Updated almost 6 years ago on . Most recent reply
Overbudget Live-in Flip. Advice?
Hello BP!
My wife and I recently started our first foray into real estate. We bought a home in Del Rio, TX that we are rehabbing, and plan on selling in about a year and a half when we leave the area. We purchased the home for $139K, which is at about 86% of the highest projected ARV (big mistake I know). However, the rehab quickly went over budget as is apt to happen during a first time experience. We are about $12K over and still have some work that we feel we need to complete to make the home even worth selling at ARV.
Seeing as we are already over, should we continue with the rehab and try to go a bit above the ARV on resale or should we focus on turning this into a rental? Del Rio is a small town on the Mexico border whose primary source of economy is the nearby Air Force base. The current mortgage on the home is $1010 and average rent in the area for a comparable home is $1200 - $1400 and we would more than likely want to use a property manager. What advice would you all give on this situation?
Thank you!
Roderick T. Byars
Most Popular Reply
I second the advice from @JD Martin
Don’t turn what is a poor situation into a disaster situation. Renting will not produce profit per your numbers and you can’t do half or 3/4 of a rehab so finish as economically as possible and sell for as much as the market will allow.
As JD states, even if you just break even, the learning experience of doing it is priceless and the mistakes you made are just the cost of your real world education.
Don’t repeat the same buy mistake and for flips, buy in areas with good schools, good job growth and good population growth. Going against that grain will likely result in what you have now, and of course don’t buy at 86% clips anymore, that equates to losses.