Problem property -- help me with strategy

[Josh Feit]

Hello BP -- I have a purpose-built duplex in 30318 (Atlanta / Grove Park) that has become a problem property.

It is very large -- almost 2700 SF with eight bedrooms and six full baths. Each side has four bedrooms and three full baths. For a long time I have rented it as a section 8 property. Tenants were very stable, and the rents were good (about $2,000 per side / 4K total).

Bought for $140K and put in about $40K over time to renovate to its current current condition. Similar properties with both sides rented have sold in the past three months for about $500K, but I think the local market has probably softened somewhat. And the vacant side doesn't help.

There's no HOA. It's on a Main Street (Perry BLVD), and it is on a bus line.

About 8 months ago, one unit went vacant, and we can't find another tenant no matter what we try or how low we go with the posted rent. I understand that a lot of units in ATL are now accepting section 8, so newer, nicer properties are taking the tenants.

Possible strategies:

-Just lower the rents to the lowest price I can find for a 4BR in Atlanta -- probably around $1200 or $1300, and get a market tenant in there.

-Convert the vacant side to a PadSplit. This would take a decent amount of investment to improve the kitchen and bathrooms. Currently the unit is rent ready, but it is very basic / utilitarian, with section 8 tenants as the main audience.

-Get rid of tenants on the other side, and renovate both sides for Padsplit.

-Sell the property and move on (but if I sell it, I imagine I need to find a tenant first to maximize the sales price...)

Does anyone have any creative ideas of what I should consider doing with this property?

[Michael Dumler]

@Josh Feit, as an Atlanta agent extremely familiar with this area, I know precisely which location this is in and the property type you're referring to. I encounter duplexes on the market in this area all the time. In 2020/2021, when rates were at all-time lows, this area was super hot, like most other Atlanta markets, and investor demand was high. Needless to say, as you mentioned, that is no longer the case with current market conditions.

I'm biased, but I recommend exploring and considering the option of vacating both units and renovating both sides for PadSplit. Hypothetically, this deal would perform very well if you achieved 80%-90% occupancy. Being close to a MARTA bus stop is always a good factor in assessing whether or not the property should be held as a PadSplit. Consult with an account representative at PadSplit to assess comparables and determine bedroom rental rates. I wouldn't necessarily advise selling unless you have another investment lined up that you can 1031 into.