Tell me if I'm being a chicken.....
Hello everyone!
I’m a single family investor who has always paid cash for my investment properties. My typical formula has been to spend 10-20k on the house, another 10-15k in repairs, rent it out for $800-900…rinse and repeat. This formula provides me with returns around 30% and a tremendous cashflow of between $500-600 per house and I’ve grown comfortable with the process. These properties are all in decent, working neighborhoods.
However, a few months ago I closed my first seller financed investment property. It’s in the ‘burbs and has a bit more land. Now that the rehab is complete, I’m having a difficult time deciding whether to continue with my plan to rent it out, or just flip it (1031 exchange) and move on. I think I’m hesitant because I’m not used to such high carrying costs...using other people's money is simply unfamiliar territory Having admitted that, I don’t want to chicken out just because I’m “not used to something.”
As a rental, the cashlfow on this property would be (conservatively) $125/MO
OR
If I sold it now, a quick sales price is 105,000. After all selling expenses this would leave me with around 30-35,000 profit….which I could use for my above mentioned formula. However, I realize having a tenant buy the majority of this house is an incredible opportunity too…albeit 15 years later.
I’d like some outside opinions as to whether you’d carry this house as a rental or sell it and move on to a higher cash flow opportunity.
Here are the #’s if interested…..thanks everyone.
Purchase – 55,000
Down – 10,000
Rehab-7,500 (all completed – new roof, all new mechanics, the place is tight)
Terms –45,000 at 5% for 15 years no balloon
Monthly Mortgage $350.00
Monthly Operating costs $450 (Tax,ins,PM,Water,repair fund)
Total monthly costs - $800
Rent – $925 (easily)
-Carrying the monthly cost between vacancies would not be a huge financial hardship.