Take Profit And Run Or Rent?
I recently picked up a 4/2 home in S Tampa for a steal...$73,000 and put $15, 000 worth of work into it with the intention of renting the home for $1150 mo. I was offered $150,000 for the home yesterday and I told the potential buyer I would have a decision for him this weekend. (Im also a mortgage broker, ran his credit and he is qualified to buy) What should I do? This property would be a great rental (near an Air Force Base) but it would be nice to have a $60k+ profit in just a few weeks? HELP!!!
You could do both. Assuming comps in the area is $150,000 at 80% loan to value, in California we have PMI, you should be able to get a loan around 5% with a PI at $800 per month. Even with TI this will give you positive cash flow on a monthly basis with approximately $32,000 in pocket with no tax consequences.
Look at it this way....there are very few "once in a life time" deals. If you have found one you can find another, they are there. If you sell this one you will pay some tax but on your next comperible deal you have cash to close. I would take my money and run. Go buy a 60K house next for a rental and have true possitive cash flow.
Best to you
Sire
This house is free and clear, and have plenty of available funds to buy if another opportunity presents itself. Now what should I do? Take the profit? Thanks a million for your advice
Then it depends on your Business Plan. Do you accumulate or Wholesale.
This is really a question on your goals for real estate investing. I cannot answer this question for you.
However I can tell you why I would SELL the property if it were me personally:
1. I do not have a lot of funds available. I am looking to do flips and rehabs to generate cash for my long term rental investment goal.
2. You didn't say what FMV is but I'm assuming that $150k is in the neighborhood. You said you would only get $1150 in rent. It seems to me that you could easily leverage your money farther to make more money than you would renting it out
Just a couple of thoughts here. Rentings got a few purposes. One is to provide an ongoing income, the other is for appreciation of properties, another is for tax purposes. If you sell now, you pay capital gain taxes, but you make a good profit. If you hold, you have + cash flow, IF it stays rented, and nothing breaks. Personally, I'd sell the heck out of it, and move one... But, that's just my opinion, and I do have rental houses, so I do the landlord thing, too. Ultimately, it's a personal decision, to be made by you.
of course, it is entirely up to you what you think the best to do. But if I were you, I would go ahead and sell it. take the profit and invest in more properties. I would not pay cash on the props, and I would definately get mortgages on them. Keep the cash for downpayment, closing cost, and rehab cost.
Can you imagine how much you can make out of multiple properties, if you can make $60,000 profit out of just one!
Best of luck!
Good Job on that property. If you have great credit and the neighborhood is appreciating far quicker than the average, I would hold on to it, avoid capital gains tax and pull an equity line on it from an institutional lender at a rate just above prime.
Beware that you will be at interest rate risk.
I'd take the money and run.
If you rent it you run a number of risks. Individually they may be small risks but cumulatively they are significant. You could rent to a deadbeat who trashes the property. The building could develop any one of the hundred possible mechanical/structural/electrical problems to which buildings are prone.
I have personally always figured that SFH's are more difficult than apartments to manage as rentals because your travel time per unit is so much higher.
I'd sell, take the money, do a 1031 exchange into an apartment building and hire myself a good janitor. With $150,000 down you could spring for a decent sized well-leveraged complex.
I look at deals from the numbers and this is what I see.
You have a asset worth $150,000.
To make it a good investment it should return 1% per month or in this case $1500.
If you rent it you will only get $1150. That is not a a good ROI. And you will have to deal with upkeep ect.
Sell it and use the cash to fund more deals.
You will be better off in the long run.