Hold or Flip?

[Trevor Sambrano]

I am in the process of completing my first investment deal. I have discussed owner finance with the seller and so far he is willing to do that with no money down and I can assume his current loan terms. He has owned the property since 2005 (he moved that same year due to new employment), never pulled equity, and currently owes approximately 133k with a rate of 3.6 fixed. My realtor pulled the comps and came back saying market value was $165k-$169k. The home is in very good shape, and I don't think it needs much more than carpet in a couple rooms, and some fresh paint - I'm expecting no more than $2000 in rehab and minor touch ups. The home is a 3-2, in a good neighborhood and location, and has rented the last several years without any problems.

I know the property will rent within the first couple of months on the market and will cash flow approx $500/mo (not including operating costs). I am starting a business in real estate investing on the side of my day job, and would like to use this property to help kick off my business.

My question is, would you suggest I buy through owner finance and hold the property, and then pull money out of equity to give me working capital to build my business – AND if so, is that even possible with owner finance? If it is not possible to pull equity from owner finance, do you suggest I get a loan and purchase that way and eat the closing costs? Or do you suggest I flip the house quickly and use the profits to build?