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 $450 - $500 a month rent. It is a hour and a half from where I live now so its quite a drive. Would you rent or sell? Thanks
It’s time to put pencil to paper, or better yet, a spreadsheet. It depends on what your carrying costs are, expected return as a rental, and whether the area is appreciating or not. There are also other factors that can’t be reflected on a spreadsheet, leg., do you want to be a landlord? And, do you need cash now?
Right now I have financed the house with a home equity loan off my current residence. I want to get my first rental property but I don’t know if this house would be a good fit. I figure I could rent it in this area for $475.00 - $500.00 a month and my costs of mortgage, insurance and Taxes will be around $300.00 a month. My concerns are maybe it’s too big of a house to start off with. If I have to replace carpet and paint every time someone moves out that would be costly. Also it is a hour and a half from my house. I have never rented a place. Is that too far to drive for this deal? I feel I have some decent equity built up already and it’s a pretty good looking house. I am just torn on renting or selling
Any ideas from anyone?
I’m new at this myself, but it seems to be a bit thin for a rental. After your mortgage and taxes it leaves only $175-$200 for maintenance, vacancy, and what about property management. If you do not have a good cash reserve, I would sell and invest in property closer to home. Thats just my 2 cents. At least you have your first rehab under your sleeve. Good Luck and I’m sure you will hear from more seasoned investers that can give you better advice.
Weldon
here’s my two cents based upon doing rehab and rent; rehab and sell and just general apt. purchasing over the last 8 yrs on a part-time basis.
First and foremore is when you start a project (acquire a property) have an execution and exit plan. Moreover, you should avoid major changes in “the plan” unless someting really warrents it. Sure there are always issues that come up, things take longer than planned etc.
It sounds like “the plan” was rehab and sell. I see no compelling reason to change that plan. It looks like you and your partner could each get out with probably $5k each (per tax) which is kind of thin for my taste, but its a profit never the less.
On the flip side, this does not sounds like a great rental property. SFR do not tend to cash flow well unless they are older and small (I’ve had some success there). Also, you listed some isues that come to mind which is far away from your home (probably need prop. mgmt), etc. Also, I think you are overly optimistic about the financial. I think you will be bearly breakeven once you figure in repairs and maintenance, vacancy, prop. mgmt fees, etc. Put that ned to the fact you have $50k in cash tied up in this property, that’s not a great investment. Plus, you mentioned you have fronted some of that money off a HELOC which is the ultimate in adjsuable rate mortgage and the rate will only go higher in the next year or so.
So, my advice would be sell and then take you profit and equity and look for the right property to start you rental business( a nice 2-4 unit that needs work, under rented and beingsold by a seller that wants out). I have had excellent success buying from older owners who just want cash out.
I agree with the sell suggestion. Based on the amount of money you have in it sounds like are just recylcing money - and very slowly at that. You had a succesful rehab, if you can get the price you need to make a profit sell and head for experience number 2.
Liz
An hour and a half is too far to drive to fix a leaking toilet.
I highly suggest buying multi-family properties that you can put a total of $40k-$80k into and be cash flowing at least $200-$500/month after all expenses are paid. And by all expenses, I mean:
Mortgage
Insurance
Taxes
Property Management
Maintenance
Vacancy Loss
Etc.
Cash out on that deal. Then, take your money and look for something stronger. S/F are risky in that way and it does get tough to make the numbers work well.
Rbader,
I NEVER rent, and why sell an asset if it can make you money? You have $32K or $50K in the property and can sell it for say $70K. Here is what I would do:
** I would cash out my partner for $4K. Now I have $36K invested.
** Advertise NOT for a renter, but for a “live-in property manager”.
** Place the property in a land trust and deed it to my Trustee.
** Set up a triple net lease with my new manager.
** Grant him a 50% ownership in my trust. He has full responsiblity for maint and repairs.
** Share future appreciation with him 50/50 over $70K.
I have no maint responsbility and my trustee collects rent and send me the money in the mail each month. When it’s time, my tenant/partner can REFI as an owner and cash me out. Everything up to $65K is mine. Let’s say we sell at $90K. I make another $10K and get to depreciate the property each year. It doesn’t matter if he lives 1 mile or 1000 miles away.
Don’t let naysayers con you into thinking a land trust is complicated or difficult to set up. The results are awesome and well worth it. You are shielded from liens and encumbrances and in complete control of the situation. Best of luck to you whatever you decide to do.
Da Wiz