To Rent or To Flip??

[tamahitter]

Just curious as to what some opinions are here. SFH, $35,000 appraisal, offered him $19,000. It currently rents for $450. Even if I finance the appraisal I will cash flow if rented. Taxes are $42 a year, $400 for ins. and I put $1000 in for misc. exp. Annual loan amount is 2790 at 5% down, 7.5%. Im getting a 7.2% R.O.I. Should i keep this property or flip it? What kind of cap. gain taxes and exps. am I looking at if I flip it? Thanks for any suggestions. Damion

[propertymanager]

I'd keep it.  $450 rent on a $19,000 house - I like it!

Mike

[hanatal]

I'm in for a keeper!
Wendy

[GenerateCashflow]

Any time you can get 1% of the purchase price in monthly rent it starts to look like a really good rental.

[Teksch]

Where are you located? Those prices are amazing. You are buying a place for half of a yearly mortgage cost where I am.

[tamahitter]

I'm in Indiana. This guy is a motivated seller as well. I think I am gonna keep this one in the portfolio.  

[hanatal]

These no.'s are also available in Michigan.
Wendy

[propertymanager]

Those numbers are available thoughout the vast majority of the United States.  

Generate Cash Flow:

A rental with gross rents of 1% of the purchase price will almost never cash flow if you are using real world expense numbers.

Mike

[Melissa]

Why it won't cash flow with real world numbers at 1%.

[propertymanager]

Melissa,

It's just simple mathematics.  Post a 1% deal and we'll look at it.

Mike

[Melissa]

Ok, Mike, thanks....I am looking at a little house that is $12K, 900sf, 2/1/1 rents for $375.    Has new roof, new plumbing, been rewired.  There is also a house MV $190, can get it at $98, needs about $35K put into it.  Will rent about $1700.  A little high for my portfolio, but the appreciation should be good.

I am not a buy and hold investor...because it is so much less stressful to be in and out of a deal quick.  However, I know buy and hold is the way to accumulate wealth, so am trying to shift gears and not 'fear' the tennant headache that I feel is emminent.

There are 2 deals I am looking at...appreciate your input.

[jagsterr]

Hard to find deal like that - I'd keep it!  That's like a retirement plan.   I say keep it.

[propertymanager]

Melissa,

Those are good deals!  However, they certainly aren't 1% deals.

The first deal has rent of $375 and price of $12,000.  375/12.000 =  .031 (or 3.1%).  

With your second dea, you'd have a gross rent of $1,700 with $44,800 in the property (purchase price + rehab).  1,700/44,800 =  .038 (or 3.8%).

These properties will cash flowand are more than 3 times the 1% "rule".

In that first deal, if it was a 1% deal, the rents would be $120 per month with a sale price of $12,000.  Operating expenses would be about (actually more than) $60 per month and the mortgage payment would be $79 (if you could get a 30 year mortgage.  The 1% rule generates negative cash flow.

Mike