Thank you to anyone willing to offer some advice! I recently purchased a small multi family property with two other partners. It was honestly a deal I should have done on my own but was in my first year a becoming a realtor so paychecks were few and far between. The property was purchased for $60,000 on a 0% interest, 0 down owner carried note over 10 years. It was “appraised” at $104,000 and likely valued at $120,000. Our plans were to originally fix all ten units up due to being able to get approx $500 a month for each unit after about a $250,000 renovation. This year the property appreciated 50%. We only have about $8000 in the property at the moment and I just recently had a discussion with a company interested in purchasing it. The deal we have discussed is to sell the property for $220,000 -$20,000 down, doing an owner carried note at 12%, amortized over 20 years with a 3 year balloon. If we take this deal it works out to us collecting approx $290,000 for a property we picked up for $60,000 and have $8000 of our cash into. My gut tells me to make the deal and let the new buyer take on renovation risk, and roll my approx $130,000 share of profits into another, larger project on my own and not in a partnership. So my question to those who are in the buy and hold for long term is what do you see as the smarter play? Holding and renovating, or taking the cash and reinvesting? Also, being that we only have had the property for 7 months, can I expect still get hit with short term gains on the entire sale of the property being that it’s owner financed? Thanks again!
Hi @Brad Dickinson ,
I definitely think selling is the right move. For having only invested about $23k, making $100k is amazing. Selling also seems like the best option because it means you don't have to carry any risk with the renovations like delays or extra costs, as well as downturns in the market or anything else.
If you do sell, consider doing a 1031 exchange (if that is at all possible for your co-purchase situation).
Hope that helps.
@Doug Shapiro Doug, thank you so much for taking the time to offer some advice! I do plan to do a 1031 exchange and have spoke with two potential buyers. Thanks again!
@Brad Dickinson I would definitely sell and do he next deal by myself, without partners involved. It sounds like you have a great deal. I would let someone else take the risks and the time of rehabbing. Take your share of the money and run. Invest in the next deal on your own.
Thank you so much for the advice! Have a couple different offers now on the property.
@Brad Dickinson for your first deal...I think I am in the same boat with the others. Don't push it, take it and run. My one hesitation would be if you could reasonably predict, due to some obvious market factor that the property may keep increasing, then you may want to hold on to it. But it sounds like taking that deal is going to be in your best interest. Good luck!
@Nate Monson Thank you so much Nate! The dilemma I have with selling is that it’s an area with high oil and gas work. All of the workers down here are staying in places just like what I would rehab this into for $45 a night on short term stays. One lodge down here has been mostly 100% occupied for two years. Although, due to the properties condition I could see how it could be better off to lessen the risk and walk away with “guaranteed” pay. Thanks again for the advice!
@Darius Ogloza Thank you!!
I would sell it. Find another deal in the area and use your profits from this sale to buy it.
@Theresa Harris thank you so much Theresa for the help!