Would you flip this property or rent it out?

Buying & Selling Real Estate
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Would you flip this property or rent it out?

Nick Brubaker
Decatur, GA · Member since 2015 · 419 posts · 52 votes

Hello Atlanta / Decatur folks.  So I am closing on the purchase of my first property tomorrow.  After considering this property for weeks I still can't decide whether to 

A. flip the property straightaway

B. rent the property out

C. fix the property up and then rent it out. 

Before others say this, I realize that this decision depends a great deal on my particular circumstances and goals.  I'd just like to hear what other experienced investors on this site would do with the same property in the same neighborhood and your reasons why.

Here are some things to consider:

- The address is 2854 McAfee Road, Decatur, GA, 30032  (http://www.zillow.com/homedetails/2854-Mcafee-Rd-D...)

- I am purchasing the property for $48,000

- The property needs a new water heater, AC compressor, roof (in the near future), and work to the kitchen, bathroom, and deck

- The property is located on a main street / a Marta bus route

- FHA buyers would not be able to make offers until the middle of June

- The property is already fairly rent-ready

- The property is on a long lot that connects to the anterior street, which could be subdivided into two reasonably sized lots if I go through the process of rezoning it (jumping through beuracratic hoops and contending with the local community)

- I have already negotiated down some of the contracting costs

- I am paying cash 

- Taxes and insurance favor buying and holding

- Flipping is a faster process, which would allow me to try both strategies (next property) sooner

Again, I realize in many ways in comes down to my own circumstances, but if you would humor me I'd be interested in hearing what others here, particularly those familiar with this local market and area, would do.  

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Jerry W.Pro Member
Moderator
Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
10y

I am a buy and hold person.  it is get rich slowly, not get rich quick.  I so not have the time to do flips at this point in time.  If you get rental income started coming in you will be able to use it on your borrowing next year.  You also can refinance it later if you bought for cash and use the money from the refinance to buy another property.  Just make sure it still cash flows after you do the refinance or you may as well flip it.

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  • Rolanda Eldridge
    Investor/Realtor · Hoover, AL · Member since 2010 · 1k+ posts · 459 votes
    10y

    I would rent it for a couple of years and then sell.  Consider marketing to someone looking to buy, but can't qualify today.  You have options, but it really depends on what's best for you..Go for it!!!

    1Reply
  • Nick Brubaker
    OP
    Decatur, GA · Member since 2015 · 419 posts · 52 votes
    10y

    Thank you @Rolanda Eldridge!

    0Reply
  • Derrick Lu
    Suwanee, GA · Member since 2016 · 48 posts · 4 votes
    10y

    I've purchased my first investment property, too, but in the suburbs of Atlanta.  I'm not very handy so I lean towards non-fixer uppers.  The home I bought was brand new for 229K back in 2009.  It has a +cash flow of $450.  I only put a 3.5% down payment and recently found a creative rental structure where I can increase the cash flow from 450 to 759.  I would say Buy and Hold, as I prefer a passive income to replace my current income in the corporate world.  The other option is to rent it and include a Buy option (2k-15K).  Good luck in your ventures!

    0Reply
  • Joel Sherlock
    Kelowna, British Columbia · Member since 2016 · 61 posts · 108 votes
    10y

    @Nick Brubaker It looks like a great buy and hold property. I would run the numbers on what would need to be spent on the rehab, compare that to what kind of rent increase you would be able to get. If you are spending 5k and going to get 100 more per month or more then I would say Rehab. Also I have always found some minor rehabs have decreased our vacancies and we typically have better tenants in the rehabbed properties. 

    After a short period once fully rented, look into a refinance and then move to your 2nd door.

    Good Luck!

    1Reply
  • Nick Brubaker
    OP
    Decatur, GA · Member since 2015 · 419 posts · 52 votes
    10y

    Great tips, @Joel Sherlock.  Thanks!

    0Reply
  • Kiran K
    Real Estate Investor · atlanta, GA · Member since 2008 · 80 posts · 15 votes
    10y

    Nick, I am familiar with this area, house already looks rent ready already from the picks and it's a great rental area u can get 800$ for it, if it was 3/2 u could have got 950$. If the only thing u need to work on is hot water heater and compressor it shouldn't cost u more than 2500 for both of them. You can replace the roof slowly just don't spend on patching it up too those costs add up quickly.

    Hold it for year or two and add another bathroom to it and u can flip it if u need to. This part of the area is becoming active with flippers. Not far from you 3/1 sold for 124k but had nice finishes.

    Hope this helps, I would do the same if it was me.

    Kiran

    1Reply
  • Nick Brubaker
    OP
    Decatur, GA · Member since 2015 · 419 posts · 52 votes
    10y

    I appreciate the advice from someone knowledgeable of the area, @Kiran K!

    0Reply
  • Rick Baggenstoss
    Developer · Decatur, GA · Member since 2011 · 1k+ posts · 1k+ votes
    10y

    @Philip Bashaw can share his experience there.  

    1Reply
  • Justin R.
    Developer · San Diego, CA · Member since 2015 · 1k+ posts · 1k+ votes
    10y
    Nick Brubaker Lot splits can be profitable, but they're not for the faint of heart. It's time consuming, expensive, and land is a totally different asset when it comes to driving profit. The extent of each varies dramatically in different areas. I'm doing a lot split right now after renovating the house in the front. Split and sell. It only makes sense for me, here, because it's a high value lot situation. It'd be MUCH easier money to have flipped in this situation (if I hadn't screwed up the rehab). To your question, I enjoy being a landlord, so I'd hold your house after hardening it. Like flipping, don't expect your first rental to go completely smoothly - it was definitely easier for me once I was managing a handful of properties.
    1Reply
  • Brian Turnbough
    Investor · Big Spring, TX · Member since 2016 · 140 posts · 59 votes
    10y

    If it were me, I would flip the property without replacing the roof. Unless it failed inspection. You need to get capital so you can move on to the next property.

    0Reply
  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    10y

    Exit strategy should really be clear before purchasing.

    0Reply
  • Anna Watkins
    Investor · Atlanta, GA · Member since 2014 · 389 posts · 250 votes
    10y

    Hey @Nick Brubaker -- I know you don't want to hear it again, but it still just depends on your goals.  Rental income won't count towards getting financing until you've got a year (maybe 2?) of experience -- so put in what the house needs to be safe, comfortable and clean, get the best tenant you can, and start building your landlording resume.  You'll tie up your cash for a year or so, but the chances of losing money are slim.  After a year, you'll have more options, and you can still flip then it if you want.

    If you want to try a flip now, you stand a greater chance of just breaking even or losing money.  To make it attractive to a buyer you'll have to put in a lot more money, with no guarantee of profit.  But you'd get flip experience.  I don't think you're getting a good enough price on the house to make much money flipping to an investor -- houses all over Belvedere/GlenCo are going for $50K as rentals.  Lots aren't worth much in the neighborhood, or you'd see folks scraping for new build like they are in Decatur.

    If you just want to get it over with, you could sell or even assign it to an investor/landlord asap (like a wholesaler), make a few thousand quickly, and start over.

    1Reply
  • Nick Brubaker
    OP
    Decatur, GA · Member since 2015 · 419 posts · 52 votes
    10y

    I think that's pretty sensible @Anna Watkins.  Thank you for your input!

    0Reply
  • Philip Bashaw
    Investor · Atlanta, GA · Member since 2014 · 172 posts · 64 votes
    10y

    Hey @Nick Brubaker

    Like @Rick Baggenstoss said, I have experience on McAfee and currently own a house on McAfee. This was my first investment purchase and Rick actually advised me on it, so I don't mind sharing. It's good you are paying cash! That part of McAfee a better rental than a flip because it's a busy road, on the bus line and the values aren't as high for a flip, especially at a 48K purchase price. A lot of buyers are turned off by busy roads and you generally have to lower your price to sell it, which reduces your profit. 

    My house is on 2551 McAfee and also a dividable lot. It's good to have that as values increase, but I would not worry about that right now and just concentrate on doing the bare minimums to get it rent ready as fast as you possibly can. Dekalb housing authority might be a good fit here because I think they need more houses for their program participants. I have decided to use mine as a live work/ space for my REI business and have started setting it up to do that.

    Let me know I'd be happy to meet and look at your property. I also have a local, retired painter that loves to do local projects. He's a bit slow, but will do a good job for you.  

    2Reply
  • Nick Brubaker
    OP
    Decatur, GA · Member since 2015 · 419 posts · 52 votes
    10y

    Thank you for the advice @Philip Bashaw and thank you as well @? 

    @Rick Baggenstoss.  The Dekalb Housing Authority is a particularly useful tip.  I will contact you directly.  

    0Reply
  • Damir KamberPro Member
    Investor · Roswell, GA · Member since 2014 · 234 posts · 97 votes
    10y

    Great information you are receiving @Nick Brubaker

    At the end of the day, where do the numbers make most sense. Seems like for that particular area, rentals extract more value for a property like yours. It is very hard to sell a 2/1 and you don't seem to have the large enough spread to flip it at 48K. At the end of the day, what is the end goal in mind. Do you MUST have the return on this investment right away or can  you wait 1 year to extract the funds.

    Good luck, you seem to be on the right track and this thread definitely helped.

    Cheers,

    Damir

    1Reply
  • Nick Brubaker
    OP
    Decatur, GA · Member since 2015 · 419 posts · 52 votes
    10y

    Thanks @Damir Kamber.  And thank you to everyone who contributed to this thread - it has been very helpful.

    0Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    10y

    I am a strong proponent of buy and hold but if you can not refinance to the maximum amount immediately you would be farther ahead flipping to get your money out and move on to the next property.

    The use of cash for flipping is good but you do not want equity tied up in a rental property. Equity is dead money.

    0Reply
  • Naga A.
    Investor · Atlanta, GA · Member since 2010 · 186 posts · 14 votes
    10y

    Hi @Nick Brubaker 

    We met in Tokyo last year!  Glad to see that you are active in R.E. in Atlanta area.  If you decide to go the buy and hold route, you need to take into account the real estate tax.  I own a house in that area (not on McAfee but very close and same zip code).  When I purchased the house in 2010, my tax bill was $300, the DeKalb county has steadily increased the tax since then and last year's tax bill was close to $2000!  It is hard to raise a rent to make up for the increased tax burden.

    Just my two cents.

    Naga

    0Reply
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