Should You Sell Or Keep A Property After Rehab
Keywords: Real Estate Investment, Real Estate Investing, Real Estate
There are many people who feel that there is no need to keep a property once it has been rehabbed. According to them, it is better to sell it after the rehab and than get the money. Practically this decision will depend a lot on your emergency for quick cash. You can without any hassles generate short term cash when you sell a house that has been freshly rehabbed.
In case you are planning to keep it, there are chances that you will make more money. There are some great benefits associated with keeping a rehabbed house like a tax break, cash flow and more money with future appreciation. Even after few months of buying, you can earn a good amount when you plan to refinance the property from your money to long term financing. As an investor you can make more money if you hang on with the rehabbed property but there is a downside to it as well. You will have to play landlord and decide if you are serious about it.
There is a lot of difference in the money when selling and rehab and rehab and renting. For instance, let us surmise a case one (you) and case two (your friend) scenario. In case the appreciation rate is 5% in your city and the price of a recently rehabbed house in the neighborhood is 100,000 dollars, you can sell your property after rehab and make money (15-18000 dollars). However, if a friend keeps his rehab property and cash out refinance then he can pull out approximately 10,000 dollars per house in 3-6 months of owning it. You can make a great living with around 150,000 dollars every year, but you will also have to keep on rehabbing to earn. But in the case of your friend, he will also make a good living with 100,000 dollars or so in tax-free cash that he can spend easily.
He will be able to control million dollars in real estate and there will be no need for him to pay taxes on the money he will be getting from cash out refinance. If your friend buys at least 10 houses that are priced at 100,000 dollars each and owes 90,000 dollars on each, then it means he has control over 1,000,000 dollars in property. If he holds on to those properties for lets say 5 years then after the calculations he will make an extra 50,000 dollars every year because he kept those properties. Even if he sells those properties after being the owner for 5 years, he will get 276,000 dollars in return.
If you calculate on an average, then your friend will make more money than you, as discussed in the case one and two scenario, because he has kept his property after rehab. A lot of fluctuations are taking place in the real estate market and if you do not want too many hassles then it would be a better idea to hold on the property for few years especially when too much of your personal money is not invested in it.
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