Help with Flip vs Rental Analysis

[Griffin Malcolm]

Hey All. Looking for some help on whether or not to do this deal as a flip or a BRRRR. Here are the details:

3/1 SFH roughly 1400 SF. Using Hard Money 10% down 100% rehab loan to finance the deal.

Purchase Price: 75k

Renovations: 30k if BRRRR. Probably another 10-15k if doing a flip to fix some structural things the next buyer will no doubt discover

ARV: $175k. Feel really strongly about this number, as the house next door sold for 175k 6 weeks ago. If we crush the rehab I think we can even push closer to 200

Cash-Out Refi Amount: $131k (75% LTV of the conservative 175k figure)

Profit if done as a flip: 60k. (175k - 115k purchase price & rehab)

Cash Invested: 18k (This accounts for $7,500 for down payment to lender, $2,000 in EMD to seller, lender fees, inspection, insurance, title, projected 3 months holding costs at $1000 per month)

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If I do it as a flip, from what I understand, I'll be hit with a ridiculous tax bill (24% short term capital gains + 15% self-employment tax), leaving me with roughly $36k after-tax profit. 36 - my 18 invested leaves me with 18k increase to my net worth. Not bad. If I want to avoid tax and go the 1031 route with a BRRRR, I think I would get all my money out of the deal, but I'd just be holding on to a property that doesn't cash flow anything since it's a single family.

I want to do what will help me scale the fastest, as my goal is to complete as many rentals as I can so I can replace my W2 income. I think taking the liquidity makes most sense right now, but I would really value the community's input on the numbers here and strategy. Thank you!

[Jacob Sherman]

Would rather hold to collect rent with depreciation write offs and build wealth than sell to pay capital gains