First Investment…Rent or Sell?

Question

My husband and I have been wanting to get into Real Estate Investments for a while now. We’re making our first purchase this coming week and boy are there so many questions and concerns.

For this post I’m wanting advice whether we should sell or rent this first buy.

Selling: We have the opportunity to make $50-75k profit within 6 months, hopefully less. Renting: we can make $1000-$1200 a month

Concerns: we’re entering this with very little start up, money will be tight for a while if we decide NOT to sell, if we hold on to it and rent it we can make our money back in under 10 years, and still have that property under our belt.

what else should we be considering?

Jon Kelly · Answer

@Monica Vasquez running the numbers will make your decision a lot easier. You have 2 scenarios:

1. Keep the property as a rental

2. Sell and use proceeds to buy a new rental

Pick the scenario with metrics that best meet your goals (e.g. monthly cashflow, COC return, IRR, # of units, etc.)

I'm guessing keeping it as a rental will be a better option. After all expenses and reserves you'll make a couple hundred per month. If you sell you will only have $30-50k after taxes and expenses. That will buy you a property worth $120-200k and will probably provide the same cashflow amount...

Adri Jusczak · Answer

Hi Monica,

Congrats on your first property! I would say what you do with the property depends on what your long term goal is. By selling this property for a quick profit (keep taxes in consideration) will you be able to maximize your growth? Or would you be able to rehab this property, refinance and get your money out while keeping the property for long term appreciation and monthly cash flow? When I'm analyzing properties, I like to have two strategies in case my first option doesn't go as planned. I prefer to use the BRRRR method and if something goes wrong, I can always fix/flip/sell to get out of the deal.