First Multi Family- Buy/hold or Flip

3 Replies

Hi Everyone

This is my first multi-family that I am interested in. The flips go for double the price in this location, I am posting two properties one that am interested and the other that has been flipped . Would really appreciate the input if I were to rent/hold or flip. Never done a flip and never managed a multi-family rental.

Thanks so much.

https://www.zillow.com/homedetails/141-Western-Ave...

https://www.zillow.com/homedetails/73-Western-Ave-...

Account Closed, it seems your question is really about exit strategy, though it's light on details.  I'll provide my own thoughts on analyzing deals, and you can fill in the blanks with your own details / assumptions.

Step one would be to acquire a property and get it to the point of the exit strategy (rent out vs. flip). When you say "flips go for double the price" I assume that involves a certain amount of rehab after purchase. General rule is to shoot for an all-in investment amount (purchase price plus rehab) of no more than 70% of the estimated selling price (aka ARV). If you can get those numbers, then you move nicely into step two, the exit strategy. You asked about two of them... renting vs. flipping.

My preference is always buy-and-hold/rent, but there are a number of considerations.  First, how will the property be managed?  Hiring a PM adds costs but is more passive.  Self-managing can avoid costs but is more active.  If the financial analysis won't support hiring a PM, and you don't want to take on self-managing, that points toward flipping.

Second consideration is rents.  General rule is to shoot for total monthly rents of 1-2% of market value.  Market rents below that threshold point toward flipping.

Third consideration is expenses.  General rule is to estimate 50% of rents to cover all expenses before debt service.  If, after conservatively estimating each individual expense, total expenses add up to more than 50% of rents, this points toward flipping.

Forth consideration is your return on investment goal.  After deducting debt service, the resulting pretax cash flow as a percent of your total invested cash represents your cash on cash return.  If the return meets your desired goals, then great.  If not, then this points toward flipping.

Again, these are just my opinions. Hopefully there's a nugget or two in there that can be helpful. Best of luck on your REI journey!

@Chris Jensen Thank you so much , I am learning new things everyday!

Well, we would need to know rents etc... to be able to guess about these... You need to find out from your agent a REAL value now... what it would rent for as is... and then an ARV and an After repair rents.. PLUS the after repair property taxes etc...

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