Mathematical decisions for flip vs. rent

[Igor Aybin]

Hello everyone,

Historically I'm a BRRRR investor. I've recently encountered an interesting scenario that I hadn't considered before.

All following numbers are approximations and exclude any tax implications:

I've recently purchased a property for $90k. After settlement and repairs, I will have spent $127k. The ARV is $150k and we can assume a 75% LTV, with a 4.25% interest on the loan with a 25 year amortization.

After applying my formulas, I can flip the property and make $10k today. Otherwise, I can keep the property and leverage it. After leverage, I will be out of pocket about $16k and I will net a positive $500 a month cash flow ($6k per year).

I am trying to decide which path to take and I'm using NPV calculations. However, even after I have the numbers in front of me, I can't decide on the right course of action. I seem to want to go back to my strategy and I think "my goal is to build a passive income portfolio, $10k now would not allow me to do anything more than I am already doing". However, this doesn't totally feel like the right answer either.

So specifically in a scenario where a property would "work" as either a flip or a rental, how do you objectively decide which option is financially better? What math and thresholds do you use and how do you decide?

-TIA

Igor