Should I sell and what to do with small profit

Question

Hi everyone,

I purchased a 2 bed and 2 bath townhouse in Kennesaw, GA for $245k which I renoed to 2 beds 4 baths, finished the basement, added counter tops and repainted. House looks like it will appraise for $320k on the high end. I’ve put about $35k into the house (closing costs, renos, mortgage) and my next mortgage payment is coming up.

I was planning to rent it but with a payment of $2k it’s not looking promising. Thought of short-term but didn’t get much traction and still risky. I’m thinking of selling to at least come out with $30k to $40k as I feel stuck in a mortgage. This option makes me nervous because there’s not much I can do with that amount to get something that will help me cash flow.

I’m open to suggestions on what strategies to use with this $30k to $40k if I sell. (This will also be my first sell).

Mike Barone · Answer

@Rufaro Chirewa What is the interest rate of your current mortgage? Have you thought about doing a wrap? You can create cash flow by wrapping to create a spread between the interest rates. You can also get a down payment which will allow you to get cash up front to buy another property.

Example:

Current Mortage at 4% then you wrap at 8% (So you are getting cash flow from the spread)

Down payment from buyer 20% = 64K Cash Now money :)

Terrell Garren · Answer

That's a lot of bathrooms.  May rent to a Urology practice?

Chris Seveney · Answer

@Rufaro Chirewa

My recommendation would be to sell as it does not seem to have rental value.

Just remember to factor in closing costs etc which are 7-9% so when looking at it the net profit after taxes will be closer to under $20k.

Kevin Paulk · Answer

@Rufaro Chirewa

I see you have an Extended stay hotel in your area ( extended stay hotels offers long term accommodation for guests. With amenities such as self-serve laundry and in-suite kitchens, they’re a cost-effective and convenient alternative to renting a traditional apartment) and it looks like there going rate is around a 100.00 a night.

I would try and MTR (mid term rent) the space and charge about 80.00 a night and see where it goes.

Good tip! would be to check there parking lot and see what companies if any are in the area and give them a call and see if they need more housing or housing down the road.

Bonnie Low · Answer

I hope you're considering a 1031 exchange if you do decide to sell so you are protecting as much of your gains as possible. Don't be too hard on yourself, though. Walking away with a profit on your first flip, especially in this market, is something to feel good about. People act like every deal is a home run - it rarely is. Steady improvement is the name of the game. Meanwhile, work on your networking and connections. It's going to be hard to buy a "deal" off the MLS right now so you want to have some off market deals to look at.

Chris Stonestreet · Answer

What would you be able to rent for? If it's enough to cover all of your expenses and maintenance/repair reserves, I would consider holding on to it. A few people have suggested making it a medium term rental which could work really well depending on what part of Kennesaw you're in, just be prepared to furnish the house. Go to furnishedfinder.com to see what the going rate is for MTR's currently.

Bud Gaffney · Answer

@Rufaro Chirewa sell and buy a multi family. Use proceeds for down payment.

Michael Dumler · Answer

@Rufaro Chirewa, correct me if I'm wrong, but did you purchase this as a primary residence? Sounds like you've added a good amount of value to the property. What is market rent indicating?

Brad Jacobson · Answer

Plan on about $10k in closing costs, then you'll have capital gains tax (15%) so you're likely to net between $15-25k.  Unfortunately, that's not life changing money.

In this market, cashflow is really hard to come by but if you have any at all in this property, I'd consider keeping it!  Remember that you make money in four ways with a rental: cashflow, loan pay down, tax benefits, and appreciation.  I wouldn't forego all four of those awesome options for only $20k or so.

Good luck!

Ray Hage · Answer

@Rufaro Chirewa You're in a bit of a tough spot. If you are looking at other good options to buy that will cashflow well, then I would probably just sell it and 1031 into those. However, if there isn't much out there, it may not be a bad idea to hold it and see if you MTR it to people that are only in town seasonally or for a 5-6 month contract. I live in south Florida where MTR does quite well but you'd need to do a little research locally to see if you can make it work.

Should I sell and what to do with small profit

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