About 10 minutes after writing my previous post (about getting The Red Garage House under contract), I got a call that my offer on the “somewhat run-down duplex” was accepted as well.
Wow, two properties in one day!
As I mentioned previously, I don’t have an exit strategy planned for this one. That said, I could imagine doing one of a few things:
- Wholesale It: Wholesaling a deal basically means reselling it to another investor immediately after closing it on (or in some cases, at the same time). This would involve me marketing it to other investors while it is under contract, and if I can find someone who is willing to pay me more for the property than I’m paying for it, I resell it to him and pocket the difference. While I likely won’t be able to find anther investor before I close (closing is next week, and I don’t yet know too many investors), I can certainly start marketing it and see what happens. Considering this deal was straight off the MLS, I’m curious if any investors will be willing to pay a premium (I think it’s worth a good bit more than I’m paying). Again, we’ll see what happens.
- Board It Up: Another option is to just board the place up and wait until the market turns. I believe the land alone is worth a good bit more than I’m paying for this property, so I could imagine that I could resell it in a few years for a decent profit. In the meantime, I could throw a For Sale sign out front, stick it on the MLS, and if a buyer comes along at any point who is willing to make an offer, I can consider selling. The big drawback to this one is that the property taxes alone are $100/month, so I’d be spending over $1200 a year to hold the property. Could be worth it though.
- Rehab and Rent: While I’m not thrilled with this specific area, and don’t particularly want to hold a low-income rental (I imagine each side would rent for about $400-450), it probably wouldn’t be too difficult to get it into rental shape and find a couple tenants. And if I decide that I don’t want to deal with chasing down rents in a sub-optimal area, I could likely resell it for a premium to an investor looking for a turn-key rental property. It’s just a matter of whether that premium would be worth the effort of rehabbing and finding renters.
Those are my three most-likely exit strategies on this one. I firmly believe any of the three could make me a profit; it’s just a question of how much profit I want to make and how quickly.
I’ll have more to say about this one later…we close next Friday (assuming the closing attorney can get the paperwork done by then), but there’s really no rush to figure this one out just yet…
Congrats on the two houses. With only two months as a landlord myself, I look forward to seeing your plan on rentals.
Curious, will you pm yourself or contract it out?
Yeah, I’m looking forward to seeing my plan as well… 😉
I’m open to any advice!
It’s going to be seat-of-the-pants to start with, but hopefully with all the great resources out on the web, I won’t make any terrible mistakes, and I’ll learn as I go along…
Definitely planning to PM the first few myself. The house is in good shape (so hopefully not too many calls), is in a decent neighborhood, and is relatively close to my house and to my other projects. Of course, I’m making sure that the numbers work out with a third-party PM, in case I decide to go that route in the future, but for now, my brother and I will manage it.
A book a found that has some unique ideas is “Landlording on Autopilot” by Mike Butler. I have picked up several tidbits that seem to be working. Time will tell. I do like how he treats the rental application process.