Advice on a languishing flip in Lexington.

1 Reply

I bought a house in April I had intended to be a rental.  It was larger (4/3 2500 sq ft), in a really nice area  and not really what I typically consider a good candidate for a sfh rental but I bought it because it was priced 60k under market and needed minor cosmetic things totaling about 10k. The market was super hot and stuff nearby started selling like crazy and I could make 80k or so flipping it by investing an extra 7k in some stuff which I did.  As soon as it hit the mls the market immediately softened. I listed it for sale about 45 days ago and We've had a few interested parties but they want to offer me 20k or so below what I'd really want to sell it for (I own it outright).  At this point I feel like my options are: 1.lease to own, which I have someone interested in, 2. Short term leases and 3. Rent it out as normal for a much lower cap rate than I'd like and sell when the market improves.  Or I guess 4. Sell it for less, learn a lesson and move on.  

Christy,

As near as I can get from your numbers, you paid 60K under market, put 17K into it (10 cosmetics, 7 in "improvements"), and listed it for 80K profit (or 20K over market, since you were probably seasonally leading the market). Someone offered you 60k over purchase price (non-seasonal market price), (80-20K) and so, you stand to make 43K overall (60K-17K).

What is the time value of money for you? Is it better to have the 43K in your pocket, or take the lease/own rent and wait for the return of capital? Are you looking to do more deals and need the cash? Can you refi, get your 75% out, and wait for the rest?

How you answer the questions above will help you determine the course of action.

In general, if you are getting lookers but no "good" offers, you are +10-15% over market.

Generally, it all depends on what you think the market is going to do. If you think it's a temporary decline, then the short term lease or normal lease. If you think it's going to go further down, then get it gone. Finally, if you think the value will hold steady, or slightly increase over the period of time for the lease to own term, do that.

Hope that helps.

Good Luck,

Jim

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