Advice on how to handle a difficult property

[Hilary Noon]

Hi everyone -

My husband and I own a multi-family property in the vibrant cultural district in Ft Worth, Tx.  It consists of a front unit which is an upgraded 1930s bungalow.  The back unit is a converted garage with a loft.  The conversion was poorly done and we have put quite a bit of money into it to make it more attractive to renters.  Whenever we have to turn the back unit over, it takes a long time to secure a tenant.  We get lots of activity due to the great location, reasonable price and updated interior but the loft ceilings and other quirky factors make it less appealing.  At this point we feel like we have done everything we can do to the property without re-doing the structure. Prices in the area are plateauing and so I don't think selling is a good idea right now. Recently we've started thinking about consulting with contractors about scrapping the current structures and re-building a four unit place on the land instead.  

I'd be interested in the opinions of others in this forum with experience handling a lemon in their portfolio.  Are there other ideas we should explore?

Thanks, Hilary

[James Wise]

Originally posted by @Hilary Noon:

Hi everyone -

My husband and I own a multi-family property in the vibrant cultural district in Ft Worth, Tx.  It consists of a front unit which is an upgraded 1930s bungalow.  The back unit is a converted garage with a loft.  The conversion was poorly done and we have put quite a bit of money into it to make it more attractive to renters.  Whenever we have to turn the back unit over, it takes a long time to secure a tenant.  We get lots of activity due to the great location, reasonable price and updated interior but the loft ceilings and other quirky factors make it less appealing.  At this point we feel like we have done everything we can do to the property without re-doing the structure. Prices in the area are plateauing and so I don't think selling is a good idea right now. Recently we've started thinking about consulting with contractors about scrapping the current structures and re-building a four unit place on the land instead.  

I'd be interested in the opinions of others in this forum with experience handling a lemon in their portfolio.  Are there other ideas we should explore?

Thanks, Hilary

There is a term in real estate called functional obsolescence that sounds a lot like what you folks are dealing with.

Functional Obsolescense: A term commonly used in real estate, is a reduction of an object's usefulness or desirability because of an outdated design feature that cannot be easily changed. 

Thing is I don't think that land value would be high enough in Fort Worth to support a tear down and rebuild and a sale would be the right move. I could be wrong though, I am sure others with more knowledge on that area can chime in on that.