Rent It, Then Flip It Down the Road?

Question

What are the thoughts on rehabbing a rental to stabilize it, then flipping it later? Should the work done in the early stages be completed to set up for the flip later? For example, a wall doesn't need to be knocked down now for a rental, but for a flip, it would. If we knocked it down later, we would have to worry about patching the flooring vs. going ahead and knocking it down now and going in with new flooring.

Same for the bathroom. We have a large closet inside the bathroom that would make a killer stand up shower, but for a rental this would be overkill. Should we just put in a shower-tub combo and install the stand up shower in this space later during the flip rehab?

Any thoughts would be appreciated. Thanks!

Chandler Durham · Answer

@Darius Ogloza- yeah, I may hold off on the wall removal until it is time for the flip. We purchased the home at a great price and it could go either way, but with rental cash flow at almost $500/month after all the necessary saving %, I can live with renting it at the moment. It's just tempting to flip it with demand being high, with not much quality supply in our area. At least with starting off renting, you get the best of both worlds. Also sell down the road as a flip.

@Martin Lindsay -  I'm currently running numbers on doing a BRRR. Just not sure, if we can wing it.

Martin Lindsay · Answer

I'm actually doing this on a BRRR rental that I have owned for about a year. It wasn't my exact plan to sell it at this point but the value has gone up and it makes sense for several other reasons.

My thoughts:

-Wait until the tenants are out before doing any heavier updates for the flip sale. Tenants maybe damage your property to a degree and I wouldn't want them to damage the new work that was done.

-You'd also be able to save up money from what would have been your repairs and capex reserves throughout the rental period which could go towards repairs and updates for the flip.

-Depending on the market the value may go up over the rental period as mine did, however I'd never bank on this happening, it's just a plus.

Darius Ogloza · Answer

I wish there were an easy answer as we face this kind of dilemma all the time in cases where the flip is postponed whether due to lack of resources or requirements for obtaining permits, etc.  As a general rule, repairs are most easily and readily performed when the property is vacant and there is no outside time pressure other than time value of money.  Unless you can increase the rental value substantially, I would hold off on the heavy lifting until after the lease term has expired.