Flip to sell or Flip to hold? | seeking advice

6 Replies

I have been stalking the forums for a bit and can't express how appreciative I am for all the info I have gleaned. 

My wife and I have a deal that we would love input on.  

-the condensed version- .We found a house a couple blocks away from our own home in Rio Rancho, New Mexico.  We toured it and placed an offer for $65k.  It was listed at $85k.  The seller (bank owned) accepted.  We have about 40k in rehab costs (septic, kitchen, baths, etc...) none of which scare us.  We really enjoy the process.  I am also projecting $10k in purchase and carry costs. 

In the end, I project we will be in about $120k.  Our Realtor is confident that it can be sold for $160k once rehab'd.  $160k is a pretty conservative number based on comps but it is the number I am using to run calculations. 

The question: should I sell it @ $160k (projecting a gross profit of $20k) OR hold, rent and cash out refi in (x) months?  It would rent for $1200 per month. 

Longterm our goal is to hold property. We just don't have the capital currently to tie up for extended periods of time. I need the cash back out of the investment either through a sale or though a cash out refi @ 65%-75% LTV.

Thanks so much for helping me think through it. 

If your long term goal is to have a portfolio of rentals then I would say sell it. 

There is very high risk in SF Rentals, Gain the profit roll it a few times, till you can afford a Multi Unit. Good Luck.

It all depends on your goals...Do you want to be a landlord or flip properties.  My advice is that your rent doesn't look high enough.  1% rule but that is a guess since I don't know all the external variables that will go into that.  Get a quote on Tax, Insurance, run the numbers again yourself and then throw it out to the group with definitive numbers for the buy and hold strategy...If buy and hold doesn't make sense, then sell.

Thank you both for the quick response.  My goal is to hold property that generates "passive" income.  I want to be a landlord more than I want to make a business of flipping homes.  Right now, I can't afford the ideal rental property but can afford a few homes that need some help and can be turned for a modest profit.  

My fear is that I am trying to hard to make this particular property a rental.  If I had the money outright, I would not purchase this house as a rental unit.  Too many issues related to septic system, yard size, floor plan.  I love the neighborhood (this is where we live) but not too sure it is a good rental place to rent within. 

If your gut says no, then that's something to listen to.  Your rehab should be different for a flip than a rental.  If you got it rent ready could you spend less, put a tenant in it, and then pull a line of credit (or cash-out refi) on the additional equity which you could use towards another rental?  That way you don't have to choose.

@Easton G.  

Hi Easton, When I read your posts, I think you already answered your own questions.

It may be a long-term goal, but short term should be gaining some money in the bank.   

You have fears for whatever reason, then take the money and move on to the next.  That way you don't need to regret anything later that you already fear now :)

@Easton G.  I have some intimate knowledge of this market we should sit down and have some coffee in the near future.  I can point you in the right direction on rehab costs, actual rental values in the area, and sales comps.  I think your rent number might be on the high side.  In the end, I tend to agree with @John Slater  .  Good luck.

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