First time investor analysis help (Flip-In)

[John Armando]

Hello,

I am a new investor, and my fiancee and I are looking to do a Flip-in. We both work in Boston and live in a nearby suburb just south of the city within walking distance to the primary subway line (30min. door-to-door commute). We plan to live in the area for another 3-4 years before moving to a further away suburb, and would like to start investing in real-estate on the side of our full-time jobs. We think a flip-in may be our best option as we will have a longer time-line for re-hab. We hope to continue renting the property after moving out and using some of the equity to help with a down-payment for our next property. Alternatively, if the market has appreciated well enough selling out and using the profits via a 1031 exchange for our next property or permanent home. 

Here are the specs for the potential properties:

List price: $393,000 (I think similar properties are selling closer to $250-260/sqft. based on the work needed)

Sqft.: 1381 

Beds: 3

Baths:1 (we think we would want to eventually put in a half bath if possible)

Location: 10 min. to train station, 1 block from golf course, in a family type neighborhood, corner lot

House: Cape, with fireplace, single car garage, built in 1925. 

Work needed: new garage door, paint throughout, exterior is fine, new drywall (40sqft), light fixtures, hardwood flooring (1 room, approx 198 sqft), new bath floor tile + vanity + bath/shower combo, landscaping. 

Reach updates: install new 0.5 bath, install granite in kitchen, update appliances, re-tile kitchen floor (~100 sqft), add kitchen backsplash, paint exterior

We would do as much work as possible ourselves, but for bigger projects (electrical, plumbing, major tile) we'd look to hire. 

I estimate based on craigslist adds we could rent the property for $2200 right now, but definitely with the improvements. The area has a growth rate of 6.7% in rentals over the last year. 

What is the best way to assess a flip-in with a 3 year owner occupied timeline?

[Bill Exeter]

Hi John,

I just wanted to comment quickly on your 1031 Exchange comment.  Properties bought with the intent to rehab and sell or flip do not qualify for 1031 Exchange treatment.  Properties that are bought and held for rental or investment purposes would qualify, but rehab/flip properties are actually held for sale like inventory rather than held for investment purposes.