Hypothetical question on rental property

[Al Bunch]

If I pick up a property using hard money and budget $20k for repairs - $8k of which are for the roof and flooring, how would you proceed:

Roll everything into the repair budget and get it done under the hml before you convert, or, finish all the repairs except the carpet and roof and do those after you convert.

There's no underlying motive for doing one or the other, I'm just looking for and pros or cons.

[Jackie Lange]

Make sure you budget for payments to the hard money lender, insurance, taxes and other holding costs like utilities, yard work, etc.

What will the refi cost be? You need to budget for those costs too.

Rarely does it make financial sense to buy with hard money, spend $20k on rehabbing PLUS holding costs, then refi expenses so you can rent it out. It may be better to cash this one out.

For rentals, it is much better to buy with seller financing or subject to a mortgage ... and on a property that only needs cosmetic repairs. You can avoid all the expenses of loans. And usually get it ready and rented within 30 days so you reduce your holding costs too.

For rentals, the faster you can start producing cash flow the better. This does not work if a rehab is necessary.

A rehab almost always takes longer and costs more than originally projected. Which means profit margins dwindle.

If you really analyze the numbers, it is usually much more profitable to just do a quick flip for fast cash instead of a rehab.

About 10 years ago, I got an option for $69,000 on a $185,000 house. I could spend $40,000 rehabbing it and make a nice profit..

Instead, I wholesaled the property for $99,000.

I made $30,000 in less than a week.

The guy who bought it spend 5 months rehabbing it dealing with city permits and contractors every day, then another 30 days to sell it. His profit was $40,000 after all expenses were subtracted out.

Who was the winner?

I'd gladly take $10,000 less profit, get my money in a week, and avoid dealing with the hassles, headaches and expenses of rehabbing.