To rent or to flip is the question

Rehabbing & House Flipping
9yFollow

To rent or to flip is the question

Ed Perez
Cleveland, OH · Member since 2016 · 42 posts · 12 votes

Hello, I'm just torn between rehabbing and flipping a property I own free and clear or just rent out the property after rehab. I know in this business it's just a numbers game and it just up to you when you want to get paid. Do you want to get paid now and look for the next deal or just recoup the overall $$$ invested over a period time? Should I opt for rent, the monthly gross rent is approx $4150 (or 49,800, cap rate of 5.5% only). My net yearly income from the rent would be $30,670. Should I opt to flip the property, however, I can potentially make $102k (net). This property is located in an affluent community and is in a good school district, and that's the reason why the cap rate is on a low side. 

What other things should I be considering to make a smarter decision? Making a little over 30k a year on a single property I think is a good passive income (less the headeache). To break even, it will take 20 yrs to recoup my investment. Making 102k on a rehab is also nice but, once I sold the property, I'm unemployed once again. I will be searching for another good deal out there.

Most of my properties are giving me between 15 to 22% cap rate (5k yearly income on each). This is the first time I'm torn between the two investment scenarios. 

So, please let me know your thoughts are. Thanks in advance.

Ed

0Reply
84 views

Most Popular Reply

Troy Zimmerman
Investor · Mount Pleasant, SC · Member since 2015 · 20 posts · 15 votes
9y

Seems like a fairly short payoff.  Wait three years and you will have roughly the same amount to go and find the next deal.  Although the cap rate isn't outstanding, have you considered leveraging the current property?  Interest rates are low, and this might give you the best of both worlds.  You could potentially keep your property and find a new deal that cashflows a little better.  Best of luck!

3Reply
See this reply in the discussion

33 Replies

Jump to latestLatest
  • Ed Perez
    OP
    Cleveland, OH · Member since 2016 · 42 posts · 12 votes
    9y
    0Reply
  • Chang Pan
    Investor · Richmond, VA · Member since 2017 · 32 posts · 12 votes
    9y
    I would say hold it for at least for one year to get the tax rate down.
    1Reply
  • Ed Perez
    OP
    Cleveland, OH · Member since 2016 · 42 posts · 12 votes
    9y
    Originally posted by @Chang Pan:

    I would say hold it for at least for one year to get the tax rate down.

     Hi Chang, thanks for the reply. Thats what I normally do with my flipped properties. I wait until the day after the 12-month period has gone by. That way, I pay less money to the KGB.

    0Reply
  • Elijah F.
    Investor · Kaneohe, HI · Member since 2015 · 91 posts · 36 votes
    9y

    you stated you own the property free and clear and that if you sold it you would potentially net $102k on this $1MM property. why wouldn't you net closer to $1MM if its free and clear?

    0Reply
  • Sid Leibowitz
    Contractor · Glen Cove, NY · Member since 2016 · 209 posts · 89 votes
    9y

    IMHO being a landlord brings huge responsibilities, maintenance and huge legal issues. It is not for everyone and you have to have a gut for it. Dealing with tenants issues is not a walk in the park. If you only look at the income it produces, you will probably be disappointed. try looking at the cost of ownership, maintenance in its many forms. Plumbing, roofing, landscaping, Insurance. It is an exhaustive list. Are you doing cleanup yourself, hiring labor to do the yard work? You are responsible to the town and they will enforce all kinds of hidden and unknown issues. I would simply flip it before something happens that requires your attention away from your other endeavors. Take the money and run. 

    0Reply
  • Ed Perez
    OP
    Cleveland, OH · Member since 2016 · 42 posts · 12 votes
    9y
    Originally posted by @Elijah F.:

    you stated you own the property free and clear and that if you sold it you would potentially net $102k on this $1MM property. why wouldn't you net closer to $1MM if its free and clear?

     Hi Elijah, thanks for the reply. I bought this property cash and with the amount of money it requires for rehab, I would only net around 102k. Now, if i inherited this property and sold it for 1MM, my net profit should be closer to 1MM since I didn't spend a dime on the property. 

    0Reply
  • Ed Perez
    OP
    Cleveland, OH · Member since 2016 · 42 posts · 12 votes
    9y
    Originally posted by @Sid Leibowitz:

    IMHO being a landlord brings huge responsibilities, maintenance and huge legal issues. It is not for everyone and you have to have a gut for it. Dealing with tenants issues is not a walk in the park. If you only look at the income it produces, you will probably be disappointed. try looking at the cost of ownership, maintenance in its many forms. Plumbing, roofing, landscaping, Insurance. It is an exhaustive list. Are you doing cleanup yourself, hiring labor to do the yard work? You are responsible to the town and they will enforce all kinds of hidden and unknown issues. I would simply flip it before something happens that requires your attention away from your other endeavors. Take the money and run. 

     Hi Sid, thanks for your reply. I see exactly what you're saying about being a landlord and all the responsibilities that come with it for being one. Thus far, I've been relatively lucky (knock on wood). For all of my renovations (flip and hold), I've always work with contractors. Its kind of funny that the majority of my contacts in my phone are all in the construction trade. I have backup after backups. 

    0Reply
  • Sid Leibowitz
    Contractor · Glen Cove, NY · Member since 2016 · 209 posts · 89 votes
    9y

    I was only referring to the holding. I always flip. There were too many problems with holding. Constant attention to the property. Tenant bought a pit bull even though the lease said no dogs. The dog ( service animal ) attacked another tenant baby and they sued me. Roof leaked after hurricane and damaged roof and to floor apartment. New Ceiling and paint at my expense. Just a couple. There were more. There was no profit. I sold the house and mage the profit there. Landlord beware

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free