Should I sell my property?

Question

I have a 4 unit in NJ that i purchased 4 years ago.  From the beginning this property has been difficult.  I had to evict 3 out of the 4 units initially.  Thereafter I have had to take tenants to court constantly to get them to be able to pay.  Currently, I have a problem tenant who has not paid in over 12 months and due to Covid cannot do anything about it.  They also have forced my best paying tenant out by apparent harassments.  The other two tenants are always 1-2 months behind at this point.  Obviously during normal times I could proceed with court hearings but due to the moratorium and super slow court hearings, I am stuck.  I am thinking of selling but recently drove by the property for the first time in a year (i have a property manager and bc of covid have been mostly working from home and staying local) and saw a bunch of new apartment buildings nad restaurants being close to completion just a block a way. Could this be a sign for a neighborhood revitalization or should i sell while the investor excuberence is still high in spite of the difficulties in evicting? I am very concerned about the long term ability to evict tenants in NJ and the state leaning more and more towards being tenant friendly.

Joe Villeneuve · Answer

You can either bleed to death slowly or....

Tim Wasson · Answer

The eviction moratorium is only for non-payment right? If your tenant is harassing other tenants, I would think you could still make a case for eviction.

At least this is what I was told for my state. I had to evict someone during COVID. She hadn't paid for several months, but she did threaten another tenant and that other tenant got her doing it on video. That was enough to get her out of the building.

Evan Polaski · Answer

@Devang Patel, who is doing your leasing?  In 10 yrs as a landlord (by no definition big time) and having 9 doors at one point, I had to post one notice to vacate, once, and the tenant had already agreed to move out.  I posted notice just in case she didn't move out as agreed.

When I had a manager (technically when through 3 over the course of a couple years), I had far more turnover than I ever had when I self managed.

Are new apartments and restaurants a sign that others see value in the area? Typically, yes.  But, the headaches won't go away unless you clean up operations.  If your manager is also leasing, it sounds like you need a process to screen tenants and stricter criteria of who you will lease to.  I would consult an attorney about your recourse for getting the non-payers and harassers out.

As JD mentioned, demand for multifamily is very high, and interest rates are very low, so it could be a good time to sell. But if an buyer asks for current collections and proof of payments, you are selling an asset that is essentially 25% unleasable with a non-paying tenant and two other units that will no show well on an aging report.  You may find an unsophisticated buyer that doesn't ask for this information, but in reality they will and the value will be dramatically reduced because of the operations.

Mark Gallagher · Answer

@Devang Patel it can't hurt to list it and see what kind of results you get. But you're essentially selling it mostly sight unseen because it doesn't sound like you will have cooperative tenants who want to show your property. If there is that much new construction going on, perhaps you would get a speculative buyer. We have people squatting in some of our houses for over a year that started before Covid19, so I feel your pain. Our attorney is telling us it could be another year or more while these people squat for free, and we have no recourse.

David Thomas · Answer

@Devang Patel demand and prices for investment properties in Union County is as strong as ever (a bit of a plateau last month though) and if you do sell it should go quickly. But yes the tenant situation will be a concern.  I don’t know your process for tenant screening but this sound like an opportunity to reevaluate your approach.  Otherwise you could be in the same boat with future tenants, plus money spent on rehab.

Linden has a strong rental base overall with low vacancy.   If you can make a good profit selling it’s worth considering.  Draw up pros and cons on paper and assess the best decision.  I am local so feel free to DM me if you want to discuss further. Glad to help.

Devang Patel · Answer

linden nj

Joseph Matarazzo · Answer

As a fellow real estate investor doing buy and hold of 3 familys in NJ, may I ask what area you are in?

Devang Patel · Answer

one of the tenants is actually now moving out today, and the tenant that is non paying for over 13 months i am trying to offer cash for keys.  If I can get them both out I can perhaps I can renovate the units and obtain a higher class tenant since the neighborhood seems to be changing.  Or it will make it much easier to sell.  Difficult choice to make.

Dena Puliatti · Answer

If it's more of a headache than anything else, sell it.  I would have a sit-down with your property manager, as I don't think you are getting the whole story. The moratorium is not a total ban.  Check it out on the CDC website.  Some effort must be made to pay.

JD Martin · Answer

Well, you will have the added problem of having to sell non-performing tenants as well as a building. So I would say if you think the area is going crazy in RE it certainly can't hurt to try to sell your problem to someone else. NJ is a good state for appreciation, and there's a lot of demand, but it's also a tenant-friendly state.

Should I sell my property?

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