Delivering vacant: when it is worth the carry
Delivering a small multifamily building vacant unlocks the widest possible buyer pool - owner-occupants, condo converters, gut-renovation investors - and it removes every rent-roll argument from diligence during a time where tenancy is a touchy subject.
It also costs you carry, and it only pays when the spread between vacant-delivery pricing and occupied pricing in your specific submarket exceeds that carry plus the risk of a unit not turning on the schedule you assumed.
The variables that actually decide it are narrower than most owners expect. How many units are we talking about, and what is the realistic timeline on each. What does your debt service and tax bill look like across that timeline with reduced or no income. Whether the units in question are free-market or regulated, because that determines whether vacancy is something you can pursue at all. And whether the buyer pool in your submarket actually pays the vacant premium, or whether the investors bidding on your block are perfectly happy to buy it occupied and do the work themselves.
That last point is where owners most often get it wrong. A vacant-delivery strategy assumes a buyer who values vacancy. In some submarkets that buyer is abundant and the premium is real. In others the dominant bidder is a local operator who has managed buildings on that street for twenty years, is not intimidated by an occupied rent roll, and will not pay a cent more for an empty building than a full one. Carrying a building empty for eight months to sell it to that person is a pure loss.
We run this math for owners before recommending either path. It is a genuinely close call more often than people expect, and the wrong answer is expensive in both directions.