A well-managed duplex can be a valuable piece of real estate when it comes time to sell. Here’s how to sell a duplex and what you’ll need to get the best possible deal.
Knowing how to sell a duplex can make this valuable piece of real estate more lucrative, and one investors will want to add to their portfolios. With both units in the same location, it’s much easier to manage your rentals. But like any piece of real estate, there are situations where you’re ready to figure out how to sell a duplex and move on.
While learning how to sell a duplex can be very simple, there are still some things to consider. Who’s the right buyer, and what are the market conditions each type needs? SoldFast will cover that and other details in this guide to help you learn how to sell a duplex. We’ll take a look at the most common options for selling your duplex and how to navigate the process successfully.
How to Sell a Duplex to Retail Buyers
Retail buyers intend to actively use the property they purchase, becoming owner occupants. For duplexes, this can mean house hacking, which involves living in one unit while renting out the other to offset your cost of living. This kind of arrangement is growing in popularity, especially with the rise in working from home during the pandemic.
But in most parts of the United States, it’s still easier to find single-family homes than duplexes. This lack of supply is a great asset for current duplex owners, but you will need at least one empty unit in the duplex to attract these types of buyers. What’s more, while some owner occupants won’t mind a fixer upper, most will want updates for a ‘move-in-ready’ duplex. New flooring, painting walls and ceilings etc. Completing these renovations can be harder if both units of the duplex are currently occupied.
This is important to consider. If an owner occupant buyer wants a duplex with current tenants, you will have to provide a 30-day notice for one of them. And if you want help from a mortgage lender, you’ll also need to occupy the property anywhere from 30 days to 6 months.
Finally, a small number of retail buyers want both units empty. These buyers usually work from home and view the other unit as their office. If you’re considering selling to this kind of buyer, don’t forget to provide the 30-day notices to both tenants. Having good tenants and timely rent makes investments reliable, so be sure to take that into consideration as you make your final decision.
How Selling a Duplex to Investors Works
It’s usually a lot easier to learn how to sell a fully occupied duplex to real estate investors. These kinds of buyers want turnkey solutions with tenants and property management already in place, so they won’t want to empty either of the units for house hacking or remote work.
However, two occupied units aren’t always enough to win over real estate investors on buying your duplex. They’ll review specific numbers to determine if your duplex makes sense as an investment.
Some of the metrics a real estate investor will consider are:
- Trailing 12-month profit and loss statement: P&L statements offer several insights, such as past repairs and whether the tenants have consistently paid rent on time.
- Cash flow: A positive, consistent cash flow is something every investor wants.
- Average rent: Investors compare your rent prices with the market’s to see if adjustments would improve cash flow.
- Amenity costs: Adjusting tenancy to exclude utilities like Wi-Fi or garbage is a way to lower long-term maintenance costs, another top priority for investors.
Some real estate investors will have an even greater sense of urgency due to 1031 exchanges, which require Investors who recently sold a duplex to buy another within 180 days to defer their capital gains. A suitable replacement property needs to be chosen within the first 45 days of the sale, giving investors a short timeframe. It’s easier to sell to these types of investors, and you might be able to sell the property at a premium. However, they are usually experienced buyers and are likely considering other duplex properties at the same time.
Understanding a Pro Forma
When there are tenants in place, selling your duplex to a real estate investor also requires a pro forma. It’s not the only resource you need to present and sell your property, but investors want any metrics they can use to analyze the viability of your duplex. This profit and loss document assumes no repairs and that all rent is paid on time, giving the investor an idea of how much they can earn when conditions are good. However, some real estate investors refer to these documents as “pro-fake-as” since they don’t account for surprises.
You should still review a pro forma since it can reveal opportunities to lower costs and demonstrate a higher potential cash flow. Then, buyers may feel more comfortable buying the property.
Higher Costs Long and Short Term Can Make Selling Harder
Real estate investors don’t only consider current cash flow. They also review what a property could look like in a few years. Even if good neighborhoods give investors the opportunity to raise rent over time, expenses like interest rates, property taxes, and insurance premiums are also going up. Any of these can reverse a positive cash flow into the negative. At the same time, some real estate investors may be eager to work in these neighborhoods, where those uncontrollable variables give them more flexibility with rent. Still, properties that are dated or in disrepair can struggle to attract many real estate investors. It costs a lot of time and money upfront to restore an old duplex, especially when the issues are structural or involve updating utilities.
Don’t Sell, and Convert the Units into Condos
When sellers have enough time and resources for these kinds of projects, turning the duplex into condo units is the most lucrative option. As you work on finding your home value, remember that local rules and regulations determine how to sell your duplex, and you’ll have to gather a lot of paperwork for:
- Securing regulatory approval
- Planning and zoning approval
- Setting up an HOA
Because of these requirements, investors who know how to sell a duplex often stick to modernized units in desirable areas, such as those you’ll find in big cities like New York, Washington D.C., and Los Angeles. “Condo-izing” these units also increases home value and may help you justify higher rent.
Before you start making any updates, assess the area’s taste for condos and townhomes, as these two kinds of properties thrive in some markets and lag in others.
How to Sell a Duplex to a Cash Offer Investor
When front-loaded costs are high, paperwork is piling up and you just want a quick exit, selling a duplex to a cash buyer can be a great option. Investors like SoldFast buy your property as is and make a fair cash offer based on the current condition and area’s market. SoldFast then handles the entire process, from making repairs to relisting the home. Don’t hesitate to request a free, no-obligation quote to learn how much you’d receive for your property as-is.
For All Options, an Investor-Friendly Real Estate Agent Makes a Difference
You can figure out how to sell a duplex on your own and save a little money, but it will likely take weeks or even months longer to sell your property. Selling a duplex is very different from selling a single-family home, you might also not get the best deal or miss some critical paperwork.
But if you’re committed to learning how to sell a duplex without renovations or a cash offer, you should at least learn how to hire the right real estate agent, and work with someone who’s investor-friendly. These agents know how to work with real estate investors and how to present your property. They can also help you with the most complex parts of the process, like crafting estoppel agreements and other contracts. Having the right experience in selling your duplex or similar multi-family properties will limit delays and other issues, ensuring the sale goes off without a hitch.
The professionals at SoldFast can help simplify selling your duplex, with options like cash offers, fix-to-list services and real estate consulting. Reach out to your nearest representative online or give us a call at 855-276-5332 to get started.