I have a house that I can't decide whether I want to hold or flip. I bought the house for 40k and I believe that if I sold it after renovating, I can earn approx. 25k after all expenses and closing costs. However, if I hold onto it, I can get approx. 1k/month in rent. I can see the positives for both options. My overall plan is to flip houses while slowly adding rentals to my portfolio to generate some passive income. Any advice?
I think it depends on what your cash situation is. If you need the cash for your next deal I would sell. If you already have the cash/financing for the next deal I would keep it long term and use that 25k you would make as a down payment to a cash out refi.
I have a house right now about the same #'s as you that I have been struggling with the same decision you have. With the cash out refi for my I think I will have enough cash for my next deal so I am planning on keeping the house as a rental.
With the cash out refi you will not come away with as much cash but you save money in that you avoid all the costs that go into selling the home. So it may be a 10-15 k cash difference vs selling your place or keeping it. If the 10-15k will break your upcoming deal sell it.
My thinking was very similar to yours. I do have the cash for another deal already so I don't need the quick cash. I guess really I'm trying to come up with criteria on how to decide when to hold and when to sell in the future.
Yea, good position to be in either way:) I will follow and see if anyone else has any criteria that they use.
What are you goals? What do you see yourself taking this money? Honestly all of ours houses we could "flip" for those types of profits. Those are the types of the profits that we want when we buy a house.
Here's the thing the $500 a month in cash flow means more than the 25k in profit. It is also VERY hard for us to find these houses so there is not a dime a dozen ;) Therefore we have chosen to keep the houses and build up our cash flow which reaches OUR goals!
Now if you have an infinite number of these houses and the time to flip. Than I would flip to fund. Unfortunatly that doesn't work in my areas ;)
I do think the availability of houses in my area has played a part in my decision to keep the house I am rehabbing as it is only a few blocks away from my current home which will make it easier to keep a eye on the house when I have renters in it.
Good deals don't come around everyday in my neighborhood so if you get one I guess it makes sense to buy and hold if you can afford to do so.
What are the tax implications if you take the quick profit? And, if you keep it will there be deferred maintenance issues coming in the next few years? I always buy and hold but like @Elizabeth Colegrove said it's really about starting with the end in mind (your goals).
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