Seeking Advice - Maryland - Newbie (Rehab) - Next Steps

[Aaron Hughes]

Hello,

This is my first post. Let me cover the basics:

Who: Aaron (myself)

What: Rehabbed Property

When: Over the past year (Summer 2020 - Present)

Where: I live in MD, the property is in SE DC.

Why: That is what this post will cover ...

Next let me explain my title of this post ...

Newbie - The "financial literacy" switch recently got flipped with me during pandemic. My job went fully telework, and I found myself walking. After my first walk, I found that I could be using that time more wisely, and decided to try, for the first time, audio books. My first book was ... yep, you might have guessed it ... RICH DAD, POOR DAD. Excellent book. Got me thinking strategically and long-term and about my goals/wants in life.

I have since "read" (listened to) 40-50 books.

I recently read "The Book on Rental Property Investing" by Brandon Turner. Which lead me to the BiggerPockets PodCast. Which has lead me here to the BiggerPockets forum.

Begrudgingly Entered - The property in question is my Grandmother's property. Unfortunately, she has Alzheimer's disease and dementia. She can no longer stay by herself, and stays at a facility. My Father was the one assisting my Grandmother, but he passed away from cancer. I have Power of Attorney (POA) for my grandmother, and I'm named in her will (after my Father). The "begrudgingly" part comes from the anger I had when my father passed, and I did NOT look at this property as a "good thing" initially.

Took Action - There was a time period between my father's death, and when I took over (with my brother) that another loved one was taking care of my grandmother and her situation. Since then it has been all on my brother & I; paying bills / ensuring she has what she needs / scheduling doctor's appointments / tending to the house / etc. Around July-August 2020 my brother and I decided to do something about the house that was literally just sitting there. Again, the house is in SE Washington, DC. Two Floors. Ground Level: 3 bedrooms / 1 bath / Kitchen / Washer & Dryer. Basement Level: 1 bedroom / 1 bath / Kitchen / Washer & Dryer / built in brick bar.

We completely gutted the basement. This was due to some minor water damage. We brought a contractor in and they addressed the water damage, removed the bar, changed the basement layout adding another bedroom and removing the built in bar. Tile throughout downstairs, new walls, new paint, new carpet upstairs, new cabinets throughout, etc.

We are literally "days" away from completing the rehab. Minor things/Small jobs/Major Clean at the end.

Seeking advice - This is where it gets "weird". My grandmother has a sister; my "Aunt". Back in the day my grandmother and my Aunt had an agreement that my grandmother would sell the house, and give her some $$$ (1/2 of the profits). My grandmother did not sell, but instead refinanced; and gave my Aunt nothing.

Note: We have a good relationship. My brother & I are like best friends. We have sat down with my Aunt and talked through her expectations; which tie into 'Option 2' below.

My brother and I are now at a point where we have some decisions to make ... rent the property ... sell the property ... AirBnb ... whatever ...

Option 1 - Rent the property: We would still be tied to my Aunt. There would be some type of expectation from any cash flow.

Option 2 - Sell the property: We have sat down with my Aunt, and she is hoping for this option. This is significant, because initially, my brother & I were under the assumption that there would be some sort of nostalgia/sentiment for the house, since this was my great grandmother's house and my grandmother & Aunt grew up in the house. That is NOT the case, lol. She cannot care less. She appreciates my brother & I stepping up for her sister (our grandmother) and noted that she WANTS us to first take out the money we put into the house. After that, we would split the remaining profits down the middle. For example, IF remaining mortgage is approx. $200K ... we put in $50K for rehab ... house is worth $400K ... Which leaves $200K ... So minus closing cost (assume 5%) $20K ... which leaves $180K ... minus taxes (assume 15%) $60K ... which leaves $120K ... minus what we put in for rehab $50K ... which leaves $80K ... divide that by half $40K to my Aunt and $40K to my brother & I.

Technically, $90K ($50K for rehab + $40K from sell) for my brother & I. Or $45K each.

Option 3 - We technically don't have to do a long-term rent or sell right away. We could look into something like AirBnb. We are in DC, and not too far from tourist attractions. While my grandmother is alive we could do this. When she passes we could sell.

I am curious to see the communities thoughts on this ... I know that there will be some that say keep it ... my worry is that we will be tied to my Aunt, when my brother & I are trying to start something for ourselves. This could put us in position to attempt the BRRR strategy elsewhere. Potentially purchase multifamily home(s).

What are your thoughts?

Is my approach correct?

Am I missing something?

Does it make sense to sell while my grandmother is still alive?

Has someone been in a similar situation, and have advice on what to look for (or avoid)?

I truly appreciate your input and look forward to responses.