Buy and Hold or Flip a condo?

Question

I don’t own any rentals so this would be a first but I’m not sure whether to keep it or flip it. I recently purchased a foreclosed condo in New Hampshire. The tenant hadn’t taken care of the unit so it’s in need of about $9k in repairs which I’m working on. I paid 112,000 in cash + I’ll put in $9K for improvements = $121K.

Rents go for about $1400. There are 12 units in the building, all 2 BR, 1ba. Heat and hot water included in rents. $270 HOA fee. I could cash flow about $400 a month after doing a cash out refi or flip it and net about $10k and find another..I know the smart answer here is probably to hold it, but I’m trying to accumulate some capital so I can continue to invest in flips and eventual more buy and holds. I’d be leaving about $8-10k into the condo and flowing about $400 a month which isn’t too bad.

Thoughts?

Matthew Stanizzi · Answer

I’ll make your choice easy.

If you need the 10k that bad I’ll be happy to loan it to you. Just give me the 400$/month cash flow for three years.

Essentially that would put you in the exact same position as selling the property except you’ll be able to collect continued cash flow there after the three years.

Then you do the math and realize that  The deal I offered you is a 26% three year loan.

Hold it.

Frank Wong · Answer

Keep it,  you don't get rich flipping houses.  You get rich buying holding and renting out your property.  Why sell your asset if you have a way of extracting some capital back.  If you flip you will always be chasing the next deal.  All that work and effort for little money.

Rob Massopust · Answer

What is your LTV with refi, I would assume 75%

I'd Keep it for sure

Once you refi and all in your costs are at $1000 per month

You only have $30k into the deal after refi, so at $400 per month x 12 = $4800/$30k = Cash on Cash return 16%, forget CAP rate, plus appreciation and depreciation etc, cant do much better than that on anything.

Making $10k on a flip if will be zero after closing costs, commission and taxes

Jamie Adames · Answer

If you're okay with not getting the money back definitely hold. If you hold then you open up the doors for a 1031, and you will get significant tax benefits with depreciation and you won't be guaranteed to find another deal this good. Good luck!!

Christian Nachtrieb · Answer

I'd hang on to it, do the cash-out refinance and keep a little dough in the property. You'd be getting a great return on that money, and have a chance to let that property appreciate some more while having enough leftover funds to repeat the process. Also depends on your goals, but since you asked, that's what I would do!

Glenn English · Answer

Thank you for the feedback. I am planning to hold it now, but just wanted confirmation since this is my first buy and hold unit. Now let's hope I get a good tenant!

Lien Vuong · Answer

Hold it, the biggest gain will be from the appreciation and you can always leverage it in the future to fund other deals.

Tchaka Owen · Answer

@Glenn English - this is an easy one: hold.

If you were going to net a lot and that would help you with other investments, it would be a different story. But $10k is nothing. If a hot deal came along and you needed $10k, there's family, friends, other investors, etc.

But to have someone pay your mortgage and you make $5k per year, that's a no-brainer.

Rob Massopust · Answer

Wait, you are only leaving $10k on the deal, then your returns are astronomical. Im moving back to NH [Grew up in Londonderry]

Jamie Adames · Answer

Also, 4% cap isn't awful.

Buy and Hold or Flip a condo?

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