Buy & Hold, or Wholesale this deal? What do you think?

[Brian Cooke]

I have a house under contract in the Mt. Auburn area of Cincinnati, near OTR. Some areas of Mt. Auburn are seeing some major rehabs with the houses going on the market for 2-300k, but this house is in an area that is still a C to D type neighborhood. It is a 4-plex with 4 one bedroom units, fully rented with long-term tenants right now, grossing 1700/month on rents that haven't been raised in years. Operating expenses come out to around 55% which is average in cincinnati (so i've been. A property manager I had look at it said we could raise the rents a little in its current condition but not much, so that it would gross 1800/month. I have it under contract for 82k, and I would want to put about 35k into the property (which i think would also allow us to raise rents further). 

If I continue this deal as a buy & hold then it won't leave me with anything to do any other deals, so I'm thinking maybe I should wholesale it at 92k for a quick return. What do you think i should do?

[Chuck Stagliano]

If the rents are raised to $1,800, the cash on cash return would only be a little over 10%, at a $92,000 price, considering 55% expenses and closing costs. This is without doing any rehab. That does not look like a screaming good deal to me, especially in a C or D neighborhood.  Perhaps you could renegotiate your price. Tough, but sometimes doable. Depends on seller motivation. Best of luck with it.