BRRRR or FLIP? A Question?

[Shane Willis]

Have a SFR deal I just acquired. Property picked up with 100% owner financing and very little work done so I am out of pocket maybe $5k total (closing costs plus the minor repairs)

OPTION A.) I can rent now (even with the higher rate the owner charging me) and cashflow about $150 a month. Then refi like a good BRRRR project in 6 months and cashflow goes up to about $500 a month. I would literally have all my money back out.

OPTION B.) I could easily sell this and walk away with 50-60k. 

I don't really need the capital at this time, but just sound boarding off this great group to see what other ideas are out there...... 1031 into multifamily etc...

[Brad S.]

Quote from @Shane Willis:

Have a SFR deal I just acquired. Property picked up with 100% owner financing and very little work done so I am out of pocket maybe $5k total (closing costs plus the minor repairs)

OPTION A.) I can rent now (even with the higher rate the owner charging me) and cashflow about $150 a month. Then refi like a good BRRRR project in 6 months and cashflow goes up to about $500 a month. I would literally have all my money back out.

OPTION B.) I could easily sell this and walk away with 50-60k. 

I don't really need the capital at this time, but just sound boarding off this great group to see what other ideas are out there...... 1031 into multifamily etc...

 Well, for me, it comes down to 1 question: Is the area still set to grow and is a good long term prospect? That depends on migration data, building growth, employment growth, etc. There are areas that will still appreciate, and/or hold their value, even as the overall market eases up. I personally know of areas around me that continued to appreciate long after the rest of the market tanked, in 2007-08. Remember the old and true RE adage, location, location, location.

Bottomline, do you want to keep it longterm? Does it fit in your longterm goals?

Also, it sounds like if you cashed out now, you will be taxed as regular income, not capital gains or be able to do a 1031. Keep that in mind in your decision. I suppose technically, you don't need to rent it to do a 1031 (just needed to have had the intention of renting it), but you may have to explain your case to the irs one day. And I am not a cpa, so my advice is worth what you pay for it.