Rent vs. Live In Flip Calculation and Evaluation

[Julie Marquez]

So where is the rent vs. live in flip calculator? I am moving for my W2 job, and have the opportunity to rent a 2/2 apartment from my dad in a 4-plex on a street full of rentals, or to buy a nice 1990 built 3/2 family home in a nicer part of town and fix it up while my husband and I live there. I am going to run some numbers here based on a two year stay, and let me know if I am missing anything or should consider anything else in this decision.

Rent Apt: $600 total, including rent and utilities (this is about a 50% discounted rent for the area, thanks to my generous dad). $600 x 24 months = $14,400. That's about 10% of my own income.

Buy House: $250k for this 1990 3/2 home. $25k down, $4k closing, $20k in repairs, $2000 PITI and utilities per month x 24 months = $48k. Total cash for two years = $97,000. Minus the $14.4k that I would spend on the alternate to rent, and I come to $82.6k additional cash needed during the two years. Plus add in all the sweat equity (I do have the tools and capacity to do my own live in flip, it will just take time.)

Sell House: It's worth $335k today, and while this is an appreciation game, I'll assume the same. So if I buy at $250k, I can make a profit of $85k.

Conclusion: Over two years of the house option, I really only profit $2,400. This profit is also so low because my alternate to rent is so cheap. If my rent were more, it might make more sense putting it into a house. But I think with the cheap rent, just saving for a better cash flow investment. What do you think?

[Stephanie Medellin]

Originally posted by @Logan Turner:

Why 10% down? Why not do an FHA loan and put 5% down (no PMI after 20 percent owned)?

I just want to clarify for anyone reading this post - The 5% down with the ability to remove mortgage insurance after your balance is paid down to 80% of the home's value is still a conventional loan. Conventional loans have PMI, or private mortgage insurance, and FHA loans have MIP, or mortgage insurance premium. Please don't confuse the two, because FHA loans now require MIP for the life of the loan for 30 year loans with a minimal down payment.  It can only be removed by refinancing into a new loan.