Hi Biggerpockets, this is my first time posting (John Smith is not my real name btw). Anyways, I have been reading and visiting this site for quite some time, and I want to get your thoughts on what you would do if you were in my situation. I have a property that I obtained subject-to. The remaining balance on the mortgage is 120,000 and ARV is $175,000, and the PITI is just slightly over $1,200 a month with 22 years left on the mortgage. This property would rent out for $1,600-$1,700 a month no problem, which was my initial plan; do some quick repairs and rent/build wealth. I am in a debacle though... With recent heavy rains, the property has had a few issues. Water came in the basement due to a grading issue and water pooling near the foundation. That problem is being taken care of as I write this. Another issue though, is over the years, the sump pump outlet was not being drained away from the house, and now the foundation is bowing. I now need to straighten/brace the one wall with I-beams and possibly rip up the driveway. The roof also needs to be replaced ASAP. I have bids for all of the work, and it looks to be around $10,000 in material and labor for everything (roof, foundation, final repairs). This is what I think my options are. Option A) Clean up the property and sell as-is, no new roof or foundation work. I would be selling at a discount, which could potentially cut into my profits, but I also would not be putting myself at financial risk. Option B) I could bite the bullet and fix issues and sell it. I could possibly make more profit or lose money, you just never really know what you're getting into when you start rehabbing a house. Option C) Bite the bullet and make repairs and stick to my original plan of renting it. Option D) Possibly refinance the loan, take out money for the repairs and either continue living in the property, sell the property, or rent the property. The loan would be in my name though, which has it's own issues and liabilities, but I could lower my monthly payments quite a bit, as the current mortgage has a 6.25% interest rate... If there are other options please share. Again, what would you do?
You must choose your own path - Powhatan
I would give you the same advice that the gurus give everyone... take the course of action that yields you the greatest profits with the least possible exposure to risk. Buy only properties that you know will go up in value, and only rent to quality tenants that will not cause you future problems.
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