Minocchi · Answer

Hey @Mike Boss - Rents seem a bit low for the size of the property. If you were to rent both sides for $1,000 and increase cash flow closer to $540, would it be worth it to you to keep it? Is it in an area that appreciates well, or do you only have the cash flow to work with? It might not be an investor that purchases your property - it could be a homeowner that wants to live in it if you leave one unit empty for the time being. This is assuming you're planning on listing immediately. For down payments, if it is an investor, they'd likely need 25% down. Owner occupant, 3.5-5% minimum down. If you can find a buyer willing or able to pay all cash, that's a best case scenario for you. A lot of people still follow the 1% rule, which you're a tad under as it stands. Are you working with an agent? Have you pulled comps to get an accurate value? Impossible to say what you should list for knowing nothing specific about the property...Another thing to consider....do you have a prepayment penalty on your current loan? Many lenders prohibit them in OH, but not all. If you sell or refinance your current mortgage and you DO have a PPP, you'll have to pay that at closing.