Buy and Hold turned in to Flip in less then a week.

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Buy and Hold turned in to Flip in less then a week.

Ahsan Harriel
Atlanta, GA · Member since 2019 · 14 posts · 14 votes

So I have this duplex under contract in Macon, GA which my intentions where to buy and rent out. So my closing isn’t for the next couple weeks but after running title search I decided to show some initiative and start working on the house nothing crazy just cutting the yard and cleaning up the house. Nothing that actual cost money just time. So by closing day I am ready to just str8 into rehab which I intend on doing my self. So after cutting out the jungle around the property you can now actually see it. (Neighbors told me they had no idea a house was there) I get approached by the closest neighbor who owns the house next door and plans on doing the same using it as a rental offers to buy the house at 3x what I paid for it??!! I had no intention on being a wholesaler. I am in for the long term cash flow. Do I use this as an opportunity to increase my number of doors or should I just stick to the original plan. Did I just become an expert wholeseller lol only a week after signing up for BiggerPockets lol. 

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John Thedford
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
7y

A flip means you pay taxes on the flip as ordinary income. Rentals will give you tax advantages.

3Reply
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  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    7y

    A flip means you pay taxes on the flip as ordinary income. Rentals will give you tax advantages.

    3Reply
  • Ahsan Harriel
    OP
    Atlanta, GA · Member since 2019 · 14 posts · 14 votes
    7y

    I have the property under contract for 5500$ he offered 15k as is and was ready to give earnest money today. Only problem is I didn’t have any intention on flipping so there hasn’t been any talks to the seller about assignments. Just a standard purchase agreement with 10% earnest already deposited. 

    0Reply
  • Amy Aziz
    Specialist · Los Angeles, CA · Member since 2019 · 587 posts · 269 votes
    7y

    @Ahsan Harriel I would definitely look into the tax fees but 3x times what you paid wow! 

    1Reply
  • Ahsan Harriel
    OP
    Atlanta, GA · Member since 2019 · 14 posts · 14 votes
    7y

    I’m almost certain I can find more deals just like this one. The house wasn’t on the market i just scouted the neighborhood found the owner through tax assessor site and used white pages to get in contact. 

    5Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    7y

    Interesting market where you can buy a duplex for $5500. I assume rents are over $100/mo. You’ve got a cash cow. If you can find more keep this as your base. Divide that $8-9,000 you might make by how how many months it will take you to make the same in rent. If it’s less than 5 years you’re making too much to sell. 

    1Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    7y
    Originally posted by @Ahsan Harriel:

    I’m almost certain I can find more deals just like this one. The house wasn’t on the market i just scouted the neighborhood found the owner through tax assessor site and used white pages to get in contact. 

    Awesome.

    What are the white pages...

    2Reply
  • Ahsan Harriel
    OP
    Atlanta, GA · Member since 2019 · 14 posts · 14 votes
    7y

    It probably needs another 10k in rehab. I really don’t have it all in full so I would have to work on it as I get it. I was just thinking that the profits would help me get my foot in the door and maybe secure 2 in that same area with a few dollars left over for renovations. it’s a 1b 1bth on each side water and meters already split. Median rent is like 250-300 for that area. My plan was to actually knock the wall down and make it a 3 bedroom single family which will do like $650. I appreciate all the input. Offer came so fast I really was just excited to share it with someone so I posted it 

    2Reply
  • Ahsan Harriel
    OP
    Atlanta, GA · Member since 2019 · 14 posts · 14 votes
    7y
    Originally posted by @Mike Dymski:
    Originally posted by @Ahsan Harriel:

    I’m almost certain I can find more deals just like this one. The house wasn’t on the market i just scouted the neighborhood found the owner through tax assessor site and used white pages to get in contact. 

    Awesome.

    What are the white pages...

     Www.whitepages.com 5$ a month and you can look up phone numbers by name and address.

    0Reply
  • Lee Taylor
    Investor · Warner Robins, GA · Member since 2016 · 112 posts · 70 votes
    7y

    @Ahsan Harriel take the bird in the hand and sell it and take your profit. The challenge with a low income area like that in Macon is that you planning on doing the work in segments will draw the attention of vandals and that’s a huge problem in those low income neighborhoods.

    3Reply
  • Adam Fiore
    Investor · Simsbury, CT · Member since 2015 · 46 posts · 31 votes
    7y

    @Ahsan Harriel

    Great job my man.

    Way to show initiative. I suppose it depends on how you determine what your time is worth.

    It also depends on how long it would take you to save the funds to continue to fix your purchase.

    Calculate what you have in it so far

    Sounds as though you have a couple days into cleaning and maybe a couple more to find the property. If your certain you can find more similarly

    Priced properties, that you can then self fund

    It seems as though this would be quicker then

    The the yo-yo effect of a little bit of improvements at a Time. Which kills moral and sucks because you have a one way cashflow directly into the property.

    Instead of waiting to do a little bit of work as funds come in seems to me it’s better, quicker, more inline with your skill set to continue bird dogging deals

    Think about it this way

    650-insurance- taxes === guessing

    Sub 500 ?\ 10,000 takes how many months ?

    In essence could you make more then 10k with

    The total 15,500 under your control in less then 20 months plus however long it takes you to finish your rehab and find a renter, by doing multiple deals ? If so then sell

    If not then stay the course

    1Reply
  • Bryan Cavellier
    Rental Property Investor · Syracuse, NY · Member since 2019 · 90 posts · 34 votes
    7y

    @Ahsan Harriel there is a reason he/she wants it for 3x the cash. Its a great cash cow so keep it for yourself! Unless you need the short term money but I would let it appreciate and cash flow... Stick to the plan it sounds like a great buy.

    0Reply
  • Tyler Hardy
    Rental Property Investor · Williamson, GA · Member since 2018 · 78 posts · 35 votes
    7y

    @Ahsan Harriel I would go with Lee on this one. Quick turn over and no renovation means your dollar can be used on your next project faster. I'd take the cash, pay the capital gains, and do it again. It's good to get lucky sometimes, but don't let it go to your head. Good job though!

    1Reply
  • Lee Taylor
    Investor · Warner Robins, GA · Member since 2016 · 112 posts · 70 votes
    7y

    @Bryan Cavellier it won’t be a cash cow after the first of many issues with tenants.

    0Reply
  • Bryan Cavellier
    Rental Property Investor · Syracuse, NY · Member since 2019 · 90 posts · 34 votes
    7y

    @Lee Taylor not a good neighborhood?

    0Reply
  • Ola Dantis
    Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
    7y

    @Ahsan Harriel Good on you to take some initiatives. 

    A duplex at $5k and someone is offering $15k? You should take it and walk away. That is an extremely low purchase price for anywhere in the country. 

    Perhaps, you want to take that 15k and go invest that money in a better neighbourhood. 

    1Reply
  • Account Closed
    Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @Ahsan Harriel:

    So I have this duplex under contract in Macon, GA which my intentions where to buy and rent out. So my closing isn’t for the next couple weeks but after running title search I decided to show some initiative and start working on the house nothing crazy just cutting the yard and cleaning up the house. Nothing that actual cost money just time. So by closing day I am ready to just str8 into rehab which I intend on doing my self. So after cutting out the jungle around the property you can now actually see it. (Neighbors told me they had no idea a house was there) I get approached by the closest neighbor who owns the house next door and plans on doing the same using it as a rental offers to buy the house at 3x what I paid for it??!! I had no intention on being a wholesaler. I am in for the long term cash flow. Do I use this as an opportunity to increase my number of doors or should I just stick to the original plan. Did I just become an expert wholeseller lol only a week after signing up for BiggerPockets lol. 

     I dunno...this post says 3x the money, the next post says $10k more than you are paying ($5k to $15k).

    It may very well be a $15k duplex is also a very good deal, and there are not many of those to be had. If that is the case, then maybe you want to keep the nugget for yourself, consider the $10k a bonus. On the other hand, if you can go out and buy 3 more @ $5k all day long, it's a no-brainer - sell it to the neighbor and go get 3 other ones.

    In any event, a $5k-$15k property that can rent for $1300 a month is a great thing, so long as the cap-ex isn't too significant, which it usually is in these sorts of "cheap" properties. 

    Congrats!

    0Reply
  • Rich S.
    Central, MN · Member since 2015 · 148 posts · 184 votes
    7y

    There is money to be made in low income rentals, but it's more work and much easier to do if you are close by(in my opinion).  It also comes with more turnover and maintenance costs as statistics would show low income renters are harder on units then others.  The fact that you are low on cash and only able to fix up as you can and can come away with cash to move to the next deal and even do better if you sell, I would sell.  The catch 22 of low income rentals... low cost of entry, but not the best way to start in the business, in my opinion.  Too easy to lose your shorts and end up on the outside looking in.  Risk is higher, so if you can wholesale your way to better opportunities, I think that may be a better plan.

    1Reply
  • Clint ShelleyPro Member
    Surveyor · Dothan, AL · Member since 2014 · 425 posts · 391 votes
    7y

    Sounds like a crappy neighborhood. I'd take the cash and save. Go to small bank and get a loan for a 35-50k fixer in a better neighborhood. Use your 15 for rehab and then BRRRR that out for next deal. You can lose money on a free house in a bad hood. Good luck.

    Clint

    2Reply
  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    7y

    @Ahsan Harriel

    I would keep it every day. Making only $9500 and then taxes on that aren’t worth it to me to sell. If you can rehab it for $10k, you’d be all in at $15,500. A steal.

    What would it be worth rehabbed?

    0Reply
  • Randall Weatherall
    Real Estate Agent · Memphis, TN · Member since 2019 · 261 posts · 253 votes
    7y

    Tell him it's $20,000 and move on with the sale.

    1Reply
  • Ahsan Harriel
    OP
    Atlanta, GA · Member since 2019 · 14 posts · 14 votes
    7y
    About 30k but after studying the market and getting To know it a little more. I do see a lot of other houses that need significantly less work in the same price range. I kinda just jumped on the first deal I found. For everyone talking about tax purposes is 1031 not an option? If I were to take the profits and use that to buy 3 more like properties would this work? I think the potential buyer has more of a personal connection with the house and is not looking at it as far as a good or bad deal. Remember he owns the house next door and the 2 behind it which none of the 3 are being rented and he has had possession for over 5 years 
    Originally posted by @Matt M.:

    @Ahsan Harriel

    I would keep it every day. Making only $9500 and then taxes on that aren’t worth it to me to sell. If you can rehab it for $10k, you’d be all in at $15,500. A steal.

    What would it be worth rehabbed?

    0Reply
  • Ahsan Harriel
    OP
    Atlanta, GA · Member since 2019 · 14 posts · 14 votes
    7y
    The neighborhood definitely has a lot of potential there is a Walmart, Kroger, Home  depot And any restaurant you can possibly name within a 10 min walk from the property not to mention a huge highway expansion almost complete. It is mins from downtown. This wouldn’t be my first time trying to make something happen in a so called warzone. I am trying to avoid banks at all cost right now because my main concern is cash flow. If I can sacrifice a month and a half’s worth of work to be able to pay for the home i really don’t see how I can lose. 
    Originally posted by @Clint Shelley:

    Sounds like a crappy neighborhood. I'd take the cash and save. Go to small bank and get a loan for a 35-50k fixer in a better neighborhood. Use your 15 for rehab and then BRRRR that out for next deal. You can lose money on a free house in a bad hood. Good luck.

    Clint

    0Reply
  • Ahsan Harriel
    OP
    Atlanta, GA · Member since 2019 · 14 posts · 14 votes
    7y
    Wise choice of words. It is truly all luck. I am trying my best to take it with a grain of salt but there is a part of me that knows the only reason I got lucky is because I did something to have a ground to stand on. You worst investment is the one you never attempted and I keep telling my self this day in and day out. I know I am on the kiddie pool side of the spectrum but I have to at least attempt to take my shot.
    Originally posted by @Tyler Hardy:

    @Ahsan Harriel I would go with Lee on this one. Quick turn over and no renovation means your dollar can be used on your next project faster. I'd take the cash, pay the capital gains, and do it again. It's good to get lucky sometimes, but don't let it go to your head. Good job though!

    0Reply
  • Tyler Hardy
    Rental Property Investor · Williamson, GA · Member since 2018 · 78 posts · 35 votes
    7y

    @Ahsan Harriel Couldn't have said it better myself. From the sound of your posts, whatever you decide to do you'll learn from it. That's the most important thing and worth well over $10k.

    1Reply
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