First Deal: Rent or Flip?

[Alex Huang]

Would love to get some feedback on the following deal. I think I know which direction I would like to go, but I would be curious to hear what people would do in my shoes. The options would be to to rent the property out long-term (keeping it for 15+ years) or to flip it and use the capital to look for a Multi, which I know provides better numbers.

Area is an A-/A area with a solid school district. The neighborhood is one with many beginner families. The house is within walking distance of the nearby elementary school and it has a good-sized fenced yard.

Property: 4 bed / 2 ba. ~1,350 square feet

Purchase Price: $38,900 cash (originally listed at $70,000)

Rehab: $20,000 - In all likelihood, this is a high estimate, but I have remained ultra-conservative on these things since it's my first deal and I don't want to overlook anything.

All-in After Rehab: $58,900

I estimate that rehab will take around 2-3 months. It's pretty much all cosmetic.

ARV - Comps in area are around $80k-$90k

The numbers:

Rent: $1000 - This is probably a conservative figure. Area rentals for 3 bed properties are ~$900 and I've seen 4 bed properties as high as $1,300. None of those properties are as updated as mine will be.

Management: $100

Maintenance (15%): $150

Vacancy (10%): $100 (no idea if that's a good figure)

Tax: $140

Insurance (0.035% of purchase price): $21

Monthly net cashflow: ~$492

Annual CF: $5,900

~9.9% cash on cash return