I just picked up my first 3/2/1 home in Florida. I am purchasing it about 50k below market value. The owner is an older lady who wants to move to a condo. I would like to hold it as a long term rental. It will probably only rent with a positive cash flow of 50$ since I have a higher interest rate due to my credit score. Would it be better for me to do minor repairs and flip this property and use the money to buy more properties or to just let it build my equity and bring in a small cash flow?
The answer really all depends on you. What are your goals? You should know the answer to that question before you purchase the property. Are you trying to build up cash reserves? Can you flip it for enough money to make a great profit? Do you want to hold and manage properties?
You need to determine what your goals are. What is that investing is trying to get you. Are you a buy and hold stategist or are you a wholsale strategist? How long before you retire? What are your current retirement funds looking like and do you need the money now?
Personally, I like the motto from one of the other posters on this site. (Sorry, can’t recall who, but this isnt my line). Keep the best, wholesale the rest. Or something to that effect. The short of it is that you should know your exit strategy before you get into the property. Hope that helps.
Thanks for the reply. I am only 25 years old and I am just getting started. Some books call it the aquisition phase. I know it is a great deal, it’s comps are about 40-50k above my purchase price. I currently run a property management company and would like this to be my first property I manage that I also own. My main question is since I am young and have the option should I refinance in a few months and use the equity to buy more homes or sell it an use the profit to buy more homes?
Joe
I would flip it. Make the quick cash. I wouldn’t start holding properties long term again until I see a stable economy. Right now too many things can sink Real Estate.
I’m a buy and hold guy, but if you can truly net out $40k vs. barely break even on cash flow, I would have the for sale sign in the front yard tomorrow. That would give you a nice little nest egg to do some further deals. Also, don’t get greedy. Cut a deal with the first real solid offer you get.
My gut feeling is that you probably don’t really have a PCF is you include ALL of the numbers…
Can you post the numbers (rent, cost, taxes, insurance, etc… for a better picture?
Keith
I am with you 100% on that Keith what is the whole picture?
is this a F.S.B.O.?
flip it a hurrican can come by and wipe you out unless you have funds for repairs or enough insurance 50 bucks cashflow won’t cover much maybe a screen door if that.
Here is the basic picture.
$950 Debt Service including taxes and insurance
I own my own property management company so I won’t have to pay for that. The property is rent ready. Comparable rents in the area for 3/2/1 are anywhere from 1000-1150. The cash flow will be better than stated earlier.
how is the appreciation in the area? I know Florida is rockin anyway! If you make enough personally to afford to cover a little yourself and bank on the appreciation of the property I would rent and hold it! Why not?
Thats what I figured I would do. It is in a great location, near good schools and already has about 50k in equity. I appreciate all the responses.
Thanks JOE