What to do with this deal?
It's amazing how it becomes common knowledge to the people around you once you're truly passionate about something. One of my coworkers is a painter on his spare time and people come to him consistently about custom pieces for which he gets paid a good bit of money. The same has started to happen when someone in my office has a house they've inherited, or want to sell; they come to me for an analysis and I make them an offer.
Anyhow, recently a coworker came to me with a deal that he hopes to sell which him and his sister have inherited from their mother. It's a 3 bed, 1.5 bath, 1 car built in 1960 with a 5 year old roof and HVAC. Everything else would need to be updated. We're in negotiations on price and meanwhile I'm trying to determine if this would be a good flip, or hold opportunity. I've never done a flip, but have always wanted to dive right in and learn through taking action.
Here are the numbers as a rental assuming it won't need much work to just get it rented out:
Purchase price: $80,000
Market Rent: $1400
Expenses (PITI, CapEx, PM, Vac, Rep): $1066
Cash Flow: $333
CoC Return: 25%
Possible BRRR as non-rehabbed comps are around $120,000
Flip:
Purchase price: $80,000
ARV: $150,000
Repairs: $24,000
Holding costs: $2000
Cost to sell: $9,000
Approx Net: $37,000 before capital gains
Now I know the rental return looks great but here's the kicker: the mother had three different tax exemptions (1 owner occupant and 2 senior citizen exemptions) and once those fall off the taxes will go from $3550 to around $6200. This brings the cash flow down to $105 meaning a CoC return of slightly less than 8%. What would you guys do with a deal like this? Flip? Wholesale?