Flip or keep it, my first investment property, suggestions 🙏🏻

[Rosario Rolandi]

I purchased a property for$ 105,000 , single home in a B/C neighborhood, 3/ 2 , large lot, it will need at least $ 20,000, ARV $ 145,000. houses like this ones are for sell around 175,000 to $ 180,000 . I pay $ 15,000 down and $ 5000 closing costs, from my 401 K , leaving me with $10000 in my savings, I got to business credit cards for $9000 with 0% apr. the mortgage is $980 inc taxes and Ins. it can rent for $ 1550 . The actual tenants are paying $ 1000 , because they are leaving in a disaster home, they lease will finish in May 31st 2020. Flip it or keep it. ? My first investment property, I'm scared but hopeful and grateful!
please help 🙏🏻

[Dan H.]

I do not understand ARV being $145K to $150K when "houses like this ones are for sell around 175,000 to $180,000". After spending $20K and making the repairs you should be in the range of the other houses and if you rehab the place nice (likely will cost more than $20K), you should be at the top of the market price.

If you spend $105K + $20K to get an RE valued at $150K (ARV) the profit will be small. You start with a potential of $25K profit but that does not including cost of money (i.e. lost return from your 401K), realtor costs, or any unexpected expenses. If you can sell for $175K to $180K, then I think you flip it for the quick profit. However, if your expected selling price is $150K, I am unsure you will have a profit.

As a rental, the cash flow seems OK.  50% rule indicates expenses other than mortgage service will be $1550*0.5=$725.  $90K loan at 4.5% for 30 years = $456/month so over $250/month cash flow.  Not bad, but it will take a long while for it to add up to the profit that can be obtained on a flip selling at $175k to $180K.

Good luck