Wholesale or Buy and hold?
I am currently about to buy a single family home from a family friend for $100,000. It will need roughly $10,000 of repair. The appraisal value is approximately $190,000. My question is should I buy and hold this property which will tie up money for future investments or should I whole sale to fund the next rehab project to continue to expand?
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@Shon Drennan We need more information to help with advice. If you Buy-and-Hold, How much is the rent for the property? Like @Greg Dickerson mentioned selling it retail may be an option for you.
How will you be purchasing the property, Cash, Loan with 20% down, Move-in while rehabbing using 3.5% Owner Occupant Loan?
Below is just a basic workout to give you an idea as to what to look for when making a decision. To make it simple I did this as a Cash purchase, the profit numbers get smaller if you have a loan in place as a part of this equation. These are mock numbers for rent since I have no idea what the rent is in your area. Other options are you can do a cash out refi, or a HELOC to get your cash out if the ARV is at $190,000
Update us and let us know what the numbers really look like beyond the purchase price and rehab cost.
| 190,000 | Sales Proceeds |
| (11,400) | 6% REA Commission |
| (100,000) | Purchase cost |
| (3,800) | Purchase settlement cost |
| (10,000) | Rehab Cost |
| (5,700) | Sellers Closing cost @ 3% |
| 59,100 | Profit |
| (23,640) | Taxes on profit |
| 35,460 | Net profit |
| 800 | Gross Rent |
| (400) | All Expenses |
| (80) | Reserves |
| 320 | Net Cash Flow |
| 111 | Number of months to make $35,460 |
| 9.23 | Years |