Own home - rental or flip?

Question

Hi all! My name's Kristen, and I am a recent college graduate with not a lot of cash on hand but am interested in real estate investing. I am currently working on expanding my knowledge and starting with a place to live myself in the St. Louis area. I will be buying in the next month or so for my own residence with intention of it being an investment a year or two down the line. At my price point, I could either buy a condo needing some improvements which I'd then sell a year or two down the line (flip approach) or I could buy a single family home for myself, which a year or two down the line I would keep for cash flow (rental approach). Does anyone have advice for which approach a new beginner should take? Thank you, and happy Thursday to everyone! :)

Account Closed · Answer

One approach might be to buy a 2-3 SFR and rent out the other two rooms.Or buy the same property and list it on Airbnb, higher margins but more hand holding......Welcome and stay the course!

Jesse Peña · Answer

@Kristen Paquette Welcome to BiggerPockets! Below are some links to get you started. Much success to you!I received this info from @Nathan Sharp when I first started.http://www.biggerpockets.com/renewsblog/2013/01/04/how-to-rent-your-house/(house rental guide)http://www.biggerpockets.com/renewsblog/2013/02/22/buying-rental-property/(how to buy a rental property)https://www.biggerpockets.com/renewsblog/2013/04/09/how-to-buy-a-small-multifamily-property/ (How to buy a small multifamily property)http://www.biggerpockets.com/renewsblog/2014/07/19/how-to-buy-a-duplex/(guide to buying a duplex)https://www.biggerpockets.com/renewsblog/2015/11/16/how-to-choose-areas-multifamily-deals/ (Choosing multi-family deals) BP Podcast 061:How to Succeed in Multifamily Investing – A Unique Conversation with Josh, Brandon, and BenBP Podcast 131: Investing in Multifamily Properties in a HOT Real Estate Market with Serge Shukhathttps://www.biggerpockets.com/renewsblog/2013/03/07/profitable-ethical-landlord/The bottom line is that you must take action to start.Don't get bogged down with analysis paralysis. You must take risks, but, ensure that they are calculated risks.Below are some more links to get you started. http://www.biggerpockets.com/startherehttp://www.biggerpockets.com/meethttps://www.biggerpockets.com/alertsHow to Use @Mentions on BiggerPocketshttps://www.biggerpockets.com/rules https://www.biggerpockets.com/termshttps://www.biggerpockets.com/inviteshttps://www.biggerpockets.com/perkshttps://www.biggerpockets.com/forums/categorieshttps://www.biggerpockets.com/courses/a-beginners-introduction-to-real-estate-investing (video courses)https://www.biggerpockets.com/real-estate-investing (Ultimate beginner's guide to REI)REI books suggested by BPershttps://www.biggerpockets.com/renewsblog/2015/11/13/7-real-estate-books-beginner-investors/ (7 absolute must read books for beginner REIs)http://www.biggerpockets.com/renewsblog/2013/04/14/best-real-estate-books/?utm_source=search&utm_medium=internal&utm_campaign=books (books recommended by BPers)Before making your 1st REI purchase please visit the link below for some useful tipshttps://www.biggerpockets.com/renewsblog/2014/12/19/real-estate-investing-success-smart-tips/Simply, bone up on the areas that you need to expand knowledge in such as, Forums, Marketplace, Learn, Network, Analyze and Resources.Feast on the BP Podcasts, #askbp Podcasts, BP blogs and BPwebinars Much success to you!

Jerry Houk · Answer

Hey kristen, it really depends on the money you have to work with. Both options are good and can be done each way with both. Buying something that needs work is the best bet so you can have more equity in the property when your done. Just do your homework on location location location and find the best deal in a good one and run budget numbers and comps in the area to figure how much profit you can turn. And in the end sale may be better than rent just on the first one at least to get some capital built up to fund the next ones. Good luck!

Monique Rene Coates · Answer

Another approach could be to LEASE-OPTION a SFR. With this approach, you would initially LEASE or RENT a SFR that you want to own in the future with a percentage of the monthly lease payment going toward your future down payment. The contract negotiations would stipulate how long you have to initiate the purchase option. Usually 3 - 5 years. But it could be shorter or longer. NOTE: If you do not exercise your option, you would lose all monthly saved option funding to the property owner. However this is a good way to basically rent to own. GOOD LUCK!

Kristen Beahm · Answer

Wow, thank you everyone!! All he the wisdom is greatly appreciated! I think SFH Wins :)

Frankie Woods · Answer

I personally hate condos because of at the fees, but not necessarily a problem if you plan to flip. Keep in mind, they don't appreciate as well as SFRs.I prefer the BRRRR method and would rather stick to the SFRs for buy and hold, especially in the beginning when you are still figuring out the business. I feel like more can go wrong in a flip. Just my .02.

Mackal Smith · Answer

Hey Kristen,I see that you are in West County. You're definitely right that out here we don't have much inventory in terms of duplex or 4 family units however, don't overlook areas closer in to the city. There are some really nice places in Dogtown and close to the CWE where you can pick up nice properties that would definitely cover most of your mortgage and are absolutely as safe and secure as West County.For someone just starting out, there's really not a better way to get into both home ownership and investing...

Travis Scribner · Answer

What area you looking to buy in? The wholesale market is non-MLS, so when you say there is not a lot in your area, you may not be searching the right sources. Let us know what your area is, and we will see what we have with our contacts, wholesalers, etc. to try and match you with what you want! We are all here to help, so use us to your advantage! :)

John Cohen · Answer

@Kristen Paquette If you don't mind living with people (i.e. apartment or 2-4 family) that is the approach I would take. It kills 2 birds with 1 stone, gives you place to live and rental income.

Kristen Beahm · Answer

Thanks all!! Unfortunately, there are very few duplexes or multi family homes around here in areas I'd be comfortable living in myself; otherwise house hacking would be my first option. I'll be sure to check out some of those resources!! Thanks again :)