hold or sell

[Randy Rought]

I bought a foreclosure Condo (2 bed/1 bath) in Colorado Springs a while back for $50K cash. We have been renovating it and I have been doing the work myself because right now I have the time and luckily enough the talent. We have been flip-flopping back and forth between renting it out, or outright selling it. We live about an hour north of the condo, and if we rented it out, I would be the Property Manager.

This is a nicely renovated 860 sf, 2 bedroom, 1 bath, fireplace, reserved parking space, trash included in HOA.

If we rent it out, we would be able to get ~$725 month, with $175 HOA fees. It is a gated community, and has well kept externals (newly paved road & parking; well trimmed yards). There are no other real community amenities.

We estimate the ARV price is $75,000 and our renovation costs were $8500.

What are everyone’s thoughts – would you rent it out or sell it?

[Jon Holdman]

Split your post off, @Randy Rought so it doesn't get overlooked.

If you sell, you'll have about $6000 in selling costs, netting you about $69K.  You have $58,500 into it.  Probably some additional costs there, too.  So you're going to net less than $10K on a sale, before tax (federal+state+SET).  So, maybe $6000 after taxes.

If you hold and self manage (you're closer than me, and I would) then you'll have about $500 after all expenses. Now with that HOA fee, taxes, insurance, interior maintenance, and vacancy, that may be a little optimistic. If you hold for a year and that number holds up, you'll net $6000 in net income. That's about a 10% cash on cash return for your investment, pre-tax. You will have some tax on that, but no SET and depreciation will offset some of the income.

So, its really a question of what you want to do.  Sell if you want to continue to do fix and flips like this.  Hold if you want the ongoing income stream.  If you hold, it may be possible to refi and get some cash back out.  That will cut into your return, but that might be a better fit for your goals.