Feedback for a property
Hi guys working with my client over a property they have under contract in Nashville (LaVergne Area) that is a 3 BR/ 2 BA (1,500 sq ft) with an attached 1/1 (600 sq ft) apartment (not separately metered). Purchase price is 235k with a potential ARV 500k. Rental rates are approximately $1800 for the 3/2 and $1100 for the 1/1. Property needs a full rehab and my client is trying to decide whether or not renting it or flipping it makes more sense. If this were your property what would you do? Appreciate any feedback on the route my client should take!
Depends on rehab cost. If it's low they could rent it out and snag another property. But if it's high they may need to flip it if they need the cash for another project.
Hi @Harris Miller, I agree with @Paul Pratt, we don't have enough information to really help you here. There are many options you can take. Here might be a couple:
1. If they plan on owner occupying the property then they can fix the smaller side first (quicker/cheaper) then live in this side while rehabbing the other side. This way they can keep a better eye on the management of the contract during rehab of the larger side.
2. Complete full Rehab, and sell. Market seems a little rough for flipping right now given the increase in mortgage rates, but Nashville could still be selling hot. I don't know that market.
3. The rental rates seem good for the price you are getting the property for so it really comes down to how much cash it will take to rehab the property. If only 100k then you would make 165k on only a 335k investment. That's not bad as a flip. Cash out refinance is an option too.
4. Look into seller financing as an option. Then the creativity can really be let loose.
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#2 General Landlording & Rental Properties Contributor
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Quote from @Harris Miller:
Hi guys working with my client over a property they have under contract in Nashville (LaVergne Area) that is a 3 BR/ 2 BA (1,500 sq ft) with an attached 1/1 (600 sq ft) apartment (not separately metered). Purchase price is 235k with a potential ARV 500k. Rental rates are approximately $1800 for the 3/2 and $1100 for the 1/1. Property needs a full rehab and my client is trying to decide whether or not renting it or flipping it makes more sense. If this were your property what would you do? Appreciate any feedback on the route my client should take!
Not enough info to respond,
Good luck
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@Harris Miller - you / your client should obtain quotes on the rehab costs (including financing of acquisition + rehab if not all cash), and the refinance loan (note you can't refi based on the ARV until 6 mo after acquisition). Will the property generate enough income to service the debt and pay your client back any capital left in the deal quickly enough? Would you net enough on flipping the property to justify time/money/risk? What are the tax implications for each option? How confident are you the property would sell quickly? Lotta questions for you to answer before a determination could be made, but hopefully this helps.