Advice needed: To sell or to rent

[Becca Foster]

A friend of mine got into house "flipping" about 6 years ago. I use the term flipping loosely, because there have been 2 houses on his books in 6 years and only one sale. I also use the term books loosely, because all the record keeping that has been done has been running the income and all the expenditures in a single bank account. I went over those bank statements, and after talking to the listing agent, I realized that he's deep in the red, even after house #2 has sold. It is currently listed for $100,000, but hasn't sold after 4 days and the feedback is that it is overpriced.

The basic numbers are: investment=$88,000; revenue=$141,000 (one house had a renter in it for a while, plus the proceeds from the sale of the second house) expenditures=$99,000; current cash on hand=$42,000.

My initial instinct is to advise him to pull it from the market and rent it out for at least a few years. Market rent in the area is about $850/month. I expect he could get about $400/month in cash flow by doing this rather than locking in a solid loss through a sale. I'm not excited about this conversation. The only reason I even looked at his books is that my husband and I have decided to research real estate investing and I was thinking about joining his existing set up rather than starting my own initially.

He has already put a cash offer in on his next project.

Is it time to duck and run from this property, or should he rent it out to secure some cash flow for his next project?