Taking cash-offer and breaking even vs trying to sell on market

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Taking cash-offer and breaking even vs trying to sell on market

Tammy Mason
Investor · Fontana, CA · Member since 2020 · 128 posts · 94 votes

Hi BP,

I got a rental in Kansas City thats gone into serious disrepair. It's my only property in this market and I want to get out since its on the other side of the country. I'd like to get some opinions on 2 options I have. One is to take cash offer that will almost certainly be break-even. The other option is to put in some repairs ~$45k that would likely yield $20k-$30k after sale. I was considering the repair route, but I'm starting to reconsider due to age of house, plus the unknowns during rehab like potential mold or market softening. What are your thoughts?

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David Krulac
Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
4mo

I would not spend $45K to gain $20K-$30k.  To break even you need the yeild to be at least $45K

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  • David Krulac
    Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
    4mo

    I would not spend $45K to gain $20K-$30k.  To break even you need the yeild to be at least $45K

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    • JD MartinBusiness Member
      Moderator
      Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes
      4mo
      Quote from @David Krulac:

      I would not spend $45K to gain $20K-$30k.  To break even you need the yeild to be at least $45K

      I second that opinion. Unless you mean you spend $45k and get an extra $30k beyond that when you sell (or sell for 200 now or spend 45k and sell for 275). Even at that I don't think I would spend that kind of money on something I was getting ready to sell for that kind of return. In a case like that think of it as a flip - would you do a flip to make 20-30k? I wouldn't unless it was fast, easy and pretty much guaranteed. 
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  • Jules Aton
    MD/DC · Member since 2024 · 1k+ posts · 1k+ votes
    4mo

    A bird in the hand as they say...

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  • Alex Olson
    Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes
    4mo

    I can help in KC. It is best to sell now rather than risk putting a bunch of money in and not getting that back. 

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    4mo

    Sell it. You may break even as far as purchase and sales price goes, but you would have made money while it was a rental and hopefully paid down a bit of the principle.  

    Also remember you have to pay capital gains on any profit, so that extra $20K is really less not to mention what happens if you run into problems or go over budget.

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  • Peter MckernanBusiness Member
    Residential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
    4mo

    I would agree with some of these posters. I would sell cash today, unless you have a great agent you are working with there and can really tell you, you put in X and sell for Y within a timeframe that you can hold the property. I would sell for cash and just be done with the process. The other thing that will be hard is working with someone to get it remodeled that is timely, good at what they do and everything in between while being 2000 miles away. We are in July basically, so if you fix it up and there are delays at all, then you are going into the more fall/winter months on the market which could delay the sale and then you are getting less do to holding costs as well. Worst part if you sell in the winter is not selling at the price and having to drop to get the price to win your money you put into the rehab back. 

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