Flipping A Duplex - Should I Rent It And Sell Or Sell It Vacant?

Question

Hey guys,

Under contract w/ a duplex for 33k, ARV is 70k ( 2 closed sales very similar @ end of April, leased). Light rehab needed, less than 10k. Would you lease it first to sell it w/ the income stream or sell it vacant and why?

Cheryl C. · Answer

A buy and hold LL would be far more attracted to a leased property (I know I would) as long as you have good tenants in place.  I'd want to see their credit report, references, etc.  Don't just throw someone in there.  Nobody wants to take on problem tenants.

Account Closed · Answer

I would lease it up since the ARV calculation is based on 2 closing that are already leased. You have more at your disposal to pitch. ie.ROI. You still want to make sure you put a good tenant in the property.

Tony Nguyen · Answer

great idea Rob!! that is a very sexy deal lol

Rob Gillespie · Answer

If you can sell the contract without bringing it to close, do it! You may want to have lease agreements in place first. This will show proof that they are livable, and there will be less uncertainty on the amount of work needed to make them livable.  Plus the potential buyer can calculate their ROI. If it needs 10 k in work, have a reputable contractor put a bid together. You will have an entire package you are selling. A purchase agreement, lease agreements, and a rehab contract. To make a deal sexy, take away the unknown.  :lol:

Account Closed · Answer

OH....and i was meaning to say this point

List it when the property is ready for sale, don't bother waiting to fill the units.    Once the property has a unit rented change your listing.    I highly doubt it's going to change one way or another assuming you rent it to a decent tenant at market rates.

Matthew D · Answer

While it's not going to be worth any more when you rent it out, you make it more attractive to an end buyer. Seriously, if you post it every day on craigslist, you're looking at 2 weeks before you have it rented it out. It's worth it to make an easy sale.

Account Closed · Answer

toni, i bought a pair of duplexes in my neck of the woods with the intentions on flipping about 5 months ago.  Paid 45k for the pair and did roughly 5k/door in repairs/upgrades.   I relisted them for sale at 130k which was slightly higher than what i felt the market value was.   The set of duplexes next door had a mortgage on them for over 300k, so i sort of hoped the guy next door would want more units to cost average.

Turned around and rented out all 4 units thinking it would help the resell, gross rent is about 1800, could of been higher but I was a little lazy and preferred better tenants.    The tenants have been a positive thing except for the hassle of having to deal with them.  (I hate being a landlord).

The only negative is the cash flow has made me unmotivated to reduce my asking price and the property continues to sit on the market without much activity.    If this was a normal flip for me I'd be usually happy to reduce the price to 110k or 99k which would make this place disappear i think.   That said, i wish ever flip had positive cash flow for holding costs.    Would make life a lot less stressful when you make a mistake and have to hold something a little longer than expected.

Tony Nguyen · Answer

good advice here everyone - i'll definitely lease it out before listing!

Travis Sperr · Answer

Agreed,  Rent it first.  If your end buyer needs financing (assuming a loan of that size is available) it will be easier for them to buy when the property is producing income.  Also the type of investor who if going to buy a turn key property is typically not the type to want to find tenants.

Good Luck!

Flipping A Duplex - Should I Rent It And Sell Or Sell It Vacant?

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