Should I turn my BRRRR into Flip?

[Jalen Leichman]

Hi all,

Jalen here in Milwaukee, WI. In the process of my first BRRRR property. I bought a 2/2 duplex a year ago using an FHA loan with 3% down at a purchase price of $127K (it originally appraised for $130K). Lower unit came with a tenant, I occupy the upper unit. Renovated the upper unit (put about $20K into the rehab), applied for a HELOC, the appraisal came back at $180K, I'm only getting a line a credit for $10K.

Wondering if I should take the $10k and focus on finding a better deal for the next property, lessons learned? Or should I/could I try to sell the property at the new appraised value and collect the $50K of added value and use that to buy the next property? Is there a 3rd option?

My original goal when I started was to buy and keep as many rental properties as I could, but I’m afraid my first deal hasn’t yielded the best results for me to get started on that journey.

Please advise.

[Marcus Auerbach]

It's always difficult to answer these questios generally, but based on the price point and then rents I have a good idea where it is located in Milwaukee. 

Usually I am in the buy & hold camp. I suspect there will also be some future capex, but regardless, my vote in this case is to sell it and buy a larger 3/3 in a better neighborhood. Make that a long term hold investment. You can apply what you have learned. 

Two reasons: first, quality of asset. It will perform better long term, it will generate more revenue, if you owner occupy it, you will appreciate the neighborhood as well. The second reason is lock in a larger loan at histrically low interest rates as long as you can.