Leave 100k and rent or Flip for 30k

[Conte Cuttino]

Property is in C+ area but in a different School district that’s B-

If I sale I’ll get 30k profit after 9 months.

If I keep as a Long term rental I’ll have to convert the garage into a illegal 1 bed cottage at an additional cost of $35k leaving a total of $107k left in this deal after 70% refi and closing cost.
NOI: $49,536

CoC ROI: 16.57% / CashFlow: $1488/mo

Pro forma cap: 8.26%

Purchase cap: 11.79%

Check out breakdown below 👇🏾

https://www.biggerpockets.com/analysis/rentals/6c76954e-deb6...

[Andrew Freed]

@Conte Cuttino - I personally wouldn't toss $35K into any area that is illegal. What if the city finds out? Are they going to make you rip it out? I would look into the process of making that legal space. You might be able to have it considered as a mother in law suite. Nonetheless, having it as legal square footage will help your ARV and sales value dramatically vs. having an illegal unit.

[Conte Cuttino]

Makes sense @Andrew Freed so say if we I can make it additional legal space, do you think the 107K left in the property for the return is worth it or should I sale and move on? 

[Conte Cuttino]

Quote from @Conte Cuttino:

Makes sense @Andrew Freed so say if we I can make it additional legal space, do you think the 107K left in the property for the return is worth it or should I sale and move on? 

I won't be able to make the cottage legal rental without living in the primary home myself.

[Crystal Smith]

Quote from @Conte Cuttino:

Property is in C+ area but in a different School district that’s B-

If I sale I’ll get 30k profit after 9 months.

If I keep as a Long term rental I’ll have to convert the garage into a illegal 1 bed cottage at an additional cost of $35k leaving a total of $107k left in this deal after 70% refi and closing cost.
NOI: $49,536

CoC ROI: 16.57% / CashFlow: $1488/mo

Pro forma cap: 8.26%

Purchase cap: 11.79%

Check out breakdown below 👇🏾

https://www.biggerpockets.com/analysis/rentals/6c76954e-deb6...

 If you have other money to grow your portfolio even with $107K left in the property then  hold the property.  If you'll be stuck in limbo unable to make another investment for a long time because the $107k is stuck in this deal then sell the property.    The purpose of any business is to grow.  if an investment stunts your growth then get out of the investment.

[Andrew Freed]

@Conte Cuttino - I think you are onto something. If you sell the property, a lot of the $107K cost will be eaten up in transaction cost. You want access to equity but you also want access to the full profits without safrificing it to expenses to expand your business. Are you able to move into the property and make it your primary residence? That will allow you to build the additional legal space further amplifying the value of the proprety (more HELOC money). It will also allow you to pull out a HELOC in the 90% LTV range since it will be your primary residence. You will be accessing a majority of that equity without having to pay transaction costs. Not sure your living situation but something I would definitely consider if possible.

[Corby Goade]

I'm not a fan of flipping simply because I hate paying taxes when I don't have to. That being said, I'm not a fan of holding property in anything sub B quality. 

Based on what you've said here, I'd probably rent it out as-is for a couple years and then 1031 in to a higher quality area. 

[Conte Cuttino]

Quote from @Andrew Freed:

@Conte Cuttino - I think you are onto something. If you sell the property, a lot of the $107K cost will be eaten up in transaction cost. You want access to equity but you also want access to the full profits without safrificing it to expenses to expand your business. Are you able to move into the property and make it your primary residence? That will allow you to build the additional legal space further amplifying the value of the proprety (more HELOC money). It will also allow you to pull out a HELOC in the 90% LTV range since it will be your primary residence. You will be accessing a majority of that equity without having to pay transaction costs. Not sure your living situation but something I would definitely consider if possible.

I wouldn’t move into the house because I currently own in a better neighborhood close by.
Have they made it easier to get heloc’s for investment properties. I’ve heard David Green mention it in a podcast recently.  

if so does anyone know how much is the typically LTV you can takeout?  

[Conte Cuttino]

Quote from @Andrew Freed:

@Conte Cuttino - I think you are onto something. If you sell the property, a lot of the $107K cost will be eaten up in transaction cost. You want access to equity but you also want access to the full profits without safrificing it to expenses to expand your business. Are you able to move into the property and make it your primary residence? That will allow you to build the additional legal space further amplifying the value of the proprety (more HELOC money). It will also allow you to pull out a HELOC in the 90% LTV range since it will be your primary residence. You will be accessing a majority of that equity without having to pay transaction costs. Not sure your living situation but something I would definitely consider if possible.

I wouldn’t move into the house because I currently own in a better neighborhood close by.
Have they made it easier to get heloc’s for investment properties. I’ve heard David Green mention it in a podcast recently.  

if so does anyone know how much is the typically LTV you can takeout?  

[Mohammed Rahman]

Hey @Conte Cuttino - thanks for sharing! 

In terms of the illegal 1 bed cottage... so this isn't uncommon in my neck of the woods (NYC) in terms of something similar (basement apartments, garage apartments, etc.) 

I would personally roll the dice on the rental and see where it gets me if you don't have to sell at this moment. 

It could also be worth it to test the market and see what kind of offers you receive. 

FYI, if you're cash strapped - not the worst idea to potentially partner up with someone to soften the blow of the $30-$40k for the garage/rental completion.