flipping and buy and hold?

[Jessica H.]

Is it unwise if just starting out to focus on both flipping and buy and hold properties? Our main focus is flipping but what looks like a good buy and hold opportunity has come on the market near a college. Any insights?

[David Beard]

It's a great idea to pick up some quality rentals while prices are still low (in most areas of the midwest, prices are still 20-30% below the peak). Rent vs buy ratios also strongly favor buying, so it's a great time to acquire rentals. Having rehab capabilities is a huge bonus in bringing props to a rent-ready state efficiently and economically.

There are techniques to minimize your ultimate investment in the property, such as using private/hard money to finance 90%+ of purchase/rehab, then refinancing out to conventional in 4-6 mths.

It's also a great idea to start holding properties to position yourself for getting bank loans, where lenders like to see two years of landlording experience on tax returns in order to count the rental income in your debt ratios.

Plus the rentals could always be flipped to turnkey investors down the road, should you be so inclined, getting similar profit margins as you enjoy on the retail flips.