I need advise in a property SELLING or RENTING.

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I need advise in a property SELLING or RENTING.

Vinny Lopes
Rental Property Investor · Bridgeport, CT · Member since 2015 · 35 posts · 10 votes

Hi BP community, I need some serious advise here in a situation in facing with two of my home flips.

I've been flipping houses for over 15 years, completed over 50 flips, a few years ago I decided to start buy and hold using the strategic (BRRRR), but I never stop flipping houses, even the profits on the flips is decreasing each year with the high competition when buying foreclosed properties.

Now I'm facing a situation where I have two houses on the market for sale (SFH), the properties are on the market for a couple months and we didn't have any offers yet, if I lower the price I might don't have any profits or maybe 10-20K. Now I'm thinking in renting this properties and refinance instead of sell cheap.

The numbers that I'm working follow below: 

House 1 - SFH 1480 sq ft (completely renovated, 3 bedrooms, 2 full baths, new kitchen and appliances)

Purchase price $85K, repairs $87K , ARV: $220K

SELL: If I sell deducting closing costs I will end up with $26K (before taxes)

vs

RENT: If I rent I can collect $2300 monthly ($27600/y), Tax and Insurance (7500/year), Repairs & Maintenance $950/y, If I refinance at 70% LTV monthly will be $850 ($10,200),

My monthly expenses including mortgage payment, tax, insurance and maintenance will be around $1554, and I'll be receiving monthly 2300, so I'll cashflow $746 monthly ($8952/year) 

House 2 - SFH 2360 sq ft (completely renovated, 4 bedrooms, 2 full baths, new kitchen and appliances)

Purchase price $135K, repairs $62K , ARV: $245K

SELL: If I sell deducting closing costs I will end up with $27K (before taxes)

vs

RENT: If I rent I can collect $2650 monthly ($31800/y), Tax and Insurance (8100/year), Repairs & Maintenance $1200/y, If I refinance at 70% LTV monthly will be $900 ($10,800/y)

My monthly expenses including mortgage payment, tax, insurance and maintenance will be around $1675, and I'll be receiving monthly 2650, so I'll cashflow $975 monthly ($11,700/year) 

Please Advise: Should I sell or rent this properties?

Looked at the numbers my conclusion is definitely rent in about 3 years those properties will be giving me 30K each.

Thank You.

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  • Chris T.
    Investor · Downers Grove, IL · Member since 2015 · 1k+ posts · 955 votes
    9y

    @Vinny Lopes

    how about a 3rd option? Rent w/ the option to buy to qualified tenants at FMV in a few years. There're certain regulations you need to find out more before you start doing "rent to own". But if you do this, you could open up another market of buyers. Buyers with good job history and income, but cannot qualify for a mortgage due to certain circumstances. Plus you will save on realtor's commissions.

    Or a 4th option? (disclaimer - I have not done this yet so for those who have done it, please chime in). 

    Sell w/ owner financing at FMV. Then once you've a seasoned performing note, sell that note to another investor.

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  • Vinny Lopes
    OP
    Rental Property Investor · Bridgeport, CT · Member since 2015 · 35 posts · 10 votes
    9y

    @chris 

    @Chris T.

    Thank you Chris for the great advise. 

    I'll do some research on the options you suggested.

    0Reply
  • Charles Doehler
    Real Estate Agent · Ogden, UT · Member since 2016 · 20 posts · 7 votes
    9y

    I like to keep things simple.  If I cant make money on a flip in a seller's market, I paid too much for buy, fix and commissions.  If the rent makes sense then the rental market is better than the selling.  You didn't mention any income tax costs.  I like to flip and focus on reducing costs.  Being a landlord is a full-time job for me since I place no value in property management.  Also, renting is a cumulative drain on the brain.

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  • Vinny Lopes
    OP
    Rental Property Investor · Bridgeport, CT · Member since 2015 · 35 posts · 10 votes
    9y

    Hi Charles, thanks for your answer. 

    The income taxes costs on top of the net profit will be based on a STCG (short term capital gain) here in CT is 25%

    About property management I'm use to it, I have another rental properties most multi family and my office has a staff that take care of all calls from tenants, repairs and maintenance. 

    I'm still undecided between sell vs rent, but doing some more research.

    My only concern is that the houses is very well done and with a lot of finish touches, and when it's a rental you know. We never know how tenants will take care of it.

    Thank for your opinions. I appreciate.

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