Better to resell or fix and hold for rental

[Brandon Eleazer]

Hi BP,

I'm deciding whether to rehab and resale or rehab and hold for rental. Here are the details:

Single family, Purchase price $25k

Rehab costs $23k

ARV $75k

Estimated profit for flip is $10k (13.5% of ARV), or monthly rent is $800/month

I would like to make a definitive decision upfront because the improvements/scope of work will vary slightly depending on if this will be a flip or rental. 

Bottom line is it worth the effort, money and 4-5 months time to make $10k, or is it better to put less than $23k rehab (let's say $15k) to just get the property rent ready for a tenant @ $800/month? Thx

[Skyler Smith]

I would buy, fix, and hold. Let's take your ARV at $75k, and your hard costs at $48k (25k purchase and 23k as your highest rehab cost) all as you've said

If you took this to a lender, you could pretty easily get 80% LTV in a refinance, so the bank would be willing to pay you $58,000 (assuming 2k of closing costs.) You would get pretty quick access to your capital to get into another deal, plus $10,000 of profit (the same amount of profit as if you'd sold it.) The cash flow should *easily* make the payment, and you have very quick liquidity. Take the cash benefit of a flip and the cash flow of a buy and hold! Infinite rate of return - because after the refi you have no money in the deal.