Sell as-is OR improve and sell

9 Replies | San Antonio, Texas

I have a property that I am selling that has low cashflow and a ton of equity. The rising property value has increased the taxes to the point where it is eating a lot of my cashflow.  I am now in a situation where I would make much more selling than collecting the measley cashflow. 

The property is a duplex and is rented out until February 2019. So I have 2 options:

1. Sell fully occupied property now in as-is condition. Its in decent condition and garner a 40k profit. This would allow me to pay off a mortgage on another property and increase my cashflow.

2. Wait until February 2019 for leases to expire. Do rehab on house and bring it up to level of rapidly rising neighborhood. Profit 60k-80k. 

My gut is telling me take the the bird in hand and sell property now. I'm not too fond of flipping because of the risky nature of that business. I don't want to try to predict the economy but who knows where we will be in middle of 2019 when I would be selling this property. 

On the flipside I see the potential based on comps in this neighborhood so I don't want to penny wise pound foolish. Maybe I just have FOMO.

Thoughts?

I'd take option #1 any day of the week. 

I assume you will gross significantly more than the net of $40K.  Sink that money into something else that cash flows and will also appreciate.  Have you considered 1031 exchange and moving up on property or properties?

You allude to it, but given our current state of affairs, the market could become volatile with the push of a button.  I'd hat to see 2019 come and you only be able to see for the same price as today, and only have the cash flow to account for it.  Seems like the money could be reinvested somewhere else and produce a better return.

Which neighborhood BTW?  

@Seth Teel its in Beacon Hill. I bought for 105k and have a cash offer for 125k. The problem is other listings in the area that are more rehabbed are selling for 200k-300k. So its really if I want the quick cash now or the big cash later.

Wait until 2019, vacant the unit, rehab to sell for big cash.

My past experience:

1. Hard for showings with tenants in place.

2. Limited to Investor with tenants in place.

3. End user - Owner occupied is willing to pay higher price than investors.

4. Housing market is still on the rise, will rise for at least 12 to 24 more months. Too early to jump off the train now.
House price will be higher in 2019 than 2018.

5. After rehab, sell for top dollars.

My thoughts: if you are going to be able to put the sales proceeds into a bigger/better cash flowing property, then do it.

However, if you have the wherewithal (ie good contacts with a builder), it might be a good property for you to practice your reno skills on.

Ps - can we send offers your way?

Account Closed Guys I forgot to mention I already have a cash offer for $125k with the property in as-is condition. Not sure if that changes the situation.

I have plenty of contractors from previous rehabs I can work with. The property produces cashflow but just not that much compared to my equity position.

Guys I think Ive decided Im going to try to do a light flip and sell. Its going to depend if I can do a cash-for-keys scenario with my tenant and how much the rehab will be. My biggest expense will be electric. The house is seperatley metered for electricity so I would need to reconnect that. Im assuming fully rewiring most of the house plus permits to eliminate other meter. Knock down a few walls and add a few more. Im sure there will be a few other capex items.

If i can jump the hurdles there will be an additional 50k in profit in it for me. 

Originally posted by @Joseph Weisenbloom :

Guys I think Ive decided Im going to try to do a light flip and sell. Its going to depend if I can do a cash-for-keys scenario with my tenant and how much the rehab will be. My biggest expense will be electric. The house is seperatley metered for electricity so I would need to reconnect that. Im assuming fully rewiring most of the house plus permits to eliminate other meter. Knock down a few walls and add a few more. Im sure there will be a few other capex items.

If i can jump the hurdles there will be an additional 50k in profit in it for me. 

 40-50k Cash in hand? Take that every-time.  Sure you could wait to make possibly more, but if you have the offer take it and go find your next project.

@Jarrod Kohl I did the calculation last night it will be 20k profit If i sell now because that other 30k is my equity in the house.

If i fix up I am projecting 50k-75k profit. This would be 75k-100k total including my equity.  

Id rather up my profit potential by another 50k if I can. We shall see. It all depends if I can get it vacated and rehabbed for a decent price.

Check with a realtor who is familiar with the area FIRST. Someone like @Seth Teel . I dont think your house is actually in Beacon Hill, but that may or may not make a diference. Fredricksburg is the dividing line. Make sure that you can really get the full value that someone is telling you.

With that said, you have to look inwards to ask yourself why you are investing. Are you doing it for retirement, extra income, etc. The area has increasing rents and sale prices. Longterm it is a great area. Lots happening close to downtown.

Also, just because someone offered a certain price, you may be able to get more, as is, without getting rid of tenants.