Should I sell or keep this duplex?

Question

Here's the situation. I've inherited a group of rentals in Ohio. My goal is to take this group of rentals and make them profitable. Currently, they are just breaking even on a good day because I have also inherited 2 full time employees and a few high maintenance properties.

One rental in particular has a few issues. Mostly it's that the taxes are high, the rent is low and the upper unit has high turn over. The lower unit has been rented for over a decade to the same person. I've sent the lower unit a notice that rent will be raised at the end of the summer and she said that she could pay the higher amount. The upper unit is being worked to be ready for yet another new tenant.

Here the are the numbers prior to the rent increase: $450/month total in rent, $15,000 purchase price back in the 90's. Last year expenses were $3,365 (1,000 were taxes) and gross income was $3,350 (not including labor.)

My real estate agent wants to list it at $12,000, zillow has it appraised at $51,000. I think his number is low but I could be wrong. So do I keep renting this sucker trying to get the rents up closer to 600/month? Or do I sell and get an easier property to manage? Your thoughts?

Jessica B. · Answer

As of 2017, no employees.

Brandon Hicks · Answer

I'm curious if you still have the employees? I self-manage over 60 units and make use of lots of independent contractors to help with turnovers, cleaning and maintenance. I would think you could cut your costs by hiring as needed.

Jessica B. · Answer

I'm selling. Should be listed next week. The bottom's rent is $500 and the upper will be $400. Hopefully, an investor will like what they see and do better than I have. Better late than never. The rest of my properties are doing well enough. There's another one I'm thinking about getting rid of. We'll see how this one goes.

Thomas S. · Answer

You are wasting time dreaming in techno color trying to make this a viable investment. Its only value is in the equity in the property and you should have sold last year. You will never do any better than lose money on this property with the rents where they are.

Jessica B. · Answer

Update:It's a year later and I still have this duplex. The upper is now rented for $300. The lower is improving but inconsistent at $400. This year I should make about $1000, last year I lost about $3500...My next goal is to lower its taxes.

Bryan C. · Answer

@Jessica B. At that price it would be an easy decision to sell, but I do not see there being a buyer at that price. Would it being section 8, be that much of an incentive. What I see are duplexes on the market, fully rented/half rented, selling for less or not selling at all. None of these are section 8, however.It is likely that the value would be near that if you did a little work to it, got it rented and increased rents. Its a no-brainer. I am not sure how much research you have done on that market but I still stand by that guess (of course without seeing the property).

Jessica B. · Answer

At that price it would be an easy decision to sell, but I do not see there being a buyer at that price. Would it being section 8, be that much of an incentive. What I see are duplexes on the market, fully rented/half rented, selling for less or not selling at all. None of these are section 8, however.

Bryan C. · Answer

If you get it sect 8 approved and rents up & down come to roughly $800-900/month the property could sell for roughly $50k depending on some other variables.

Jessica B. · Answer

Okay here's my plan. What's done: Raised the lower unit's rent from $250 to $400, which is closer to median rent in the neighborhood. If this tenant leaves I will work on this unit and get the rent closer to $500, which is closer to my average. What I'm doing now: fixing up the upper unit and will be renting it for $350-400. Painting, refinishing floors, cleaning, putting in dropped ceiling to cut down on heating bills, screening in upstairs porch. What I might do: Get it section 8 approved.

Jessica B. · Answer

Thanks for responding. Let me see if I can answer a few of your questions. The property in question is 1000s of miles away from where I live. It's a few blocks from where I grew up. I have little interest in moving back to Ohio to self manage. I have a team in Ohio that does the hands on "stuff." My aunt is the main point person for the rentals and we have 2 employees. I only spoke about one property because each property is incredibly different. Total there are about residential 20 units, of which I own about half. This particular property has those issues I outlined that might lead me to selling it and replacing it with an easier property. It's general condition is fair, it's structurally sound, but does show normal wear. I would say that properties valued at 50,000 in the area are a nicer than this one (newer cabinets, better layout.) The neighborhood is average for rust-belt-Ohio, stable, rough around the edges, pretty safe. Average rents in the area is about 400-500 per unit, so I would say that yes, we could be getting more rental income. Our average rent is 500-600, so this is our lowest flyer. Yes, I can invest money into the place, and I do.