Well I am new to real estate and have been learning everything I can for the last month, I ran into a GREAT deal and I'm trying to get some advice on what to do. My best friend owns a construction business so rehabbing a house will be pretty easy with this connection.
The Deal: It is in a PREMIER location in my city where most homes don't stay on the market for more then a month. Will be buying a house that will sell for 200-210k ( on less then a month) or rent for about 1800-2000 a month. Sell price is 125k recon will be around 25k.
So the question is where to start? Should I buy the home and fix it up to rent or flip it. The reason I ask this is taxes. Going to talk to my attorney about the different options but eager to know now and maybe strike up a conversation on different ideas of how to handle the property. My goals in real estate are to buy and hold but with this kind of opportunity I feel like I can take the 30-40k and start buying more homes???
Ha I like the eagerness, I as a budding investor feel the same. I cant say which option will be better for you. Selling for a profit has some great advantages such as money up front. good for capital for next investment. There are options such as a "Stalker roll over" Its called many things but it means to take the profit and buy a similar house. This option is tax free in most cases. Anyway Problem is that "active investment" or a deal that opens and closes within a year is taxed a lot more than "passive". Also if you are not in hurry, that rent income can add up real quick IE for capital.
Im sure you have a good grasp on this subject already so Ill stop the 101 class. If I could find a good deal (make sure to run those numbers) in that market of 200k area, I would buy and hold for leverage to gain financing for other purchases. Hide away the monthly profits and use that as the down payment for the next house. Then this house got you a second house and still is making you money.
Hope this helps a little
$210,000 list price
$200,000 accepted offer
- $12,000 in commissions to realtors
-$6,000 est closing cost assistance to new buyers
-$1,000 est repairs to make from buyers home inspection
-$500 home warranty
Are you borrowing the funds from a private lender who charges points and monthly interest?
$2,000 closing cost to you for buy and then sell
$3,500 taxes/insurance when purchased
$125,000 buy price
$25,000 max estimated profit
Still not too bad but if you have to borrow the money and pay points and interest and hope you sell it quick will be the deal breaker.
Thanks @Curtis Davis for the break down are you saying that I should flip it? Or your just giving me the break down of how it will break out?
Free eBook from BiggerPockets!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!