Real Estate Agent · Tuscumbia, AL · Member since 2015 · 47 posts · 26 votes
I have a property I have been rehabbing for the past couple months and the finish line should be crossed this week. I will have about 60k in it and could probably sell it for around 90-100k. The house was completely gutted and has all new plumbing, hvac, cabinets, appliances, flooring, water heater. Literally like new construction on the inside. The house would rent somewhere between 650-700 in a c+b- neighborhood.
I have another house under contract to buy for 46k that will rent for the same as the first house. I’m torn between keeping and renting the first house and getting a mortgage on it to buy the second house or selling the first one and getting a mortgage to buy the second and use the proceeds from the first to roll into the next flip.
I’m sure there are a variety of opinions but some different perspective is what I’m looking for. Thanks in advance.
The monthly rent sounds too low to cash flow from either house. If you kept your cash in the house ($60K), I'm estimating your annual return on investment will be around 10-11% as a rental (after expenses). If you flipped the property your return is 43% after the sales cost (not accounting for taxes). If you refi the house for 60K what will your monthly payments be? I don't think you would have any significant cash flow. I would flip both properties and find a rental where the rental rates make more sense.
The monthly rent sounds too low to cash flow from either house. If you kept your cash in the house ($60K), I'm estimating your annual return on investment will be around 10-11% as a rental (after expenses). If you flipped the property your return is 43% after the sales cost (not accounting for taxes). If you refi the house for 60K what will your monthly payments be? I don't think you would have any significant cash flow. I would flip both properties and find a rental where the rental rates make more sense.
first instinct was a rental area of 650-700 for homes would not sell for 90-100k, like new is not new, and if lots of homes in 46k bracket yous will have to appraise out, if you can rent for 700 each and total cost to re-fie and keep is 325 each I would re-fie both and do another, but get a bank appraisal first to make sure before even a tenant looks at it and look at some rentals on market, to make sure your rent figures are right, maybe able to rent for more or do sell option and hold 3-5, depending on supply / demand a particular area, next time try to buy with less out of your own pocket and be careful not to over improve by neighborhood, some price points sell quickly some take a while, say 45-50 might be hot but 90k might take 4 months on market or more depending on whats going on around you(job turnover,economy,relocations)
In the tools menu there's these calculators. They're fantastic as when you run the numbers you'll figure out if it's better to take the profits or run it as a rental.
Definitely check out the calculators as Steve said above if you haven't already. You can plug all your numbers in on a rental property, print the results, then switch the data over to a flip analysis and compare the two.
Seeing the numbers laid out should tell the tale, and sounds like you have good cash for flips on both if the rental numbers don't make the grade, congrats.