Should I sell or should I rent

Question

I am nearing the end of my summer project. I have been remodeling a 3 bed 2 bath in Fayetteville, NC. As I am coming to a close, I am faced with the tough decision of flipping or renting. I went into this project with the mindset it was going to be a rental property for 2-5 years and that I would sell later on. Lately I am having a change of heart. I am not sure if its because I am listening to friends, family, and other investors, but as of right now I am at the crossroads of decision making and looking for opinions for my BP friends.

If I rent:

The property I will be looking at $900/ month , with a 15 year mortgage payment of $600/month..(let me check the math..) okay so that is $300 cash flow a month .

I will be faced with  replacing the roof within the next couple of years. ( Not really a big deal but it is probably the only long term expenditure I will be faced with.)

If I sell:

My realtor suggested listing the house for $99,900. (I see it more of a $90,000-92000)

I currently have $60,668.45 into this house and I probably have another couple thousand to spend, so to be safe lets round up to $63,000.

Once I pay closing cost and realtor fees, I will be looking in the ball park of  23-25k  profit for my first ever flip. That sounds good to me, but then I also cringe at the thought of paying taxes this year for that income.

Because of Fort Bragg, this is a market and revolves heavily around soldiers coming and going. Like most markets winter makes it tougher to sell homes. I am confident I could list and rent it within the first month. I also have a feeling if I decide to flip it there is a chance it may sit all winter.

Opinions are welcome.

Thanks for reading,

Brett Campbell

Alexander Felice · Answer

I have 4 rentals in Fayetteville and I run about a 45% expense ratio

so 600 per month minus taxes and insurance is about ~450

900 - 405 (45% expense ratio) - 450 = $45 monthly cash flow

You aren't going to get appreciation or rapid rent raise in Fayetteville, so selling it is your best option. Use the funds to buy a better investment. or maybe refi into a 30yr

Filipe Pereira · Answer

I would take the profits, give uncle sam his cut, and find a property that will cash flow significantly better. If I were you, I would ask myself the following "If I had 60K to buy a rental, would I buy THIS house?" If the answer is no, then you should sell!

Please keep in mind that my my opinion is free, and folks often remind me it's worth exactly what they paid for it!  :D

Joe Splitrock · Answer

You are probably cash flowing more like $100 per month once you allocate for expenses. Put it on a 30 year mortgage. It will increase your cash flow, therefore increasing your return on investment. It will also reduce your tax burden with more offsetting interest. This puts more money in your pocket when you are starting out. Once you are established, go ahead pay off the mortgages if you want. Locking yourself into tight payments makes no sense.

What if a tenant stops paying rent? It will take you a month or two to evict them, then maybe a month or two to rehab and get another tenant in. In other words you could be hit with 4 months vacancy plus repair costs. This kind of stuff happens all the time.

Scott Weaner · Answer

Run the property through a rental property calculator using your all-in cost as the purchase price. Use the appropriate amounts for expenses and see what your cash-flow really is. If you can get $900/month on a 63k property, that may actually be quite good.

Daniel Hyman · Answer

@Brett Campbell I hear your dilemma. A 15 year mortgage is tempting, but the cash flow (especially when factoring in vacancy) is limited. It might be best to get with a CPA who can advise you on your overall tax picture, should you opt for the flip.

Miguelito Fernandez · Answer

@Brett Campbell

I'm with @Scott Weaner here. $900 in rent for a 63k property is actually very good in this area. I very much prefer buy and holds for the juicy cash flow that will help support financial freedom. If it's not a manufactured or mobile home then later on down the road you can get an equity loan for it.

I live 15 minutes away from Bragg :)

Brett Campbell · Answer

I didn't think of refinancing my loan into a 30 year loan. That would help out my cash flow situation. I will be looking into that as an option. I am going to keep it as a rental for a few years and then see where I am at. After working on it the past 3 months I have a slight attachment to this house. Thanks for all the great information and help.

Brett Campbell · Answer

Thanks for the response Jason. I have the insurance and property taxes escrowed. I will maintain the property myself, so those should be limited considering I have replaced everything in the house. I think it is a tight deal as well, but that is in part because I opted for a 15 year mortgage instead of the 30 year.

Should I sell or should I rent

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