Good afternoon BP members!
I wanted to get an opinion on a current property we have. It's a single family home in a great location that's walking distance to a rapidly growing university.
-year built: 1927
-It's a 4BR 2BA and low market rent is $1200 with high being $1500
-30yr loan Amt with escrowed ins. $535.
-city taxes: $1200/yr
-also not included is $???/month cap-ex,10%vacancy rate,10%repair & maint. or any other exp.
-water/electric/Garbage: tenant pays
-Purchase price: $91,577
-Rehab exp & holding fees: $23,423
-Total investment: $115,000
-Potential sale price: $170-180k
-Should I do a cash out refinance and leverage the money I have invested in the house and rent(of course my payment would increase if I did that and do not want to be over leveraged)
- Or sell and take my earnings and re-invest?
Although, my end goal is to generate cash flow but also could utilize the profits for a down payment on a much larger cash flowing investments.
(FYI...the home isn't listed with a realtor, we have a seemingly serious buyer that's verbally offered asking price and is ready to sign contract)
Look forward to hearing everyone's thoughts. Thanks so much!
All the best,
Why not list properly and have the WORLD put a value on your property. Someones try to fleece you!
My simple idea just made you 30,000-40,000$ more in profit.
Figure out how long it would take you to make the potential profit from the sale now, that should help you decide. I have similar issue here, the property is in a great area for a rental and income would generate good, but it would take 10 years to make what I can make selling right away in this great Real Estate market. I taught myself to think I could make more with the cash now, do another flip deal, or wait until another buy and hold comes along that makes more sense to keep.
Without doing all the math, it looks like you'd be looking at a cashflow of $300-400/mo. Also presuming your ARV is really $170K, you should have no problem pulling all your initial investment out with a refi.
I would lean towards long term cashflow of $3600-4800/yr and maybe more if you manage it well and get good tenants. Not bad for $0 investment. :)
I will get a professional appraiser to decide what it is worth. Often one can sell more than the appraisal value when the market is very active.
Sounds like it's a decent bet for both rents to grow and the place to appreciate given the location near a university. Why not hang in to it for a bit and see which way the wind blows...not to mention you would switch to the cap gains rate after a year instead of ordinary income, and you might be able to leverage more if value goes up...which it could by increasing rents...
If you are not into maximum leverage I would sell and move on to the next one.
There is no point in tying up dead equity in a property since its investment value will kill your cash flow.
I appreciate all your responses. Long term it would defiantly be a great source of income. I also battle the idea of using that as down payment for other properties.
The idea of the house still having knob and tube as most of the electrical is also a nuisance/possible liability.
It seems like the past five months has just been a rush to get this thing ready to sell and here I stand now with the idea of renting it. Maybe I should take a step back and let it talk for itself.
Thanks so much!
@Paul K. McCoy on this particular one, I would probably take the profits and do 2-3 similar deals if you can find similar ones. Spreading out your investments over 2-3 properties could give you a higher return than having it all in 1 property. The key would be to be disciplined in the use of the money when you get it. That is the hard part for a lot of flippers.
Thanks so much for the insight guys, I really appreciate it!
Your capX risk is going up with the years. Risk exists. The house is old. I would sell and pick up a few newer homes that are up to today’s codes and standards.
Thanks for the comment Tyler, we decided to sell because of those very reasons.
We are due to close by the end of January!
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing