Mindset of Buying Rentals instead of Flips

[Geoff Antone]

Hello everybody, 

Originally this year I had my mindset on flipping houses in Dallas / Fort Worth. Now I'm rethinking my strategy and thinking I should instead buy properties, fixup and then rent them out.

I'm thinking this for a couple of reasons. First one is that that most of the deals I'm seeing in this area right now. The deals present themselves more so as rentals than flips as the margins are low. 

The second thing is I like the idea of fixing up the house when I purchase it so when it's rent ready it will likely have less maintenance for me to deal with. 

I'd like to build my rental portfolio up steadily over the next five years.  My goal would be to have 10 to 15 decent rental cash flowing properties for starters within 5 years or less. 

My questions are:

How many rentals do you think I realistically acquire a year assuming the properties don't qualify as BRRR properties? 

I'm not seeing a ton of BRRR qualifying properties in this market. The home values are a bit high to pull of BRRRs, again this is just what I am able to find in the Dallas / Fort Worth Area.

So I don't think I'll be able to take money and roll it into the next property. 

Is the limit usually 10 properties I can have loans on at a time? 

What's your thoughts on doing Rent to Own options on some of the rentals?

[Jim K.]

Hi Geoff:

How many rentals do you think I realistically acquire a year assuming the properties don't qualify as BRRR properties?

Depends on your income. I think it would be wise not to maximize your speed-of-acqusition in the first three years. There's a lot to learn, a lot of relatively misleading and confusing information to sort through out there, and not enough people telling you to slow down and make sure you've mined the experience for the maximum learning you can get out of it.

Is the limit usually 10 properties I can have loans on at a time?

Yes...but commercial loans change that. I'm not the person to ask.

What's your thoughts on doing Rent to Own options on some of the rentals?

I think in my location and property class C/D SFR, it's a terrible idea. If you go through the trouble of assessing an area for potential, keeping up with area developments, making decisions on properties based on present and future value, a good rental property is worth a hell of a lot of money for a lot of reasons to a reasonably smart local operator with a smart, well-run portfolio backing up his other, more speculative moves. There are few things that are more recession proof than an independent portfolio of 15-or-so hardened rentals with carefully-vetted long-term tenants in them.