Flip or buy and hold???

Question

Hey everyone I recently found an off market As-is deal, the seller is super motivated to sell. The purchase price is $100,000, it needs about $25,000 in rehab cost. ARV is $180,000-$200,000. The quick cash would be nice but it would also cash flow $400-500 a month if I kept it as a rental.

I only have one year of self employment, so traditional financing has been no good. I found some great hard money lenders for fix and flips also for long term buy and holds, I’m just stuck on which path I should take. If you were in my shoes what would you do?

Also does anyone have experience using a long term hard money lender?

Skylar Mcgee · Answer

@Corby Goade Thank you for the advice, I’ll definitely keep it as a rental.

The two lenders I found offer DSCR loans, do you have any experience using these loans?

Thomas Corley · Answer

@Skylar Mcgee with that cash flow and equity hold it!!

Down the road you can always pull cash out (Refi)!

Sounds like a great deal!

Corby Goade · Answer

Sounds interesting! There aren't long term hard money lenders- by nature those loans are quick turns. You are probably looking for a private money lender or portfolio lender.

REI is a long term game and the IRS treats it that same way. If you have a rental with that kind of cash flow and equity, don't be tempted to grab the quick cash from the sale, you can access it through leverage and grow your portfolio much more quickly AND when you leverage, that money is tax free. No so if you sell- you'll be heavily taxed on your gain and have no equity or cash flow left. In addition, you lose all of the amazing tax benefits and write offs that come with buy and hold. You have to go right back to work and make money, which I assume is the opposite of your long term goal.

Be strong- look long in to the future rather than think about what you could have right now. Your future self will thank you.