Author Topic: Seeking advice on sell or rent propostion  (Read 1236 times)

Knapptyme

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Seeking advice on sell or rent propostion
« on: December 29, 2014, 09:32:15 PM »
So I was working on my rental property today to spruce it up. I hear a knock and then a voice. A neighbor just walked right in because his father-in-law wants to buy the place. Keep in mind, I'm not planning on selling, I just got the place a month ago (it needed some work, so that's why it's not rented yet). Although I was forthright with my plan to sell, this guy was relentless and just wanted to hear a number that I might accept. I had not thought this out.

Market Value: $132000 (per zillow)
Original Purchase price: $119000 (including fees)
Original Mortgage Amount: $90000
Interest Rate: 3%
Mortgage Term: 10 years
Term remaining: 9 years, 11 months
Amount remaining on mortgage: close to $90000
Gross Rents: none yet (will likely yield $1200/month)
Principal and Interest (the P&I of your PITI - should match with the above info): $870 monthly
Taxes and Insurance (the T&I of your PITI): ~$1600 annually
HOA costs: $240 annually
Deferred maintenance notes: none
Anything else special or unique in regards to the numbers of the property (not the property itself; things such as city assessments, back taxes, special costs due to unique features of the property, etc. etc.): I have put in an additional $5000 in repairs and upgrades.

My random number generator in my head told this guy $140000. Again, I did not intend to flip this house, but I'm just not sure what is best. This old couple is looking to move close to family (the guy across the street who first came in), and will pay cash. They already stopped by for an impromptu walk-through because I was there. They are serious, and may even have requests for paint color and new toilet install. I may be able to avoid realtor fees with the sale of the home. Assuming I could close the deal with these people in a month, I could possibly turn a profit of up to $16000 in two months time (more likely less than that with time invested accounted for). That seems good, but rental income for the first year could gross me nearly that much, and I'd still have the house.

I'm continuing to fix up the place, and they'll come back to see it again. One drawback to selling is they may start to make demands to fix things that I had no intention of fixing yet. I'm leaning toward hardballing them and/or contacting my realtor for advice. What say the knowledgeable mustachians out there?

escolegrove

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Re: Seeking advice on sell or rent propostion
« Reply #1 on: December 30, 2014, 12:42:56 AM »
I am a buy and hold investor who always keeps her eye's open.

Here's a few thing to remember
*You don't have to say don't have to sell. So you are ALWAYS in the right to say NO. Therefore if you take the deal. Put your foot down. Remember you are suppose to be able to get rid of it for a profit. You don't need them they need you. Also get a realtor to give you a value! Zillow out here is 20-30% under value.
*You will have to pay tax on the flip money. I believe it will be roughly 35% for short term gains. So your profit will be much less than you expect.
*If you take the gains what will you do with the profit? Personally a "quick" flip for me isn't worth it, if I can't find another great rental.

Just don't get tempted by the quick money. It's great if you achieves your long term goal. On the other hand, remember long term cash flow is the key for early retirement!

Knapptyme

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Re: Seeking advice on sell or rent propostion
« Reply #2 on: December 30, 2014, 10:33:38 PM »
Thanks, I was leaning toward holding it anyway. I knew there would be taxes on any profits made from the sale which I did not want to incur, and I did not want to invest my time right now looking for another rental property.

Back to taping, priming, and painting every hideous mustard-yellow, olive-green, or chocolate-brown wall.