Deal or no Deal

Help. I bought a 2400 Sq ft house 4 bedroom 2 bath for $18,000 that was in bad shape. I now have around $32,000 in it and it is livable. I have a partner in the deal. A realtor said we should get low 70’s upper 60’s if we sell. I put all the money up for the house and took my partner in because he knew how to do all the rehab. Now I can sell it at the above price and split the profit after expenses or my partner said if I wanted to rent it, I could give him $4000 and have the property myself to rent. I could get $475 - $500 a month rent. Mortgage and insurance = $350. a month. It is a hour and a half from where I live now so its quite a drive. I want to start renting but I do not know if this would be a good canaidate. Would you rent or sell? Thanks

So let me understand this:

You are into this property for about $50k and could possibly sell for $70k minus realtor commissions of about $4-5k. You have a profit of $15k to split or simply give the partner $4k either way I am not sure.

Or you could possibly get a positive cash flow of $125-150 minus maintenance, taxes, vacancy, management (self or fees).

You know what a bird in the hand is worth…

You have to weigh out all of your options and see if they align with your goals of course. I would lean towards finding a rental that provides better cash flow return. But hey, your market may be appreciating like crazy and what is worth $70k this year will be worth $80k next year. Only you can really determine the risk reward given that.

Good luck either way!

No, I have $32,000 total in the house currently. So you would think its better to sell it if I can get $70,000? Thanks Again

It sounds like you will have just over 100% return on your initial investment if you sell today. That is great!

What is your personal long term goal? Only you really know that. So any advice in forums like these you have to take with a grain of salt.

Let’s look at this: On a $32,000 loan fully amortized for 15 years at a 7.5% interest rate you P&I payment = $297 That would be $224 (or $75 less) if over 30 years. In your calculations you don’t take into account property taxes, maintenance and vacancy. These are a critical part of the equation. Sounds more like you might be able to break even or have minimal cash flow.

I personally would consider selling and finding a property that might generate greater cash flow. Or free up the capital to replicate what you just did with this property and get another 100% ROI. Unless you want to wait 15 years to get $500/mo cash flow from this property.

Only you can really determine the risks and rewards. I definitely like the buy and hold model when the numbers and income are really solid. This income may only really be an additional $1000 per year.

Then again, you can always try it out, test renting it, because worst case scenario. You sell it 6 months down the road. Unless of course your market is depreciating. So you see there are so many factors.

I hope these things to consider have been helpful.