Thoughts on Pure Rental, or Fix/Flip ?

Question

I am going to look at a 3/3 with a full un-finished basement today.

Price = $130,000

Median Neighborhood is $155k.

Rent around $1200

Options:

1. Pure rental property

2. Finish basement and flip

I just finished my primary home basement (1200 sq ft with Bedroom, Full Bath, Library, Theatre, and Rec Room for $10k, and could do the same again for this new house.

Thoughts ?

Chinmay J. · Answer

Easy now....

Flips don't qualify for 1031..

Take it nice and easy....

Cara Lonsdale · Answer

Oh yeah....and don't forget about capital gains as an expense to consider for the flip.

Cara Lonsdale · Answer

I am not sure you have enough of a spread there to make enough money on a flip to make it worth the flip VS holding as a rental.  Start at the $155K and work backwards deduct your cost to purchase, rehab, closing costs, any Realtor fees (everyone thinks they will FSBO, but you have to plan for these as sometimes you need a Realtor to help).  You also need to account for any Buyer who wants you to pay for their closing costs.  Sometimes that is a standard ask for Buyers.  Anyway, after deducting all of these expenses, what do you have left?  If it is under $10K, then you have to evaluate whether the rental overage (cash flow) is more valuable at that point.

It sounds like the rental income will be worth more to you than any possible profit from the flip would.  PLUS, you get the added bonus of building equity in your property while you collect the cash flow from the rent.

One note in your numbers..... I don't see insurance.  You will want homeowners insurance, but it won't bump your monthly payment by much.  Also, you may want to consider a home warranty to account for repairs, but that is optional, and it sounds like you are handy, so maybe you would opt out.

Ben Brenner · Answer

You’re rental numbers seem a little off to me. Have you accounted for insurance, capital expenditures, repairs, and vacancy?

Cara Lonsdale · Answer

The first time I ever sailed (was actually at the helm) was on lake Lanier.  Just beautiful for sailing.  I laways wanted to go back.  I love to waterski, and I think it would be a good lake for water skiing.

Alan Hicks · Answer

I agree. I love sailing on Lake Lanier.

I have too many hobbies ( flying, sailing, motorcycle racing ) - hahah

Cara Lonsdale · Answer

Sure thing.  I know it's tempting...Lake Lanier is so beautiful.

Alan Hicks · Answer

My personal taxes ?

So far this year - $35k in federal tax from my salary.

That hurts just to type it :(

Alan Hicks · Answer

Thanks for the insight. I agree with you. Buying, fixing, and flipping for only 10k might be difficult.

Buying, fixing, renting, and then selling may be a better option.

I would like to profit $400/month while reducing the mortgage balance ( by someone else ).

Either that.. or buy this su-weet Hunter 410 ( 41 foot ) sailboat I have been eyeing.

Alan Hicks · Answer

I went and saw it on lunch. it was a rental property ( and renter was evicted ).

Not trashed, but dirty and electricity/water had been off for at least a month.

Agents says they have multiple offers ( including full offer ).

Thoughts on Pure Rental, or Fix/Flip ?

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