The house is finished and empty in month seven, does anyone live in it

Question

I run property management, so operators call me when a luxury flip stops selling and starts costing. The question they ask is whether to put someone in the house while it waits for a buyer.

A quick note on terms for anyone new. Carry is what the property costs you every month while you own it, so loan interest, property taxes, insurance, utilities and yard work. On a high-end house that's often 20k to 30k a month, which is why a long wait for the right buyer is the main risk in this strategy. Vacant means nobody living there. Staged means furnished for showings with nobody living there.

The case for keeping it empty is simple. Showings happen whenever the buyer's agent wants, the house stays exactly as photographed, and nothing gets scratched. The case for putting someone in it is money and risk control. A tenant or a paid caretaker covers part of the carry, someone notices a leak on day one, and insurance carriers often charge more or restrict coverage on a house that sits vacant past a set number of days, which is worth reading in your own policy.

The cost is control. A tenant with a lease has occupancy rights, and what notice you owe them and how quickly you can get access for showings depends on your state's landlord tenant law. Short-term rental rules vary by city, so check the local ordinance before you assume it's an option.

How do you handle a finished luxury flip in month seven?

samantha_ruiz · Answer

I did the caretaker version on a 2.7M house that went eight months. Furnished, a guy paying well under market who agreed in writing to a two hour showing notice and to keeping the place magazine ready. It covered maybe a fifth of the carry and it absolutely saved me a burst supply line in February. What surprised me was that a lived-in house shows better than a staged empty one, and it also shows worse, depending on the day. I got one complaint from an agent about dishes in the sink and it cost me a second showing. Worth it anyway.

dpatel_re · Answer

The part I'd underwrite before anything else is what the lease does to your exit. A buyer at that price wants a vacant house at closing, and if you've signed twelve months you've either narrowed your pool to investors or you're paying someone to leave. I've seen sponsors take a lease in month seven and then discover their bridge loan matures in month ten, which turns a patience problem into a refinance problem. Keystone's structure works because a caretaker at a deep discount is really a service arrangement with rent attached, and whether that counts as a tenancy with full protections depends on your state, so get it papered by a local attorney rather than off a template.

The house is finished and empty in month seven, does anyone live in it

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