Hey, BP! My wife and I have closed on our first ever property, investment or otherwise. We bought it through a hard money lender at 1%/month and 10% down. What I am now trying to do is refinance it so I can have my first property in my young portfolio.
The facts: Tacoma, WA duplex. All-in cost of 240k so far, with it needing no more than 6k. Pretty turn key. Both units currently rented for 2k total. I am into it for right around 22k.
Our goal is to build a rental portfolio so keeping it would be ideal, but we are young, inexperienced, and have a small but growing income. Also, most of that 22k was borrowed privately so I need to get that back to them within the next 4-5 months.
Given that I have a small nest egg, should we flip this property (305-315k) and gross about 35k to use to the next purchase (which we will still have a hard time financing in a refi), or keep this and make it work? I'm calculating 150/month cash-flow after all expenses with room to raise. The payday would be nice, but we would be in the same scenario with another purchase, only this time with our own money. I like that this property is already rented and turn-key. Thanks!
I would probably keep it. Sounds like a good first project.
Congrats on your first purchase. I'm glad it's cash-flowing. Do you have another way to pay back that private money that's not flipping this property? It'd be great to keep it and push rents, increase cash flow over time, gain equity, etc... if you can.
Thanks for the replies thus far :)
@Christen G. I was counting on my refi to pay back that money, and if it doesn't, my window cleaning and pressure washing business would have to pay it back...so basically just by working.
Yeah I'd love to push the rents, but I'm not sure how to go about it. I suppose I'll just give them a 60-90 day notice of my intention to raise to give them time to adjust and hopefully they will stay. Going from 800-->975/1000 may be a hard pill for them to swallow given they will now also be paying w/s/g bills. I am going to install new furnaces. Their units were cold...like 60 degrees inside. So that is improving the units.
Jordan - Congrats on your first property! Selling vs holding really depends on your goals and level of comfort with the property. Are you self-managing the rental or using a PM? If the former, are you comfortable continuing to manage the property? Does outsourcing management wipe out your cashflow?
My wife and I own a portfolio of properties in Pierce County, self-manage and have invested hours into our education to build systems that make the process easier and ensure we are following the law. I think self-managing is a great way to start, learn, and build your real estate investor resume but you need to ensure that you are comfortable spending the time and have the desire to learn to do it right, because there are a ton of legal requirements and harsh ramifications for doing something incorrectly.
What part of Tacoma is your property located in?
@Jordan Sitzler Can you share more numbers on the rental side? Hard for us to advise without that information. i.e. gross rents, insurance, taxes, vacancy, capex/maintenance, and PM fees. Cashflow can be a pretty subjective calculation, so having this breakfast of income and expenses is helpful.
How long ago did you purchase it, and how much total rehab is going to be done? It sounds like you have some decent equity in there and may be able to cash out enough to pay back your private lenders. Doing a successful BRRRR is pretty hard in King, Pierce, and Snohomish counties, so I do lend to lean more towards keeping it if you can cashflow and pull out all your cash. But it also depends on your financial position and if the bank will allow you to do a refi.