Should I keep or flip?
bought a house this year (40k) worth 80k in its current condition (needs rehab). My intention was to fix it up (estimated around 12k) and keep it to STR but now I am half way through the rehab and the Town just banned STR.
If I flip it I could sell it for $150-170,000. Should I flip it or keep it?
My goal has always been to keep everything I buy, but I live in NY and the Landlord Tenant laws have made it difficult to want to lease to long term tenants.
If you are unfamiliar with the Landlord Tenant law here are a few examples..
Landlord can only charge up to one month rent for a security deposit or “advanced deposit”
If tenant with a criminal history is denied the law assumes the Landlord denied this tenant because of their criminal history and can be fined
If tenant leaves the unit before their lease is up the landlord has to make good faith effort to fill the vacancy. If the landlord find a new tenant and the new tenants rent is equal to or higher than previous tenants rent the previous lease is considered terminated and the previous tenant can no longer be held liable for the rent
If tenant loses a house case and the judge grants the eviction, the tenant can ask the court for up to 1 year to move if they can show they can not find a similar apartment in the same neighborhood
Can you pivot to make it a mid-term rental?
@Paul De Luca looking at the town code for the district I am in and it says “prohibit short term-leasing, business, commercial, and industrial uses.”
I am unsure if they are considering STR and MTR the same thing? If that was a loophole that would be great for me. The property is located 1 mile from the airport and just a short drive to local hospitals so I was hoping I could rent to traveling nurses.
Do you plan on investing in NY? If you do, then it looks like you have plenty of equity and can do a cash out refi to get the money back, keep the property, and collect rent/tax benefits.
if you do not plan on investing in NY because you are concerned about the market, consider selling and investing elsewhere.
just note that what earn of the property will likely be taxed based on your income. So if you made $100k with your W2 and 50K on this sale, then you will be taxed on $150k income tax, not capital gains. I believe you have to own it for over a year and use it as a rental to get capital gains taxes.
Quote from @Samira Jaber:
@Paul De Luca looking at the town code for the district I am in and it says “prohibit short term-leasing, business, commercial, and industrial uses.”
I am unsure if they are considering STR and MTR the same thing? If that was a loophole that would be great for me. The property is located 1 mile from the airport and just a short drive to local hospitals so I was hoping I could rent to traveling nurses.
MTR and STR are not the same thing. As far as I understand, there really is no such thing as a mid-term rental. It's just a made up buzz word used online. If you go 'by the book', a property rented out for over a month is to be treated like a long term rental.
If you want to get a better understanding of what's permitted, just walk into your local city hall and sit down to talk with somebody about your plans.
All of this aside, I'm curious what the return would look like on a traditional long term rental. I know you say you don't love the landlord tenant laws. But what would your ROI be on this property after you rehab it?
Flip it. And learn from this :) STRs are dicey bc the laws or HOA rules (if in a condo or townhome) can change in an instant. Roll your equity into something that fits your goals of keeping things for long term holds and maybe flipping if that is the highest and best use for the property. My point is be flexible.
Very unfortunate such a great state has laws that are so anti-investment. If the area has economic drivers that can support a long term rental, it sounds worth keeping with the equity you've got in it already at this early stage. Especially considering the cost you got it at.
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Your numbers are pretty good and given the hassle you've described, I'd flip it and move your assets elsewhere.
@Samira Jaber Honestly I am a flipper by blood, and only held rentals if I had little other choices. My vote would be to flip it, take the profit and look for the next profitable project. As for the market, there have always been some that make better sense to flip in vs hold (like the tenant friendly ones). If you hope to holds STR's then be that wise investor that researches what market(s) are designed to encourage and welcome them. The same applies for flips. Good luck.