I have just Purchased my first buy and hold rental.
I purchased it for 74k with 30% down on a 5% balloon (this is acting like a bridge loan as I plan to refi in 2 months). The Property looks to need roughly 10k in repairs and can rent for 900 mo. Right now I plan to refi after reno. In doing so I can pull out nearly all of the injected cash if I choose as the appraisal came in at 105k before repairs and comps three doors down on either side have sold for 117,000 and one on the market now at 123k. SO.... After looking at the numbers a quick fix and flip doesn't look so bad either. Any suggestions as to what would be a better choice? I plan to hold but the quick potential cash looks pretty good too.
Congrats on your deal! People here are visual types, got pics? :)
Do the math. If you refi $84K at 5%/30yrs, it's $456/mo plus tax & insurance ($300?) so this property might not have great cash flow, but a fast $30K for a flip.
It's not about tying up new money. If you pull all your cash out, you can keep buying and accumulating with this kind of deal. If I got the numbers right, however, the cash flow itself doesn't meet the ratios I see all over BP. But the flip aspect looks like something to jump on. And if you line up the right groups of workers, you can have multiple flips going on at once after the first few.
Congratulations. Let's hope is one of many more to come.
Frank you are exactly right. if i pull out the capital I would us it to finance another deal but the ratios would be off. I think this could be offset with other properties in the future as the next one should be able to help average out the cash flow etc. On the other hand with an extra 24k or so from a flip I could move on to more projects... I think my biggest hang up right now is that deals in my area are hard to find.
My aim right now is growth which tips me to the flip, however it might take another 6 months to find a good deal . This bring up another question. If the ratios are not as good but I can use this method to buy 3 or 4 quickly should I do that to take advantage of the low current rates and pending inflation (a little blue sky I realize) or should one always go with the immediate hard data even if the potential opportunity cost may be large in the future. Thanks for the info I will take some pics when I get back to town.
Just a quick update. We are a little behind as I wanted this to come to market by the 1 of June and I have about 2 weeks to go. Good news is my neighbor just sold in 3 days for 121,600'. After holding cost and reno's I will have a total of 74K plus closing for 2800, and 12,196 in, for a total of 88,996. assuming 6% for agent and a sale of 120,000 min. total profit 23,804 + I will update once this puppy has sold. wish me luck.
Good luck @Sid Newstrom interested to hear how it turns out.
Congrats and good luck with the property!
congrats on taking action
congrats but for a rental the numbers are not great. Flip it if u can
SOLD !!!!! Days on Market 0. set to close in august. After it's all done and said roughly 92,500 in and sold for 123,500. Less realtor fees of 5% for a profit of 24,850 (give or take, as not all the numbers are absolute (IE still have to return product and have a survey) and the check isn't in the bank)
Thanks everyone for the advice and the confidence.
Congrats. On to the next one