I'm always trying new things, and wanted to run this one past the group for comment.

Suppose you buy a cheap house at auction for $18k. It's in an area that is not likely to appreciate or depreciate much. Which of the following options would you choose?

1) Hire a contractor for 5K to fix it up and rent out at $650/mo.

2) Sell owner-financed for $3500 down, $38K at 12% fixed for 15 years.

3) Wholesale it for cash for $25K.

FWIW, I don't particularly need the cash right now.

I would say it depends on how much sweat you want to put into it.

Renting it is a good option because in a few years it would pay for itself. (It is to early for me to do any figuring accurately, in my head). Coffee. I need coffee.

The second option ties up your money for years.

I would more than likely sell at a higher price. That way you can take your original investment along with the profit, purchase again and do the same thing, making your money work for you.

I actually used to do this. Purchase at a reasonable, sometimes cheap price, do nothing, sell it for a profit and do the same thing again.

That is how I paid off my first home. I Kept a certain amount for working capital. Any profit I made went onto my homes principal.

Sad to say, but I have become lazy or a better word may be content enough with my life that I can now actually sit back and enjoy it.

We purchased a big doublewide on 2 acres for that a few years ago. Cleared the lien on the title, nobody else could figure out how to do for pennies on the dollar (still 2,400.). Did a nice remodel job on it & rented for 3 years to recoup a lot of the money. Sold it this year for $130,000. So even after taxes it was a nice chunk of change. Just sitting for now.

I love assets-- especially LONG TERM.

The re-coup of your original investment 23,000 will take 37 or 38 months. That of course is if you keep it rented and rented at the 650.00.

No owner financing and I don't find deals for others to swoop in and take from me. Basis for that is it takes a long time to find these long term keepers.

I like to re-coup within 18 months + or - 3 months. With that thought and with the limited availability out there I would do the deal.

Why not consider this:

If the property has small chance of appreciating a lot,the only apparent real return is in renting it long term (nothing wrong with that).

BUT, as a different way to do it,

Do a quick cleanup, mow the lawn, trim any trees and correct any major problems. Paint the outside if needed.

Then refinance and get most of your money out.

Then option the house only to someone and lease the land under it. The fee for the option could make up for any amount you don't get on the refi, or most of it.

In the end, you have minimal fix up, most of the money back, don't have to worry about the house or maintain it (hopefully) depending on the terms of the option, and you keep the land indefinitely and the land provides an ongoing cash flow.

FWIW:

Around here, that would be a house in a class D/F hood.

Since I do not want that type of rental, or any connection to a buyer wanna-be who never will be - I would wholesale the contract.

Allym I for one will never buy a property even considering depreciation. As we learned to well they-- the gov't can change that any time.

Richard I read almost all your post and agree most times. In this case I gotta say WE the people here at this site are generally not sophisticated investors and can get side tracked doing deals-- when toooooo much is planned for the deal.

Good question Robin. I will need to follow this.

6x it is one of the BIGGEST PROEPBLEMS in mom and pop investing-- over thinking the WHAT IF's!!!!

1) Hire a contractor and put back into service for cash flow of $650 a month.

2)Not enough money for a wholesale deal, after taxes.

3) Most owner finance deals don’t end with out a sale. I would want $10,000 option money.

About 3 years ago a long term tenant wanted to pull $20,000 from her 401K to do a rent to own and I’m glad I didn’t take the offer, because the house is worth about $30,000 more than it was at that time, if I would have done the rent to own. I would have been locked in at a lower price

Good to hear that you have many various paths to choose from. First step is know the best way to title it.

Place in your ROTH 401K or Roth IRA so you don't pay short or long term capital gains.