Flip or Buy-and-hold?

Question

Hello everyone! My name is Angel and I am new to BiggerPockets. In addition, my partner and I are new to real estate investing. We are out in The Los Angeles, CA area. We have been discussing the possibility of flipping a home locally or investing in rental properties out of state. What would you all recommend for our first investment? We want to be able to generate cash flow but at the same time we want to be able to grow exponentially, if possible. I would love to read everyone’s   Input. Also, are there networking events around the Los Angeles area? We would love to network with other investors.

Account Closed · Answer

I'm so new to this you should probably ignore anything I have to say but as I tried to figure out this question with my brother, what I came up with was basically, buy and hold if it's a place I really love and sort of wish I could live there. If it's just a numbers thing, where I can see the cash but am not really interested in owning the property, then look at it as a flip.

Of course, those are still champagne problems. Over the past few months, we are still figuring out our tastes. Love Boyle Heights, Lincoln Heights, Silverlake...hate stucco. Love craftsman homes.

And so far, a lot of it is just coming down to what we can actually get a bid accepted on. It's not like buying a shirt of the rack. Just because you want to buy it, doesn't mean they will sell it to you...even when it's for sale. Not sure what the rest of CA is like but LA is crazy.

Jason Carter · Answer

@Angel Samayoa There are a bunch of REI meetups around LA. Too many to list. Most are listed on meetup.com. Some are better than others, some are just sales pitches, but they're a great place to start.

Jacques Cyr · Answer

@Angel Samayoa, Welcome to BP! and Welcome to the world of investing.

It can certainly be a wild ride... As @Dawn Curry and @Joe Vastola have pointed out you'll have to access what you, and your partner's, goals are. Flipping can help fund the B&H strategy, which - depending on your perspective and market, can be "leveraged up" to escalate the rate of return and cash flow. Joe points out correctly that it's vital know the risk of the flip. General rule: The rehab cost will always be more the what you budget. So add in "buffers", and get inspections early on... Here in West MI, and Grand Rapids, MI it's taken a while to build up a network of: inspectors, loan officers, contractors, and sub-contractors, etc... but once you've got those folks in place, and you've checked their references / done your research, then the next big step is to take the leap... I may have missed what your funding situation is currently, but perhaps the local LA market is within your wheelhouse. I sometimes work with a few folks from other, more cost prohibitive markets, who like the benefits of the MI market / mid-west market. Though this approach isn't for everyone, and the comfort level has to be there.

Back to the Flipping side of the equation; what is your back-ground? Do you have general construction, etc. experience? That's always helpful (beyond the HGTV shows). If not, perhaps you can connect with some contractors in your area to walk properties, and discuss the 'tell-tale" signs to watch for on major issues. Hope this helps... Good luck, get started, remember to "power through" when stuff goes wrong (which almost always happens), and feel free to reach out with any questions. Cheers...

Joe Vastola · Answer

@Angel Samayoa I would read as many books and listen to as many webinars as possible to get a sense of what you like. That being said, starting out I would recommend buying and holding as a safer way to jump in. If you are new to real estate, flipping houses are possible but you encounter a lot of risks (Bad contractors, overpaying for a house, underestimating for rehab costs, not being able to sell right away). All of those risks could cut into potential profit and even lead to a loss. You can be successful at either, just make sure to do your homework.

Geo Tan · Answer

Hey Angel! Welcome to BP. Great first step already by becoming active on here. Tons of great info on the forums and the podcasts. I'd recommend starting out by listening to as many podcasts as you can in regards to whichever niche you plan on working on. Feel free to shoot over any questions you may have on investing, since I own a multi-unit in Boyle Heights and is cash flowing nicely. Best of luck!

Ewa Reza · Answer

@Angel Samayoa Look into house hacking. I just wrote about it on my blog. Not only you can live rent free (yes, even in expensive areas like Los Angeles) but you may reap all the benefits of real estate investment.

Bob Okenwa · Answer

@Angel Samayoa

Welcome to BP. To answer your first question, only you can realistically answer where to start as people will speak their opinions on the matter, but no one knows what you're comfortable with except you. Before getting into anything, I'd suggest reading a few books and watching/listening to even more podcasts on the subjects that interest you so you can gain a better/deeper understanding as to which each side entails. Real estate seems glamorous on the surface, but there are a million details that need to be accounted for behind the scenes.

For networking, I'd look up local REIA meetings and get out and network at these events. Best of luck.