All Forum Posts by: Chuck B.

Had it dual listed up until the new tenants came along. Re listed it commercially Monday night with the new lease details and have a showing on Friday,so that's encouraging. We'll see what happens.

Thanks for all the feedback, John.

Best,
- C

John,

Thanks for the feedback!

Im interested in selling because the old monster is a little scary... Its not a perfect house nor is it ideal for offices. A little too urban and busy to be a good house and three stories and cut up like a home make it not ideal for offices. Because of these issues it's not ideal to rent and not nearly as liquid and easy to sell as something more traditional. If the commercial tenants move out I worry that it could take a year to re-rent the place, though that doesn't seem so unusual for office space around here. It is located just on the border of a very desirable area and is just five minutes to the central business district here in Louisville.

Any thoughts on what a top selling price might be given that I have a commercial/office lease now? I guess every market is different so that's a hard question. I had it listed for sale most recently for 360k but am resisting it at 420k to see if I get any bites.

Best,
- Chuck

Also from Louisville, KY. Would love to get lunch or coffee and swap stories!

Best,
- C

Do you find that paying for marketing your SFR rentals makes good sense? Where do you pay to advertise them?

I ask because in my city (Louisville, KY) a yard sign and Craigslist post will usually keep you busy with showings.

Best,
- P

I posted a while back about trying to sell my monster old house (3,915 ft). It appraised in 2010 for 350K but I was hoping for premium money at 400, then 375, and then 360k. Its currently used as a duplex and I rent the 1Br 3rd floor for 700, which is a little low. I got a commercial lease offer and negotiated my way out of the house. I rented it for 3,050 a month for 39 months. The new tenant also pays taxes and insurance on top of that prorated each month (adjusted yearly), and $420 a year to have the three HVAC systems serviced twice yearly. They have a three year renewal option with an increase of CPI over the first term. I bought the house for 175K 10 years ago and have another 40k in improvements done since then. It's zoned OR, which is an older zoning that allows either residential or office use. My PITI is currently 1485 a month but a refi is bringing it down to 1200 a month. Total tenant pmt is 3452 a month and I got three of those up front for first month, last month and damage deposit.

It seems like really good money, do you think I did OK? And, what would be a low and high end sales price for it now that it's rented commercially (offices, actually).

2nd deal: I've had my eye on a nicely fixed up side-by-side brick duplex for a while. There's a 2br, 1.5 bath 1,000 ft unit and a 3br, 1 bath 1250 ft unit beside it with a 750 ft unfinished basement. They're barely attached, sharing one corner that used to have a door between them. Clean working class neighborhood with most houses from the 40s to the late 50s. The current owner has had it listed for 175k for most of a year. It appraised for 167k a year ago. New HVACs, new roofs, new hardwood... Move in ready, but what I'd call "nice" rental quality (no granite or fancy details). The units rented most recently for 600 and 800 respectively, but both should be 50 to 100 more. His last tenants destroyed the place, which is why everything is so new now. he was gun shy to rent again.

I negotiated a 1200 lease on the whole place and am subletting the 2br to my longtime tenant (yes, I'm taking her with us when we move) for 700. I also negotiated an exclusive purchase option at 155k for the next year, so I can save for a few months to make a down payment. My thought is that I'd buy it owner occupied with a 3.6% 30yr loan and live in the bigger unit for a couple of years. This should take the PITI to 900 at that time (20% down).

Now, my question on this is a bit loaded. My other SFRs were nice homes in bad areas. Not terrible streets, but not great areas. Not war zones either though. They ran 35 to 55k (all in, with some light rehab) and rent sec8 for 725 to 925 a month. And they're good tenants for the most part. The reason I'm interested in the much more expensive duplex is I want to diversify. I'm afraid of continuing to buy in shady areas, and who knows what happens to sec8 in the future. . Plus, I really won't mind living in half for a while. The quiet neighborhood will be a nice change from my current urban location. My thought is that I'll move out in a couple of years and keep it for rental.

Am I stupid to consider buying the duplex? Should I double down on sec8 properties? Are the numbers bad?

Best,
- Chuck

Jon,

You're right, I'm not overly motivated to sell it. I figure if I can get a great price out of it, it would be worth moving, but letting it go for a lot less isn't very appealing to me.

You're also right in that it's a unique property, the zoning, age and size make it unusual. My agent said there's possibly 7 or 8 folks a year here in town looking for something like this place (a large live/work setup) but he's convinced it will sell residentially (eventually) to a family. Despite the price per sqft being one of the lowest in the area for these really large, old houses, I still think that selling it commercially is the best shot I have of getting a good price out of it, so I'm on the other side of that bet.

It is zoned for and actually could be converted easily into three or maybe even four separate apartments, but I'm not sure it would actually bring more from a lease perspective that way. In fact, I'm positive it wouldn't bring the $4,000 we were offered from one of the non-profits (for use as offices).

Talking through this, I think you've helped me realize that I should have taken that $4K lease offer and just moved out, despite the sort of deal I'm looking for.

15% cap rates are what I look for personally (more distressed properties, rougher areas) but it doesn't seem like you can get anywhere near that here in Louisville with nicer properties / nicer areas. I've never understood that. Yet, folks still buy them and lease them out, so someone must have a plan that makes sense to them.

On the upside, I've done a project every month for the past year, getting the place looking better and better. I actually feel like I live in the house I've always wanted, so that will have to be my consolation until someone comes along that wants it more than me I suppose. That's the good and bad of it.

Thanks for your thoughts!

Best,
- C

I've been investing mainly in tough areas to working class neighborhoods, and doing well with it though it requires a lot of eyes on the tenants and properties.

In order to do more deals, my wife and I have agreed to sell our home (currently being used as a duplex), take the equity for working capital and live in a much more modest home while we get some new rentals established.

We originally moved into this place due to the zoning. We were going to do a live/work situation with either my offices or her hair salon on the 1st floor and we'd live in the top two floors. I ended up buying office space with my partner nearby and she moved in with friends at a salon a few streets away, so we changed plans and rented the 3rd floor and took the first two as our residence.

The house is a 125 yr old mansion on the very edge of one of Louisville's more desirable (and pricey) urban neighborhoods. It's zoned uniquely, as only the properties on the busier edge streets are allowed, as OR (office/residential), which allows for a lot of different uses. We're currently using it as a duplex with a separate 3rd floor apartment and my wife and I live on the first two floors. Open a pocket door and some stairwell doors and the house becomes one big place again.

You can see it here: http://www.kcrea.com/jsp/listings/listing_overview.jsp?listingID=8514264

The house has a lot of commercial upgrades, and we've redone most everything else in the ten years since we've been here except for the fully functional, but not very pretty commercial kitchen on the 1st floor and some minor work that needs to be done to the 1st floor's half bath. I'm hesitant to touch that kitchen, as some potential buyers have expressed interest in it (a professional chef thought about using the first floor as a small cooking school and living on the top two floors).

The house has been listed for a year and we recently dropped the price 20K, which has spawned a lot more lookers. However, the majority of offers that we get are to lease the space (both commercially and residential) but no purchase offers yet. We've had a $3K a month commercial lease offer, a $4K a month commercial lease offer (both for non-profit offices) and most recently a $2,500 a month residential lease offer (which we think is a little low).

I'm loathe to rent this place for a couple of reasons... The biggest issue is that I still have a 150K mortgage on it and leasing it wouldn't give us the large, up-front chunk of money to do more deals in small SFRs that I normally work in. The other problem is that it's basically a large antique, we've spent a lot of time and money putting the pieces together with as much integrity as possible and I'm scared of what (especially a commercial) renter would do to the place.

The most recent lease offer (residential for a doctor's family, 2 year lease) at $2,500 prompted my agent to try to do a dual deal, whereby he would sell the house to an investor and simultaneously close the lease to the renter. They're working on this now, so we'll see.

However, if the investor liked this deal at $2,500 a month on lease, he might have loved it at $3K or $4K on lease. Compared to my small house, section 8 rentals, the money doesn't sound so great, but I'm totally outside of my comfort zone when contemplating renting such a large place.

Here's my question... at what sort of monthly lease would this look like a good deal for someone that buys rented properties? (I assume the answer might be wide). And how does the tenant type effect that equation? Are commercial tenants more desirable than residential tenants? In short, I'm wondering if I should have leased it a while ago to a commercial tenant and then listed the property for sale?

As always, any thoughts or advice is much appreciated.

Best,
- Chuck

PS. The 3rd floor, 1BR, currently rents for $700 a month (includes utilities), but hasn't had an increase in seven years. It should probably rent for $900 a month but I can't raise the rents as the most recent tenant wants a year-to-year lease and with trying to sell it, they have to endure showings and the possibility of moving out at any time.

@RayS - The Google streetview is way out of date I'm afraid. A lot of landscaping has been done since those were taken, porch was renovated, railings all painted, etc. The place will really look spectacular this summer when everything comes out and the trees leaf up.

I have it listed with a broker that does both residential and commercial listings, so it's listed on our MLS and our commercial MLS. He's got a good reputation and is all over the city. He's adamant that the place will bring something close to ask (399K) but he said it might take some time. I've been talking to him about dropping the price 20K (my "easy" haggle room, considering his 20K commission) but he doesn't think it's worth it. I believe his quote was that "There are probably 8 or 10 people a year in Louisville looking for something this big for a good live/work situation, so it could take some time." Which was exactly what we bought it for, our original plan was to live on the 2nd and 3rd floors and have the first floor be office space.

RE: Kitchen - Yes, the first floor kitchen is the "remnants" of an industrial kitchen. The cabinets are jacked, but it still has a giant, commercial hood vent, powered louvers, fire suppression system, commercial 3-bay sink, regular sink and a "handwashing" station. It's very bizarre, but someone might want to rework it as a commercial kitchen (we've had one professional chef look at the house twice). I could do a nice rework on it, but I have no idea if a potential buyer will even want it or even a kitchen on the 1st floor, so it's left as-is right now. It's fully functional, just not very pretty.

>>>Trading it for an apartment - This had never even occurred to me. Maybe I could find someone wanting a big, old house, or office space, who might want to unload some rentals. That could accomplish the same thing. I'll have to start thinking about how to promote that sort of deal.

RE: FISBO - The only reason I'm contemplating this is that I could easily drop 40K off the price today (my built-in haggle room and his commission) and see if it picks up the showings any. I'm not sure if 359K vs 399K is a big enough drop, but it seems substantial enough to try it...?

Best,
- C

@Jon - Perfect, just what I was looking for! Thanks so much.

I'm trying to get a good idea on rental rates for various types of properties (MF vs SF, total rooms, etc.) in my city. Some areas I know well, others are a giant, black hole in my mind.

All of the online sites make it easy to produce geographic maps with SALE prices and SOLD prices, etc.

However, where does one go to pull together a RENTAL RATE map? Pouring through Craigslist ads just doesn't produce a picture and the idea of typing all of that information in is just a no-go. I've looked at some other sites and most don't seem to have enough rentals to produce a clear picture.

How do you do rental rate research?

Best,
- C