BiggerPockets

Today we closed on our 5th investment property. This one is a 3/2. 1584 sq ft. No basement. Garage and large backyard in a good area. We are trying to decide if we should rent or possibly try and flip this one.

Pictures are here if anyone wants to see them. http://www.facebook.com/album.php?aid=272890&id=612887141&l=b9a06c3437

Thanks Scott.

Here are some numbers.
Purchase price: 21,500 (had to subtract for the bank paying taxes)
Estimated rehab cost: $8,000
Monthly Rent: $850-895

I was thinking about the flip idea. I would think we could rehab this and flip it asking $49,900 -$55,000. I'm making a broad statement because flipping isn't my forte and I'm pretty ignorant in that area right now until I get experience under my belt.

The more I look at this house the more possibilities I see with it. If you go back and look at the pictures of the family room. It has the fireplace, bathroom w/shower and a sink and bar in the main part of the room. I could see that room turned into a studio Apt by creating a kitchenette. It technically could have a separate entrance. That is one reason I want that bar/sink out of there if it's going to be a rental because I'm sure a tenant would think of that possibility also. But would be neat idea if someone bought the home instead of renting and was looking for that kind of set up.

But then again, I don't know what the city policies are on that and would have to check into it. Because the utilities would not be separate and so it wouldn't be a duplex. But if you own a house I don't see why you couldn't rent out a "room" if you wanted. Am I wrong about that?

In any case, it's just an idea. Before I go tearing out that sink I wanted to see what you all thought first. Is there benefit to leaving the sink (it's the small one near the bar if you look a the pictures).

My husband also thought of turning the family room into a 4th bedroom. But that would make it a HUGE master bedroom and I'm not sure if there is any added value in doing that?

Thanks. Yeah I know that purple is awful. It's a shame because the paint job is good but the color is awful.

The tax value on this house $107,000 So our first thing will be to reduce the taxes (:

Those numbers are absolutely stellar. Even if your numbers were in the least bit off, you could easily buy two of the properties, rehab and sell, then use the proceeds after taxes to pay for a single buy and hold.

Then, rinse and repeat.

This would help preserve your precious capital and allow you to turn your activity into more rentals than you otherwise would.

The drawback is it is a lot of work, but I find fix and flipping more rewarding than just holding.

I am not a big fan of repurposing an existing into a mult-family unless absoultely necessary. Your numbers stand on their own as a SFR rental plus there is something to be said for keeping it simple.

When you go to resell, your buyer pool will be limited. There are usually issues with permits, zoning, and the tax and insurnace men will want their cut.

Of course, if the neighborhood supports this type of property, say close to a college or university, then that would be a different story. You will know your market best.

Kel,
Looks great. Lets get a tenant in there in two weeks! Don't make me come down there and help. Good luck. Keep it! The numbers look great if it isnt hard to rent.

Do you have enough money to buy more properties if you keep this?

That may be a question you need to answer before you decide what is the best option.

Personally I made a lot of money buying, holding, and exchanging up into larger properties but I also got the poop kicked out of me for a couple of years when the market tanked and I was developing apartments into condos.

I had to sell all the properties I wanted so I didn't lose the others (that I didn't want!).

Long story short is that about 18 months ago I started buying and flipping homes (instead of apartments since the apartment market didn't really have any good opportunities here in San Diego).

We have only been buying and flipping and one of the main reasons is that is where I am getting my income (wife likes to shop, kids need all the cool clothes, you know the story).

We just closed on this jewel https://sites.google.com/a/gabhartinvestments.com/3484-martin/ a few days ago for $130,000 and it was renting for $1,900 (horrible neighborhood).

It was an INCREDIBLY good deal for cash flow considering properties rarely have cash flow in san diego. It was tempting to keep it but we decided to flip it and make $50,000 (you can see our pro-forma or property financials on the property website) and use that capital to buy more properties.

I do plan on buying and holding some more deals this coming year as the market stabilized and now that the non-owner occupied loans with good terms are starting to come back and I was fortunate enough to keep great credit throughout this mess.

So in summary - IF the money out of pocket to buy & fix will not affect your ability to buy more properties I would buy, fix, rent for about a year or so and sell and exchange into a 4 unit do the same and keep growing the portfolio while deferring the taxes.

If on the other hand you do not have the resources to buy more properties because of this purchase and you have the ability to find more deals like this then sale and buy another deal and keep doing it.

Either way it looks like you are in a great position. Congratulations

The question will be how much capital do you have as stated before.

If you only have say 40k or 60k then you buy 3 properties and you are out of money.Yes you can use hard money for flips endlessly but the costs are high.

During many areas this is the best down cycle in some people's life times. So it stands to reason you would want to grow capital as much as possible and leverage into larger value add deals and hold for the long term.

When the market goes into high interest rate and prices mode there won't be many buyers and not as many sellers.

Flips will decrease and long term holds increase.property management will be booming but I can't stand property management.So for now I am helping my sellers sell properties and make as much money as possible.

By the time the cycle changes I hope to have a bunch of cash flow.

Hi Kel,

I'll like to send you a PM, I just close on my first property and I have a few questions I want to ask you

Thanks

Why not buy a few more right now and have them all done by spring with the help of a good handy man who can work full time or a GC? Your numbers look good and it looks like you are afford to hire it out and save the stress.

I am buying as much as I can. I plan for next year to be the end of the buying for a long time so I want my company to be the size I want it to be for the rest of my life. 200 good units or bust!

Jeffrey,

Hubby seems stuck in the mode "If I can do that kind of work myself why would I hire it out and spend more?". I have yet to convince him that he's slowing the process way down doing this all himself and that we could make more $ in the long run. I'm still working on him though to see the logic my way (: