Purchased 1st property, Flip or rent? Need help!

[Nolan Payne]

Hi BP! I hope ya'll are looking forward to a great Labor Day weekend! Here is the scenario and numbers for a property I've purchased at auction and I'm struggling to figure out which is the best play/course of action from here, and would appreciate ya'lls experience/judgement/advice! Details:

• Purchased home for $183,500 in cash (auction property so had to be cash)
• With repairs/rehab estimating $18,500
• ARV value $230-235,000
• If sold, would net around $22,250.

If held as rental, will cash out refinance and get $172,500 back, based on 75% of $230,000 appraisal. 4.2% interest rate for 20 yr loan, equals $115/month cash flow with almost all of my money back and 25% equity in the property.

But then I think to myself, if I sell the property for $300,000 in 20 years, we'd get a check for $300,000 (roughly), but we had about $200,000 into the property. So we gained $100K over 20 years....that just doesn't sound that great while cash flowing around $115/month.

Am I missing something? Which route would ya'll lean towards? I appreciate the suggestions and letting me know if I'm missing something.


 

[John Teachout]

I don't think there's enough spread to make it worth flipping. By the time you pay realtor fees and short term capital gains tax (or SE tax) there won't be much left. I'd hold it.