Tips on Selling Duplex

[Jean Moynahan]

I'm in the process of trying to sell my duplex but have noticed how small the market is for investors compared to regular single family buyers.  I am a little dismayed at the lack of interest and am worried it will take months to sell.  

I am wondering what techniques and methods did you all use to make your multifamily sales as smooth as possible? How long did your sale/purchase take?

The duplex is located in Central PA near Harrisburg, I have attached some property figures for you to peruse. I am pricing it in the 300's, with a projected cap rate of about 9, gave or take some percentage points depending on buyer's management fees, etc.

Some info for you:

4 bed 2.5 bath ranch duplex 

Gross Rent was $45,000 for 2021. Taxes were around 3600.

Apt 1 is 1600 sq feet 2 bed 1.5 bath that rents for $2250.

Apt 2 is 740 sq feet 2 bed 1 bath that rents for $1500.

Both units have their own laundry rooms and separate driveways, feel more like your own house than a traditional walk up apartment.

Vacancy rate is historically low, average renter stays for 5-6 years. Most renters are medical staff who work for local hospitals.

I have spent the last year remodeling the entire interior. I have also had new spouting systems and flashing added.

Apt 1 has been completely remodeled, with upgraded appliances, renovated kitchen, new flooring, paint, and two complete bathroom remodels.

Apt 2 has upgraded, kitchen, flooring, paint.

[Joe Scaparra]

@Jean Moynahan  Just a couple of thoughts.  Duplex investing is still a new opportunity in different locales.  For example, in Austin TX back in 2005 when I began to invest, duplexes were a dime a dozen and no one wanted them.  I began to buy them using the 1% rule!  The more I bought the better my debt-to-income rose.  It was a crazy time to be a buyer, you had your pick with absolutely no competition.  Sounds like Harrisburg today as described by you.  Austin, now, is at the other end of the spectrum, in that duplexes are the hottest commodity or it was up to about 4 months ago and now everything has slowed down a good bit.

With the numbers you spitted out, I question why you would want to sell, but that's another conversation.  The first thing that comes to mind is that you are using a year ago rental income numbers.  You have been vacant for what a year now?  IF YOUR PROPERTY IS VACANT NOW........THAT IS YOUR PROBLEM!   If you fill your property with tenants paying the numbers you state you should have no problem selling your property.  Get real with yourself, get specific as to what you want.  Telling us you're going to sell in the 300s tells me you are not sure what you want.  What is it 301 or 390k.  That is a big spread!  Your rental income based on your numbers are $3750 a month.  1% rule says sell at $375k.  If that was in Austin it would sell north of 500k.  Yeah, your not in Austin but what you described:  Located in class A neighborhood, fully renovated, tenant projected to be medical professionals.....WHAT IS THERE NOT TO LIKE?   

Investors who buy duplexes or small multifamily are looking at it as a business.  If it is vacant, then the business is bringing in zero income!  You will have to sell at a discount vs a business making a positive cash flow.  As an investor, I can tell you EVERY REALTOR SELLING A DUPLEX, always say, rents are below market; you can get more!   They SAY that for one reason, it is more attractive the more money it makes.  When they tell me that I let it go in one ear and out the next!  In a slow market, I AM NOT GOING TO PAY THEM BASED ON PROJECTED RENTS!  If they ARE getting $3750 a month I believe them; if they SAY IT WILL GET $3750 a month I doubt them.  GET MY DRIFT!  Don't fall for the I want to keep one side vacant incase they want to move in one side.  If you are worried about that then rent one side month to month.  However, most buyers of a duplex are investors not looking to move in.

The real problem in giving you advice is that I don't know the Central PA real estate market, but I do know investing! Let's run some numbers that speak to investors no matter where you live. Based on what you did not tell me I will make a few assumptions. You sell for 350k. Here are the numbers as I see them. 20% down (70k), mortgage 280k at 7.25% 30 yr fixed payment is $2335/monthly includes taxes(3600) and insurance (1500). Vacancy rate 5%, maintenance 5%, CAPEX 5%, total expenses 15% of $3750 is $560. $3750 - $560 (expenses) - $2335 (PITI) equal a positive $855 per month doing your own property management! That is a total of $10,260 profit a year on a 70k downpayment plus 5k closing. 10,260 / 75000 is 13.68% Cash ON Cash RETURN! In this real estate environment that sells all day long, no matter where you live. THESE NUMBERS ARE ONLY VALID IF YOUR UNITS ARE OCCUPIED!

When I am looking to buy I want to know 4 things right off the bat.  1. Asking Price   2.  Current rents, 3 Current lease Terms. 4. What if any deferred maintenance needs to be done. If your Current rents and lease terms are NOTHING that hurts your sell opportunity.  Lastly and I don't want to be too critical, but when someone tells me I have no income for a year because I have been rehabbing my duplex.......It raises all kinds of questions, the major one is it is a  DUPLEX.  Shouldn't you have gotten one side ready and rented while you do the other side?  Unless it was a complete gut job, taking a year to do rehab on a 1600 sq feet and 740 sq feet units seems excessive and NOT BELIEVE-ABLE to an experience investor.  In my mind, I am questioning the numbers more as if may be you are having a hard time finding renters.  Renters in place makes those thoughts go away!!!!!!  Now put those numbers on a laminated sheet, show potential investors and go and sell your property......Cash on Cash return or 13%, potential of appreciation and rent increase and keeping expenses fixed, sells anywhere in America. Cheers.  The bigger question in my mind is WHY SELL?