Turning a flip into a rental

[Anita Ahuja]

Hi BP members! Happy holidays to you all.

I’d like some advice on a flip I financed in central Phoenix . Basically I’m 127k into the finished flip. The labor partner ( guys who did the flip) are in about 10k, the rest is a hard money loan for about 130k. The labor partners own the home.

Unfortunately, the house has been sitting on the market for 60+ days now and with holding costs being around 1800 a month, we need to do something w the house.

I am considering buying the home from the labor partners. This would basically have me own the home outright and be able to put tenants in it ASAP.

The house is currently asking 310,000. After doing the math w the BP software, I basically need to buy the house at 285,000 to be able to break even, recover my money and carry the loan. This is expecting 1900 rent and accounting for pool fees, maintenance, 5% vacancy, 8% management ( I live out of state), property taxes , closing costs and a 6.5% 30 y loan after putting 25% down.

My questions are

- am I hurting myself in the long run by buying the house for less? Am I bringing down the value of the house?

- what can I offer the ground (labor) partners given that they will have lost a lot of time on the fix?

- any other red flags with this?

The partners are a stellar group of individuals who have integrity.

Thanks in advance!

Anita