Why is this property still available?

Question

Short version:

Do you get spooked when you come across a seemingly good deal that's still available on the MLS after several months?

Long version:

I've been looking on the MLS for small multi-family homes in some cities in the Midwest that I'm familiar with.  I came across a 4-unit old Victorian home listed at $84,900.

I've talked to the realtor, who told me that it has four tenants who pay a combined $1,800/mo gross rent.  After running the numbers on taxes, insurance, expected maintenance, cap-ex, and the like, I have a rough estimate of about $500/month in net income.

Now, I haven't done my due diligence on this house.  I haven't had it checked by an inspector, I haven't fully scoped out the neighborhood, and I haven't reviewed the financials in great detail...all of which I'll do if I decide to move forward. But so far it seems like a solid buy-and-hold property.

But...it's been on Zillow for 144 days. And part of me can't shake the feeling that if this house really was that good of a deal, some other investor in the area (it's a metro area of about 250,000 people) would have snatched it up by now.

Maybe that's bunk.  Maybe the area's investors are chasing other deals or have their money tied up elsewhere.  Maybe there are more than enough houses in this area to go around.

Or, maybe there's a reason it hasn't sold in 144 days.

So, when you come across a seemingly good deal that's still available after a long time on the MLS, is your reaction 'oh, good!  something everyone else has missed!' or 'be careful here...there's a reason everyone else has passed on it.'

Steve Babiak · Answer

There is a supermarket close to the nearest gun range. One day while shopping there recently somebody was at the range practicing, and I commented about it to the young lady store employee in the produce dept (which was the part of the store closest to the range). She replied that when she first started work there she had no idea of the practice range nearby, so when she heard gunshots she called 911 :)  When the dispatcher asked the location to confirm, the dispatcher explained about the firing range; apparently she wasn't the first caller to 911 about that shooting.

William Murrell · Answer

@Rick Harmon  absolutely there are tons of great "bikers," as in motorcyclists, out there.  I wasn't saying that a biker is bad, but that nobody would rent it (motorcyclists included) because even a harley rider would have to leave his bike in the street.  Or as you mentioned, park it in the house!

Steve Babiak · Answer

There are some short sales that can stay listed for a long time. There are properties where the asking price was unrealistic for a long time. Recently I came across a couple; one had obvious foundation issues upon visiting so asking was too high due to repair costs; the other I didn't even bother visiting since the listing mentions house is on a sinkhole, and I guess it might soon be in that sinkhole!

Rick H. · Answer

William Murrell - Maybe it's a good "biker" house.

Of course, now you're talking niche market. Although, it may be a bigger market than others may think and perhaps requires some extra skill in vetting prospective tenants. There are plenty of responsible people in the biker world who pay their bills and just happen to like motorcycles. You'd want to eliminate the one's who love their bikes so much they want to oark in the living room, though.

OP was about a Victorian 4 unit. As Wayne said, until you see it, you really can't see the problems. And even then, it may still be really difficult to envision or anticipate the issues.

An appraiser friend of mine once give me a tip on an REO in Pomona, CA. This SFR was a cosmetic fixer only and I like the neighborhood. Naturally, out of curiosity, I walk out into the backyard and like what I saw until I heard gun shots. Gun shots!

As it turn out, there was a firing range across the street from the road from the backyard fence. Didn't expect that so I passed.

William Murrell · Answer

Right?  It's totally odd.  You pull up and it's a cute little bungalow that looks like it would rent easily.  But the house is right up against the sidewalk along the front of the house, right up against the line on the right side, and right up against the line on the left side too.  And then they built a big porch on the left side that is technically not on the property.  It does have a big backyard, but to get to it you have to drive on the abandoned lot beside it which is owned by another person.  And the road it's on is only two cars wide, so you couldn't park a car there either.  Totally weird.

Justin Simpkins · Answer

@William Murrell

That's pretty funny. How odes a house not have parking???

William Murrell · Answer

I have a property in mind that was a similar issue.  It was a 4/2 and listed for 45,000 which is dirt cheap in my area.    I couldn't believe it and was practically screaming "sold! sold!" when I noticed it had been listed for months and months and I became suspicious.  And the price had been dropping for a long time.  Upon further inspection, the house had no offstreet parking, no onstreet parking (both practically unheard of in my area) and the best part: an encroachment. Part of the house went off the property.  And if you wanted to park behind it, you had to drive onto the neighbor's property.

My favorite part was something I missed at first which was how to distract from the car issue, it was listed as "a great house for an avid cyclist!"  Of COURSE it's good for a cyclist because a bike was all you could own and live there.  You couldn't actually park a car anywhere near it.  In large cities, that would have been fine but in our city everything is car dependent.  No thanks.

Jeremy B. · Answer

@Wayne Brooks, I'm not sure about the utilities.  My recollection from conversations with the listing agent is that they're covered by the tenants, but I'd have to confirm.

@Mark Gallagher, that's a good point.  I hadn't considered the owner's motivation, and also the fact that the only buyers would be other investors...as opposed to a SFH, where you'd be competing with regular families as well.  so perhaps that helps explain the longevity of the listing on the MLS.

Thanks to you both for your comments.

Mark Gallagher · Answer

@Jeremy B. It's my experience that occupied multi units move much slower than unoccupied/foreclosed multis. An owner has less motivation to sell when collecting rent.

Wayne Brooks · Answer

You sure owner doesn't pay utilities?

Without actually looking at it, there could be 100 different reasons it's not a good deal.

Why is this property still available?

Most Popular Reply