What should I do?

[Mark P.]

I bought a house on the Homesteps program. I got it at 50% to 60% market value...$40K. I am living in it according to the rules for 1 year. I have made numerous improvements, probably doubling the value to $80-85K based on comps.

1. It's a great house. It's a great long term hold. Probably cash flow $400 month off of it, however:

2. I could sell it and take the $40K and buy 2 to 4 more properties. Although there isn't 4 available right now, the come available periodically. Foreclosures in my area average $25K to $40K and quickly rehab to $60 to $80K. 4 more houses would double my cash flow to about $800 if 100% rented.

It's just such a cute house, in such a great location (on a double lot on main street caddy corner form the high school), and I have put so much work into it I hate to sell it. One of my kids might like to have it one day.

You could add on a double car garage on the lot next door and put an efficiency apartment on the back. The lot is too skinny to build another house (unless it was really narrow) with the easements. It has off-alley parking. BNSF railroad has a stop in our town and many RR workers like to just have a small place to get their mail and sleep when they are at home.

A real capitalist would flip it and buy more, or take the $40K and buy an apartment building or something. Maybe even build a spec house and sell it. But sometimes a bird in the hand...

Thanks in advance.

[Aaron Montague]

@Mark P. If the house is paid off, you may as well use it as a HELOC base. With an active LoC, you can close on the other places with cash. You will have to make payments, but HELOCs are a good source of immediate cash.