Inherited home, fix up and sell or let it go as is?

Question

Hey everyone looking to get some insight on this property my better half and I came into, heres the situation:

Home is getting bites from 150k to 220k but that's in the "as is" state that its in. The more we dive into the property the more little things are popping up, we don't mind doing the work but we don't have a team yet for renovations and its about an hour and a half from us, we both have full time jobs,kids etc. We feel comfortable putting 20-30k into house and feel confident that we could sell for 260-275 range based on comps and the fact that this is a remote area where properties don't pop up much.

Question is, would the juice be worth the squeeze for that 20-30k profit after taxes fees etc are all put into play? We haven't lived in the house, we don't plan on staying there for two years we just want to get the best bang for the buck. Lengthy post I know, but I would appreciate any advice out there. Thanks in advance.

Billy D. · Answer

@Rob Z., my situation was a bit different, but went through this same decision process last summer on an inherited property.  Home was near me north LA county, and was worth about $320K in its "as is" state and there was a mortgage of about $50K on it that had to be paid off.  We estimated repairs of $20K would have increased the home's value to approximately $370K if we'd chosen to sell it.  Had we chosen to rent it, we probably could have gotten $2200-$2400 per month for the property after repair.

Not sure if this helps, but i used the Flip and BRRRR analysis tools on BiggerPockets to figure out if it made sense for me to keep, and in the end they helped me to decide that it did not.  A big reason it did not (and doesn't sound like you have this same issue) is that I had several siblings who had equal interest in the property, and the numbers just didn't work out, unless we partnered (which they didn't want to do).  Had I been able to find a way to do the deal and just not lose money, I would've done it for the education.

All that said, if you and your wife are the only inheritors of this property, and the numbers you put forth are approximately accurate, this could be a great way to educate yourselves with a margin of safety for mistakes (i'm assuming this would be your "first flip," or "first rental prop"), so that you could repeat in the future.  This might be less about how much you make on this deal, and more about getting paid something to educate yourselves for the next deal.  If you haven't already done so, run the numbers with the BiggerPockets calculators, talk to some realtors about both the comps and the rental market in the area.  Also talk to a couple contractors to see if their bids to bring it up to snuff make sense, and as @Tim Jones said, see if you can find an investor who has property in the area, run your numbers by them.  Maybe they see something you don't, or know something about the market that you don't.

Good Luck!

Brian Truman · Answer

Hi @Rob Z.,

What is the rental market like where the house is located? Is there the possibility that it could be used as a BRRR? Or in your case.... IRRR? You could be making rental income as well as save on costs if you are trying to accumulate more properties to add to your portfolio vs. using hard money...

Brian

Sebby Gabre Madhin · Answer

My vote would be to sell the property and use the $$$ to invest in something that is closer to you, easier to manage for you first rehab and/or rental.  I don't deal in the California market, but from my (Floridian) perspective, I agree that the rental income of $1500-1800 is too low to justify keeping this property and doing BRRRR.

Kurt K. · Answer

@Rob Z. I think it will be a great opportunity if you want to get into REI. Hands on is the best way to learn and BP is here to help.

I inherited 14 units this year in March and they are all cash flowing. Yes, I had some deferred maintenance, had to evict 10 inherited tenants and had some sleepless nights, but it was worth it. Luckily we finally found a good property manager and some awesome contractors. The kicker is I am in AZ and the properties are in IN.

Just have to roll with the punches and get up again. Think long-term. Good luck.

Thomas S. · Answer

If you decide to reno you will face a lot of sleepless nights, contractor problems, over budget, job creep you name it. For 20-30,000 it isn't worth the problems you will face as a novice investor.

Rent is too low based on the value of the property, managing tenants can be a night mare as well if you are not interested in being a landlord.

You did not plan for this, sell it as it is, take the money and run. It's a free gift.

Matthew Paul · Answer

Clean it up , repair whats broken , rent it for a while . Take the proceeds and use them to fix up the house in 2 or 3 years .

Rob Z. · Answer

Thanks for all the input @Tim Jones @Billy DiSilverio @Brian Truman @Bobby Barraza.

We are leaning on taking this project head on, at the very least it will be a great learning experience. The area is in Warner Springs if you guys want to check it out. Things don't pop up very much out there but I think we could get about 1500-1800 a month for rent if we choose to go that route. Should be an eye opening experience to say the least. Open to any helpful tips or learning experiences that you guys have had.

Tim Jones · Answer

Team up with an investor in the area & have them/their team do the flip. Nothing out of pocket for you & everyone makes $. The key would be structuring the money and responsibilities. One of many, many possibilities.

Bobby Barraza · Answer

you could be looking at 3+months of repairs on top of another 3+ months of it sitting on the market if your hunting top offer. Apple's to oranges there's nothing wrong with a quick flip if it means your peace of mind, but I've been known to roll the dice, and theres nothing sweeter than when a plan comes together. Pretty vague I know but no need for details, you got this!

Inherited home, fix up and sell or let it go as is?

Most Popular Reply