Hi everyone! I purchased a single family house with hard money, rehabbed, and intended to sell. It appraised well, but isn't selling at the price I hoped for.
I am thinking about renting and holding onto the equity. It would cash flow but not by much - maybe $100/mo once vacancy/maintenance are factored in.
I did get a low offer - for about $10k less than I had hoped to sell for. I would still make a little money net, but wondered - how do BP users think through cash vs, equity? When is it best to hold or sell?
I typically translate $100/mo cash flow to "this property doesn't cash flow." How much equity do you think you have? A little more than $10k of equity on a $40k house is a lot, but a little more than $10k on a $500k house is way too close for comfort. At $100/month you're not holding for cash flow, you might want to hold for appreciation, but you don't have much of an equity position in this either. If you're going to hold, you'll need to refinance out of your HML. If your equity position allows for 70% LTV or less then a refi is probably right for you.
How long is the term of your hard money loan? Even if you're cash flowing with the hard money in place, you'll probably have to renew your HML, including the origination points, which could get you to that $10k number pretty quickly, in which case selling would have been the better option. Have you tried refinancing? If you can refi into a longer term loan with lower interest and pull all your cash out, I'd keep it as a rental.
Lots to think about, give us some numbers and you might get a stronger opinion out of me ;)
I'm with Skyler. I'd look into refinancing. You might get a better interest rate, lower payment, and better cash flow.
dan K : Your comment " Maybe Cash flow $100 ? month is concerning . As stated above if you can't Re-fi I would unload it and move on Cash is king on a lot of other deals . Have you set aside funds for emergency repairs . Insurence ?
Hey everyone! Thanks for your replies!
Here are the $s:
-purchased at $56k
-rehab cost of $14k
-prepaid interest with my hard money loan (no payments now)
-$900/mo projected rental income with tenant paying utilities
-appraised at $99,900
-I have an offer on the table for $89,900 plus $3,000 seller paid closing costs.
I learned s lot on this deal and it wasn't a great one, so neither option (keep or sell) is an awesome one, but I'm new to this and trying to start small and learn. Either option seems ok, and I'm glad that this first rehab didn't go too poorly. Could have been much worse, right?
Take the $20k profit and move on to the next one.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- 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
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing