Would you rehab to sell or rent in today’s Sacramento market?

[Patty C.]

If you have a free and clear property that needs substantial work in a desirable location,

would you rehab to sell (that includes some structural changes and more designer features) or would you rehab to rent and do the upgrades when you are ready to sell?

The project is estimated about 120K. How would you determine the finance strategy for the project if you had the option to use a HELOC, Home Equity, or cash?

Thank you!

[Patty C.]

Quote from @Scott Scoville:

Hey Patty, 

Depends on your strategy. Typically HELOC's should be used as short term debt or bridge debt. In regards to sell or rent, I would consider the following:

-If you sell, you will be paying capital gains. So maybe consider a 1031 exchange and use the proceeds to buy another property.

-If you rent, you can benefit from the cash flow, appreciation, debt paydown, and tax incentives. 

Me personally, I've regretted selling every house that I didn't keep. Best of luck in your decision, and I'd be happy to chat anytime. 

I recently found an equity loan where the interest rate is fixed, 2% less than a HELOC, and 15/20. It seems like a better idea to borrow since the rent will cover the loan and the interest is a tax-write off. Down side is I may take out more than I need, but if interest rates go up again and CD's go up, that could be a good move.

I agree, it’s easier to buy than to let one go (sell).

Thanks @Scott Scoville.