Flip or rent? Analyze my deal

[Zoran M.]

Hi all – I wanted to get the community’s take on this all-cash deal for a multifamily unit. It’s in a very good part of Cleveland, hence the ARV. I plan to get a mortgage after 6-12 months, so my analysis will include those figures: Purchase: $87,000 Reno: $30,000 Initial Investment incl. closing costs: $120,000 ARV based on comps: $200,000 Flip income: $40-50k (Reno would be nicer if I flip it, so rehab would go from $30k to $40-50) Annual figures: Gross Rent: $24,000 ($1,100 up unit / $900 down unit) Vacancy (8%): $2000 Gross Income: $22,000 Taxes: $6,000 Insurance: $1,200 Repairs: $500 (fully rehabbed property) Realtors fee (for tenant placement): $2,000 Total Expenses: $9,700 NOI: $12,300 Mortgage: $7,423 Annual Cash Flow: $4,877 Cash ROI: 4.0% Total ROI: 5.9% I could improve cash flow by $2,000 by placing tenants myself.

[Andy Luick]

@Zoran M. - what are the units....3bed/2bath, 1/1/?? Why not rent them and flip it based on the net cashflow. If the parking and the areas allows for it, I'd convert at least one of the units to shared housing for better rents and net income. The higher you can boost net rent...not just gross....the more you can get for the property. I keep very little of what I buy anymore because passive investors love the returns and line up to buy what we have to sell with a 10% net return. Different model but I'm sure it works in your market as well.

What are you planning to do with the rehab on the flip? I'm not understanding the difference in the rental rehab and the flip rehab as an investment property...or were you thinking you'd rehab one unit to retail for an owner occupier who would then have a rental unit to pay the mortgage with? Not a bad plan either. On the $500 annual repairs....even renovated properties have unexpected repairs so you will still need to budget for it!