Flip or Rent

8 Replies

I purchased a 4 bedroom property in January that I planned on rehabbing to sell as my first flip.  The purchase price was  $63K which the bank that owned the property gave me as a 1 year 2.99% portfolio loan.  I went a bit over budget on the rehab, as I put in about $34K total of my own cash.  My rehab goal was $25K.  It has been listed on the market now for over 2 months at $125K and I am now considering renting out instead of lowering the price to a point where the profit would be quite low.  I have read a lot more about how the profit is taxed on a flip since I purchased the property, and I am now considering trying to get a better margin on the next flip or trying buy and hold.  My question is should I lower the price to a point that would get it sold and I would make very little, or rent it out.  Rent in the area would be about $1K to  per month, and the mortgage + insurance is $695 per month.  Also, is there a way to recoup any of the cash that I put in for the rehab?  Any advice would be appreciated.

Thanks,

Ryan Matthews

@Ryan M. , how did you come up with the ARV? Have you had any feedback from showing agents as to why they weren't making an offer on it? Have you seen the competition at your price range and in your neighborhood? If not, ask your listing agent to run comps at both your range in your city, and in the neighborhood. Perhaps your property is priced too high or isn't as well renovated as others in the same price range.

By my calculations, you have ~$97k into it. Without selling, I don't see a way to get much of that back. See why it isn't selling.

I'd probably lower the price and chalk it up to experience. With those numbers your cash flow wouldn't be worth it on renting. Get your cash back and start looking again. Good luck!

Thanks, that's kind of what I was thinking. I'm brand new to this and I thought there might be a way to pull money out and just pay the bills with the rents but I think the margins would be too close. The comps from this street are all over the place. 

@Ryan M.

Yup, sell it.  Take whatever you can and get out.

I ran a few rental scenarios and mostly they suck for you.  I can give the exact numbers if you tell me what you're paying for:

Insurance

Taxes

I was playing around with numbers and the best scenario I could make up was a 6% return and a bit over $125/month in cash flow.  Neither make this place worth keeping.

I vote sell it.  What do you think you can realistically sell it for?

@ Ryan M.

I vote sell it as well. Cut your losses Asap.

Thanks everyone for the input. The biggest problem with this house is that it has kind of an odd layout where there is no dining area so the previous owners converted the one car garage into a dining area and there is no garage now. I think I will just have to bite the bullet and lower the price on this deal. I guess it is better than losing money but I did put quite a bit of work into it and I was hoping that I could find another solution. I am pretty confident that it will sell for about $115k. I had a cash offer for $118K the first week on the market  that I should have probably taken.

Thanks again.

@Ryan M. , is it listed with an agent? If so, have the agent contact the agent for the person who offered 118. Maybe they still want it? Maybe they want it at $115... 

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