i'm just getting started in REI and i'm about to obtain my first SFR. My parents sing family home is located in NY and still has a large mortgage on it. My Mom doesn't want the house anymore and told me that i can take it and work out a way to pay off the mortgage.
My question is this: The house is worth 500k and there is a 350k mortgage on it. The house needs work to say the least.
I spoke to Agents in the area and I was told that people that come to buy in the area usually like to fix it themselves.
They also said that Houses don't rent out here because people coming to the area are buying. (Property taxes out here are pretty high too)
What is the best Strategy for me?
Thanks in advance!
How much would the house sell for renovated? If there's enough meat there and you have the stomach to renovate then maybe it's worth it to flip. If you were able to rent it would it even cash flow? How many agents have you spoken to? If they're discouraging you from renovating and discouraging you from renting it out, I'd probably want to verify that with a couple other brokers in the area.
Also, it's not clear what you mean when you say your mom is letting you just take the house. There could be some big tax consequences with any transfer into your name so I would suggest you speak to an account or estate planner if that hasn't been figured out already.
I would talk to a property manager in the area about renting it out and not just agents because the agent may just want a listing and be nudging you in a direction that they would get paid.
@Jason Lee it would go for about 600k+ after Rehab.
It’s definitely worth flipping but I’m interested in trying to keep it as a SFR if possible.
@Aaron klatt thanks. That’s exactly the feeling I was getting.
Then the question is does it cash flow? If taxes are high and there's still a sizable mortgage what do the numbers look like after you take into account any rehab, cap ex, vacancy, property management, etc? If you can get on the rental property calculator here that might easily clear things up for you. If the numbers work, you could maybe take out a heloc now while it's owner occupied and use those funds for investing somewhere else. If the numbers don't work then you could flip and put that equity to better use somewhere else.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Join the Largest Real Estate Investing Community
Basic membership is free, forever.