New to the forum, big dilemna

**zx2guy19** · 09-22-2011, 05:54 PM

Hey everyone, my name is Brad and I am 21 years old. Alrighty...so, I just bought my second property. I currently own a 4 bedroom, 2.5 bath home in the Columbus, OH region. I bought the house for $100,250 and it appraised at $156,000, so I am already up equity on that.

Now, last night I placed a bid on a condo about 2 miles down the road from my house. It is a 2 bedroom, 1.5 bath condo also in the Columbus, OH region. It appraised for $83,000 and I paid $25,501.

Here is the thing. I don't know what to do with it!

My Realtor said if I put 2k into the house (it needs some carpet, paint, a fridge and a little tlc) I could sell it for 48-50k all day long. That would take about 6 months. So, after commission and stuff I would walk away with about 20k in profit.

I loaned the 25k from my dad. It is a 0% loan for 10 months (July of 2012). It is then a 15% interest rate after July of 2012.

I have two options. One, I could rent the condo for $575 a month and it would take approximately 5 years to pay off. I would charge $725 a month for rent. That includes splitting half the condo fee of $150. So $75 of that $725 would go to the condo fee and the other $75 I would pay, meaning I would net $575. Then I could sell it for 50-55k by then.

It is 1,280 sq ft.

The other option is to flip the condo within 6 months, make 20k, pay off the loan my dad gave me, and buy another condo for around the same price.

What would you guys do? I'm stumped.

Also, thank you for this awesome site. It has been a great help so far.

**ChelleD** · 09-24-2011, 08:32 PM

Hi Brad,
There is something to be said for getting your profit now - while you can. I don't know what the real estate market is like in Columbus - so you should check into things like days on market and demand for condos.

Couple questions:
- if you can buy another condo for the same price you paid, can you realistically sell it for $48-50K or even $50-55K?
- is your rental realistic for the other condos you are competing against?
If you do decide to rent, be sure to allow for some vacancy in your calculations, because there is likely to be some time when the property is vacant and not paying rent.

Instead of renting, have you thought about seller financing? You could lease option or seller finance (if allowed in OH) and have the tenant/buyer pay for all maintenance and repairs, in addition to their typical responsibilities, like utilities. Plus with seller financing, you can generally get about 25% more in payments for the same property because you are selling on 'terms'. So, for a property where a landlord would get $700/mo - you would likely get around $900 - 950/mo if you sell with lease option or owner financing. You could list it on Craig's List if you choose - you could even test it out beforehand to see what type of response you would get. There are a lot of people out there who are trying to get their life back together and they would not be able to qualify for a traditional loan, nor would they have the down payment that the typical lender will require. They would be a perfect candidate for you.

Something to think about - hope it doesn't confuse you!!
Good luck!

**mhomes** · 09-25-2011, 03:07 AM

Hi Brad,

I have a couple of comments, too:
1. How can you be sure that you'll be able to sell it for around 50k?
2. How can you be sure that you can rent it for the amounts you mentioned?
3. As ChelleD said, if you rent it, make sure you calculate vacant months and maintenance costs. The 5 years in which you'd have your money back sounds too good to be true for me. In Budapest, Hungary, buying a residential property for investment does not look good now. Your payout here would be more like 12-15 yrs.
I hope your numbers are good, and you get your money.