Does it make sense to buy this flip as a rental property?

Question

I am always combing though the (over-priced) listings in South Florida and I am looking for things that can cash flow or at least break even, which is a rarity. I prefer lower-priced properties because I think it limits risk a bit. Well, I found this small house, and it seems like the numbers would work.

But it is obviously a flip, so that gives me pause- Is it really a good deal considering that it is a flip? According to records, it was bought in December 2019 for $87,000 and the seller is now listing it at $275,000. It has no HOA. The calculator/report says it should work if I put a large down down, but that seems odd to me. What do you think?

Ray Hage · Answer

Just be sure the house is ok. 275K is crazy cheap in south FL, even for a terrible neighborhood. Does the house have potential to have an addition? That might be worth pursuing if you can expand it and make a big pay day or house hack it in the mean time.

Scott Wolf · Answer

Why is this obviously a flip? The property was bought pre-covid and now has a higher value.  Nothing obvious about this being a flip.

Amber Stout · Answer

Hey Mat — Flips can work as rentals, but it really comes down to the numbers. I’m a mortgage broker and investor in Florida, and I often run into this situation with clients — a big price jump after a flip doesn’t mean it’s a bad deal, but you want to make sure the rents support your expenses on the property.

If it breaks even now with a large down payment, maybe it's not worth moving forward on or it’s worth exploring creative financing or negotiating a better price.

Kevin Marshburn · Answer

Mat, two quick points. First, I wouldn't consider that property a flip as the owner bought it 6 years ago so I wouldn't factor that into your underwriting of the deal. To that point, it's not relevant in today's market at which price point the house was purchased in 2019. As for the down payment and deal itself, just make sure the total return makes sense for the amount you'd need to put down. Everyone's metrics are different here as it's based on your specific situation and expectations (risk tolerance, financial liquidity, investing strategy, etc.), but just keep in mind with lower price points in some of these areas of South FL, you may also have muted appreciation outlooks.

Caleb Brown · Answer

I wouldn't be concerned if it was a flip. Definitely do inspections/due diligence to make sure it's solid. If there are red flags negotiate or walk, flips can be done great or they can be lipstick on a pig. Outside of that run numbers, if it makes sense offer.

Mat Garcia · Answer

Doing a virtual walkthrough with streetview I see the house is right near a mobile home park. I see graffiti on some business buildings out on the main street, however, not on the houses. I don't see trash on the street/curb like I see in some questionable neighborhoods.

Some houses are obviously well taken care of, while others are in need of some maintenance, but are not looking abandoned either. The seller describes it as an "up and coming" neighborhood and there might be some truth to that.

Mat Garcia · Answer

@Kevin Marshburn @Scott Wolf The reason I was thinking of it as a flip is because it is owned by an LLC and it was updated/remodeled the same year it was bought (2019). I wasn't thinking of the time aspect. But I see that essentially this has been a rental since 2019.

@Ray Hage I don't know. The lot is a narrow rectangle at 2,625 sq ft. The house itself is only an 858 sq ft 2 bed, 1 bathroom property built in 1940. I don't see why another small bathroom couldn't be added. The zoning information says:

PA Primary Zone5700 DUPLEXES - GENERALPrimary Land Use0101 RESIDENTIAL - SINGLE FAMILY : 1 UNIT

Additionally, I found some code violations. Most just say that it is in disrepair and they are old. The one I find more concerning says:

Interior alteration of enclosed covered entry converted to living space, main building encroaching set back on east elevation and attached structural storage/living space encroaching set back on north elevation.

BTW, I thought I had included a link to the property on Redfin in this post. I don't know if I forgot to add the link or if a mod removed it. Is it bad form or not smart to post links to properties on the forums?

Ray Hage · Answer

It might have some legs to it. Well it sounds like they converted a garage or carport into another bedroom so that could be a major issue. You will want to know before buying if they will make you convert it back to whatever it was. If the house in extreme disrepair, the city may force you to demo it so you better find out for sure what the correct solution is before buying it any price. I don't think you can post links, but if you want to send me a private message, i could look at it.

Does it make sense to buy this flip as a rental property?

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