Should I sell my duplex?

Question

I bought my first duplex a year ago. I knew that diving in and buying my first investment property would be risky and I would have a lot to learn. Unfortunately, I picked a property that needs some big maintenance items addressed. I bought a property in Bedford, Ohio for $85k and I am currently bringing in $1610 total in rents. My monthly payment for my mortgage/insurance/taxes is $723. The property is in need of a new roof, the furnace is about 30 years old but still working well, and there is a crack in one basement wall that although isn't too bad and isn't causing problems at the moment, I need to consider repairing in the future. With all these things combined, I was thinking I should sell rather than getting started on the roof replacement and anticipating the other big ticket items. Do you think I should sell? Fix the roof and then sell (would my value go up with a roof replacement?)? Or should I keep the property and deal with the the maintenance items as they come up?  I should also note that I have been furloughed from my job since March with no return to work date yet, so this is surely adding to my stress as I do not want to use my personal savings at this time to pay for a new roof. Any advice would be greatly appreciated!

Kenneth Garrett · Answer

@Jessica Beard

The property cash flows pretty nice.  What is the ARV of the property?  I understand things are tight, but the property should fund itself without your personal capital being brought in other then emergencies.   I would not sell it.  Acquire some roof bids.  The roof is currently not leaking.  Bank the cash flow which is probably $500 a month $6000 a year.  At the end of year one replace the roof.  Roofs in my area are about $350-$400 a square.  I am assuming your roof is approximately 15 square.  If the furnace is working, maintain is as best you can.  In my area a new 80% furnace is about $2000.  Save the cash flow for that repair.  That would take less than 6 months.  After that you should be good to go.

A new buyer is going to reduce the offer by the value of a roof and furnace.  You’ll need to consider this.  I think you have a nice cash flowing property.  If you feel you need the cash flow to take care of bills due to your furlough then selling might be your only choice.

I wish you the best of luck.

Richard A. · Answer

Hey Jessica. Seems like you're a long distance investor as well. Any chance of partnering up with someone local to Bedford on the repairs?

What would you do with the funds if you sold? Where will you reinvest the funds? And will you even break even? A buyer will likely also notice the repairs needed and your asking price may not end up being the purchase price.

Have you refinanced already?

I'm a proponent of keeping properties as long as they are profitable by at least $1.

Jessica Beard · Answer

@Gwen Fyfe Thank you so much for your insight. It is great to get opinions from investors in the same city as my property.

Gwen Fyfe · Answer

Hey Jessica, just reading through this thread after our conversation about my roofer. I took the liberty of looking the property up on the county auditor site. The $85k is a little high - I've purchased 3 duplexes that size or larger in Bedford, with comparable or fewer repairs, for about $75k each - but not a horrible deal at all. Especially with the location! That's a lovely spot for families and a nice large lot. And you're getting solid rents.

(You might be able to increase it a little when things calm down. I'm getting $850/side for 2 bed/1 bath at one of my Bedford duplexes - nice units but my building isn't set back from the street like that and isn't right next to such a nice large park.)

I'd hang on to it. It's a nice investment, you just need to get through this tough time. See if you can get the roofer I recommended to take a look, they're really good about doing only the repairs that are most urgent. If you can't get in touch with them let me know and I'll see if I can bug them. Also, my husband is in the neighborhood doing the small repairs on ours all the time, if you want someone who isn't interested in making a buck off of you to drive by and take a look.

If you do decide to sell it, let me know and maybe we can avoid realtor fees! ;)

James Mc Ree · Answer

I agree with @Kenneth Garrett.

Roof - It's old, but still working. Call a few roofers to assess it. They may find a place to patch that extends life and can give you a quote to replace. Save to replace.

Furnace - Old furnaces can keep working great. There aren't a lot of moving parts in them and usually few electronics. The most I would do with it is have it serviced to ensure it is operating as well as can be, but I would also hesitate that the technician might break something. Doing nothing with it is fine, but save for a replacement. You can get quotes for this too.

Crack - Ignore it if there are no bugs or water coming through it. Get crack patch/sealant at HD/Lowes if it is bothering you or needs repair. Concrete patch would be used for a wide crack.

Check for federal, state and utility aid programs for a new roof or furnace, especially for unemployed/furloughed people.

Bjorn Ahlblad · Answer

@Jessica Beard I think you could have done a lot worse. You bought a property that needs some capex but it also returns cash. I would do whatever to keep this property. All the best!

Jessica Beard · Answer

@Darius Ogloza I will be better prepared and more informed next time. In the meantime, I need some advice on how to handle the current situation.

Jessica Beard · Answer

Thank you all for your helpful responses. @Kenneth Garrett the roof seemingly has a leak as my upstairs tenant just reported this to property management. This is what prompted my post. I am waiting to hear back on the situation and then see from there if the roof can be patched until I can save for a replacement. @James Mc Ree I should mention that the basement wall is a bit concave where the crack is, but the previous owners stated that the basement was leak-proofed during their ownership. It is not currently causing a problem but something I've been thinking about.

Jim Spatzenfeld · Answer

Sometimes when a roof looks like it needs replacement, if you're lucky as I often was, you might still get another 10 years out of it. Often it can be patched cheaply to buy more time. If it only has one layer then most cities allow you to just shingle another layer over it which is not as expensive as a tear-off. Also, the roof is one of the few items that tenant's really don't care about as long as there is no leak.

Should I sell my duplex?

Most Popular Reply