Why Good Properties Still Sit on the Market

The Gap Between Price and Income

Some properties look great but still do not sell. This happens because residential properties are priced based on the local housing market. This is what other people are paying for similar homes. Commercial properties, on the other hand, are priced based on the income they produce.

In many growing areas, property values rise much faster than rents. This creates a gap. A house might be worth $400,000 to a family who wants to live in it, but the rent might only be $2,000. For an investor, that $2,000 rent cannot support a mortgage on a $400,000 house.

The 2-4 Unit "Grey Area"

This gap is even more dangerous for small multifamily properties (duplexes, triplexes, and quadplexes). These properties fall into a "grey area" of real estate. They are legally residential, so they are often priced like single-family homes based on nearby sales.

However, because they are investment properties, the financing needs to be treated like a business. If a buyer takes out a traditional loan on a triplex where the rent doesn't cover the payment, that loan is often considered predatory or mathematically impossible to sustain. Creative finance solves this by restructuring the deal so the property's income can actually support the purchase price.

The Financing Failure

Banks look at today's numbers, not future potential. If the current rent doesn't cover the mortgage and expenses today, the bank will often deny the loan or require a much larger down payment. This causes financing failure even when the property is solid and the area is growing. This is a primary reason why good properties sit on the market for months without selling.