Need to sell a fourplex? Do the opposite of what I did
This story really begins back in 2001. I awoke to the DJ on the clock radio saying “I don’t usually tell people to stop listening to the radio and turn on their TV, but you need to turn on the TV right now.” I sat straight up in bed and just then the phone began ringing.
“OK, OK,” I responded to the panicked voice on the other end. “I’ll be there as soon as I can.” I got dressed, grabbed a mini television and ran to my car. I saw the second tower fall in real time from my office.
I was working in a startup travel company at the time and all of us working there knew that while this was mostly a horrific attack on America, we also knew the travel industry as a whole would be in deep shit.
There was a team meeting a few days later. There was one topic on everyone’s mind: layoffs. People were canceling hotel reservations left and right and no one (and I mean no one) wanted to fly. And remember this wasn’t long after the dotcom crash. The stock market was in a shambles. How devastated would the overall economy be when it was all over? Our vice president reassured us that no one was talking layoffs. He used the analogy of another disaster and calmly walked us through how he expected the travel industry to gradually come back. The anxiety among the team members quickly eased up and we went back to doing our jobs and hoping there wouldn’t be any further terrorism.
That’s when an interesting turn of fate changed my life forever. In a move of strategic brilliance, my company moved quickly to buy up the unused hotel inventory and to lock in favorable long-term contracts with hotels. As things recovered, there my company stood, the entire travel industry’s balls in its tight grip. Our stock soared over the coming years and even mid-level workers like myself were suddenly awash in unexpected money. In a truly twisted mindfuck, we found ourselves benefiting indirectly from the attack. I don’t like to think about that too much.
Anyway, flash forward a couple years. While I was certainly wasting my share of money on stupid crap like everyone else, overall I was more careful than most of my friends. And I was committed to not losing this small fortune. I decided to place my bet on real estate. After losing out on a couple nice properties due to a slow-moving realtor, I fired her and found a new realtor, a super sharp guy who knew the area very well.
Nothing happened for quite a while until I got a sudden call. “Nick, one owner is selling a dozen fourplexes right now. We need to meet, most of them are already sold!” We met and looked over the properties that hadn’t been picked up yet. Two fourplexes were left. Both were selling for the exact same price. Rents were about the same. Both had other pros and cons. Which one should we buy? We went back and forth on it for awhile trying to decide.
Finally, I paused, flipping the papers back onto his desk. “Tell you what,” I said. “Instead of 20 percent down on one, let’s buy both of them with 10 percent down.”
He did a little “double-commission” happy-dance and begin writing up the paperwork. That was 2003.
I researched property management firms, hired one, and began doing all the needed work myself (there was a lot). Every single weekend was spent fixing buildings, hauling appliances, fixing electrical outlets, repairing drywall, etc.
Meanwhile my property manager felt it was their personal role to be sure and empty out my buildings. I went from eight units full to maybe two or three occupied. Every time I brought it up with them, they shrugged and seemed unconcerned. My stock money was spent covering mortgage payments. Disaster!
I fired the property manager and hired another one who filled the units immediately. Cash began flowing and I started to relax. But I was still doing most of the work myself. That changed when I took a week of vacation to paint a unit that was looking a little grungy. I bought some materials at Home Depot and was preparing to get started. Somehow I decided to get a price from some Russian dude I found somewhere. When I saw how low the number was, I knew my days of working on these buildings was over. From then on I hired out all my work.
I sold one of the buildings before the real estate crash and re-financed the other one down so my payment would be lower, essentially just forcing the cashflow. I wish I’d sold both of them at that point.
But I didn’t. And as the years went by, I collected decent cashflow, but I never spent the money needed to bring up the rents. Instead I collected varying amounts of money over the years as tenants moved in and out as the needs of their lives changed.
The earth continued spinning around the sun and I focused on other areas of my life. Marriage, other real estate projects, travel, career changes, a new house and a new baby. Life was good.
But that little building was always there in the background, threatening to disrupt everything. What would be the next big surprise? A fire? A lawsuit? A new expensive repair? I’d cringe whenever the local news began a story with “an incident at a local apartment building left two dead this morning…”. Crossing my fingers, I’d chant “don’tbemybuilding-don’tbemybuilding-don’tbemybuilding” until the details came out.
Then the real estate crash happened and I was stuck. When the market came back a little bit, I tried to sell it. Year after year. No. Offers.
Things finally came to life last year when I finally got a few offers, but the buyers weren’t that serious and walked. Mostly it was bottom feeders and people looking for brand new inventory at rock bottom prices. A few of the offers got to the inspection phase and there was always something scaring people away. A roof that seemed soft, a mildewy windowframe, older electrical panels. If it wasn’t one thing, it was another. Since the building made money and I didn’t need to sell it, I just held it.
So this year, seeing a much better market and in particular a much better credit market, I tried again. And guess what? I got an offer almost immediately! That was in mid-May. Ten years after I first bought it.
And that’s when the story really begins.
My next post will continue the story of how I finally sold my fourplex and all my lessons learned!