Flip or hold as rental? $125,000 profit vs $1000/month cash flow.

[Omid A.]

Hey BP,

If you bought a property with the potential to rehab then either flip for $125k profit or rent, refinance and hold for roughly $1,000/month cash flow, what would you choose and why? 

Some background on this particular deal.

-Purchase price: 200k, rehab: 60k, ARV: 415-430k

-Rent cost: $2,700/month

-Turn-around time for a flip: 3 months

-It's in an equity market (Hillsboro, Or), rather than a cash flow market so there is potential for appreciation 

I'm interested in hearing other opinions and perspectives on this particular deal. 

[Mike Dymski]

It's hard to answer without knowing the predictable future IRR of this home versus your alternatives. It's also hard to answer without knowing your goals.

A $2700 rental that is worth $415-430k will not cash flow $1000/mo.  It can be a good investment but the return will have to come from principal reduction and appreciation, not cash flow.

If you can continue to find and flip with this type of profit, I'd recommend making hay while the sun shines and continue to do it (at least until this opportunity dries up).  Congratulation on this deal...nice work.