Do I just go for it?

Question

Hello everyone! This is my first original post- though reading and commenting has been fun!

Over the last week, an unexpected deal has fallen in my lap! It’s a cute place, with probably about 30k worth of work to do. However, I could sell for easily that much profit, or hold and rent out the two units for a great cash flow after expenses.

Seems too good, right? But even my husband is on board- which is usually NOT the case.
Should I just go for it? House has been vacant for almost 3 years, so I know there could be a lot of surprises. But it was winterized before they left, and the issue that caused the family to leave has finally been settled in court, and should be handled by end of summer.

Also- HELOC or Hard Money, if we’re planning on holding?Thanks, everyone!

Joe Villeneuve · Answer

1 - Numbers...???  You don't base decisions in REI without having actual (not "should be", could be", or "about" numbers).

2 - Also, you NEVER just go for it.  See statement #1

Joe Villeneuve · Answer

OK.  Let me ask another question then.  Why would you not do it?

Steve Vaughan · Answer

Yes! HELOC.   I wouldn't touch hard money.

Tim Delaney · Answer

@Jillian Kemmerer if those numbers are accurate it seems like a solid deal. Just a couple of things to keep in mind though - if it does only sell for $165, you are looking at a profit of less than $15k after selling commission, closing costs and holding expenses IF everything goes smoothly and according to budget. That’s still a decent profit for a first flip, but just make sure it is worth your time.

If you are doing cash out refi and holding (my personal preference) then keep in mind that 75% of a $165k valuation wont get you all you investment back out. That shouldn’t stop you from doing the deal, but be sure you have your own cash available that you don’t mind leaving in the deal and understanding that the cash flow for the first year or so is just going to be paying yourself back. So definitely don’t borrow 100% from a hard money lender. But depending on how much of a HELOC you have available I would probably try to borrow at least some from the hard money lender and use my heloc to fund some rehab and have extra available if something goes wrong. It’s a lot easier to use your heloc for emergencies than having to back to a lender.

Alecia Loveless · Answer

@Jillian Kemmerer Always, always, always have an inspection done. If it’s ok I’d say go for it with the HELOC. IN 1 year and 1 month my $100,000 3br 1ba house with about a $35,000 renovation has appreciated in value to somewhere in the $245,000-$289,000 range. So you never know.

The discrepancy in the range of value is because I’m considering selling it and still vacillating between hold and sell, and my realtor and I are waiting to see how quickly a few comparable properties go under contract at the high end of the spectrum.

If it stays in the $245,000 range I likely will keep it in my portfolio but if it gets to the higher end I will try to sell because I have another investment idea in mind.

If I were you in your price range I’d hold your property cash flowing $1000-1500 a month, in 3 years you will make more money and tax write offs than selling it and getting hit with capital gains.

Thomas Corley · Answer

Welcome to BP @Jillian Kemmerer seems like a great deal I would take action just have an inspection done in the inspection period so you get an idea of what needs to be done. But go for it!

John Morgan · Answer

Go get it! I’d use a HELOC. That’s what I did on my first property 6 years ago. No regrets!

Chris Levarek · Answer

It depends but I'd say if it the market comps and surrounding rent rates or values prove it's worth AND it furthers your investment goals, then go for it. Have that clear understanding of why you are doing it and then the decision becomes easy. Alot is dependent on your market so hard to say if it's good without knowing vacancy rates, crime rates, and overall numbers.

Just have a plan A, Buy and Hold and a plan B, Sell for a Profit. Using a HELOC or HARD Money can be expensive long term. Typically used on short term holds but just pencil it out and if it works, take action!

Theresa Harris · Answer

If you are planning on holding on it to do the financing with the best terms and lowest interest rates.  Have an inspection so you know what you are getting into and go for it if the numbers make sense.

Caitlin Faulk · Answer

Echo @Joe Villeneuve!

If the numbers work. Have you considered...Heloc the purchase and repairs (same as cash) Once seasoned (many banks require 6mos), Refi to hold long term. Pay off Heloc with Refi. Cheers, to “falling lap deals”!

Do I just go for it?

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