What would you do in my place?

Question

Hi everyone I'm brand new to this site and would really like to get started in investing ASAP as I know that is the best way to learn. However I know the first step is often the most important and I have been hesitant to make it. I am looking to invest in the Philadelphia area. I am not sure yet if I want to buy and hold or flip. I work a full time job and UPENN hospital and I wanted to get some feedback on what people think is better while having a full time job. Flipping or renting? Also, I have about 150k in equity in my home that I live in so I think I should be able to get around 100k in home equity line of credit. Does it make sense to use that to buy a property or is it better to just use it as a down payment and get a mortgage.

What would you do if you were in my situation? Which path would you take and why?

Andrew Cordle · Answer

@Nathan Zhivalyuk @Jeff Deville

Hey guys, My name is Andrew and I would consider my a pretty experienced investor. Last year I did close to 100 Buy-Fix-Sales and bought over 200 rental properties in bulk.

If it was me, I would use funds to flip houses then use the profits from those flips to invest in rentals. When I got started, I would flip 3 or 4 houses or so then take my profits and buy a rental either Free and Clear or 70% down or so and then pay it off later. Again, my approach was to own my rentals free and clear, not that I am against leverage, but I would leverage OPM for my flips then use "house" money for all my rentals. I did that for several years and my cashflow is exploding month by month at this point.

Please understand, I do not claim to know everything nor is this the only way that it can be done, but it is the way that I did it and still do it. If you want anymore info please let me know.

Thanks

Andrew

PS Feel free to connect with me on BP

Andrew Cordle · Answer

Hey guys,

Here is one of my latest flips just to give you an idea of what we do.

Let me know if you have any questions!

Thanks

Andrew

Christopher Hunter · Answer

@Nathan Zhivalyuk Welcome Nathan.  You have to get to know the contractors, handymen, and what things will cost you before you go down the fix and flip model or your GC will gouge you on price.  You need to  know this market place you want to invest in.

Rolanda Eldridge · Answer

@Nathan Zhivalyuk ...I started while working FT.  I purchased several SFR for retail prices because of time constraints.  However, in year two my focus switched to wholesale deals requiring rehab.(better cash flow).  I quit my job and became a FT investor focusing on rehabs with support of hubby...

Two things that worked in my favor.

1.  Market prices reasonable Bham area..started rehabbing 2006

2.  Networking and learning from other investors..

Jon Holdman · Answer

Flipping vs. buy and hold are two completely different models.  I wouldn't consider flipping (fix and flipping or wholesaling) to be investing.  Rather, its a business.  If you do the job and do it well it will produce income.  Stop turning the crank and the income goes away.  Landlording, OTOH, is investing.  You buy and income keeps coming.  With a PM, the time and effort is minimal.  Even without a PM, most of the work is when you do a turnover.  Rentals do not produce large incomes, though.   Its reasonable to try to get a 10% cash on cash return once you've accounted for the TRUE expenses.  So, if you invested $100K its reasonable to expect $10K a year in true income.

My viewpoint on using equity in your house is likely to be a minority view.  I think a residence is a liability, not an asset.  Houses may sound like a good investment if you compare the value from 30 years ago to the value today.  But if you add in all the interest, taxes, insurance, maintenance and major improvements you make along the way, its rarely a good investment.  So, like other liabilities, you would prefer to own these free and clear and avoid the interest charges.

Don't fall into the "I prefer to spend $1 to save $0.28 in taxes" bologna.  You're still poorer by $0.72 than if you had avoided that $1 in interest.

If you do go down this road, be dang sure you can make the payments on the HELOC even if you really take a loss on the investment.  Otherwise you're at risk of being on the street if your investment goes bad.

Andrew Cordle · Answer

@Luis Montanez

@Norma V Northcutt

Hey guys thanks for the compliments. @Luis Montanez  we are having a RE Mastermind in Marietta tomorrow we would love to have you out there.

Let me know if you would like to come.

Andrew

Norma V Northcutt · Answer

nice job, andrew!

Luis Montanez · Answer

@Andrew Cordle Good Job on those flips...  I do have to overcome the fear of holding the hot potato when the music stops (economic down turn) this is why I like to buy and hold for now..  but I would love to be just like you when I grow up... :)

Brenton Kasselder · Answer

@Jeff Deville I am in very similar shoes to you at this point. After about two years of inactivity and REI study, I developed a strategy almost identical to @Andrew Cordle in that the biggest hurdle to rental properties is capital.

I want to actually Invest, and build my asset column, not simply boost my income statement in the short term with a pure fix-flip approach. This strategy in my opinion, although aggressive, will do exactly that. Build a solid balance sheet of long term B&H cash generating assets.

Nathan Zhivalyuk · Answer

@Andrew Cordle

Thanks for your advice. You seem to have a great system in play and I would really like to emulate your strategy especially being that it was what I originally wanted to do. I would like to speak to you some more about specifics some time if that's alright.

-Nate

What would you do in my place?

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